The historically low interest rates of the past few years have created a great opportunity for non-traditional finance companies willing to offer better savings rates to customers. But as the rate environment begins to change, these same companies may be the first to experience the harsh realities of competition.

To bank or not to bank? That is the question
In the recent past, most American banking customers found that their financial institution wasn't offering any great incentives for stowing away hard-earned cash in their vaults. This is where opportunists like American Express (NYSE:AXP) and Discover Financial Services (NYSE:DFS) stepped in. By offering higher savings rates, both companies grew their customer deposits business, which in turn boosted their capital and lending abilities.

Even today, the companies without branch networks are offering much higher rates for their savings accounts. In New York state, you can get the following interest rates on a savings account with a $0 balance requirement to earn interest:

Company Annual Percentage Yield
American Express  0.85%
Discover Financial  0.85%
Ally Financial (NYSEMKT:ALFI)  0.85%
Bank of America (NYSE:BAC)  0.01%
JPMorgan Chase  0.01%
Wells Fargo (NYSE:WFC)  0.01%

Source: Bank websites and

But as the economy continues to improve and the Federal Reserve begins its plans to taper its bond purchases, investors should take note that the success of the various online deposit programs may be short-lived.

Rising rates, falling loyalty
Though the Fed isn't expected to raise short-term interest rates for the next year or so, once the rates do rise, American Express, Discover Financial, and others offering online savings products may see a big withdrawal of customer deposits, according to a Fitch Ratings report. The popularity of the online savings accounts are largely driven by accessibility and higher interest rates, so once traditional banks like Bank of American and Wells Fargo are able to raise their rates to more competitive levels, the online accounts may lose traction.

The banking products offered by American Express, Discover, and some of their online compatriots are limited to just savings accounts and lending, with the exception of Ally Bank and a few other full-service online banks. The other aspect threatening the deep deposit accounts of these traditional lenders is that the deposit products they offer are relatively new and lack the long-term relationships that traditional banks enjoy with their customer base.

Who's most at risk?
Taking a closer look at the online lenders, there is one company that appears to be at the greatest risk of customers withdrawing their funds: American Express. The chart below details the makeup of the various deposit accounts held by American Express, Discover Financial, and Ally Bank:

Source: Company 10-Q reports as of Sept. 30.

As you can see in the chart above, the majority of American Express' deposit accounts are simple savings, compared to Discover and Ally, which boast a majority of accounts in certificates of deposit. The impact of that difference in account makeup could be dramatic for American Express.

Since certificates of deposit guarantee a certain interest rate for a specified time period, there are big fees tied to withdrawing your funds before the certificate matures. Compared to a regular savings account, which generally won't have a fee tied to closing out the account, these types of customer relationships may provide a buffer for Discover and Ally if rising interest rates really do encourage customers to leave the online accounts.

Don't panic
Investors don't need to worry right now, since there won't be a run on the online accounts just yet. Since the economy is still improving at a slow pace, the Federal Reserve is unlikely to raise interest rates anytime soon. With time on their side, the firms offering online accounts have an opportunity to come up with ways to deter customers from leaving. Whether they choose an attractive option (raising their own offered rates) or a negative one (instituting withdrawal fees), American Express, Discover, and their online rivals have plenty of ways to keep their customers.