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In response to the banking industry’s recent influx of deposits, several recent bank acquisitions show how some banks are responding to the pressure of putting liquidity to work.

Midsize banks like Truist Financial, Fifth Third Bancorp, Regions Financial, and some community banks have announced acquisitions where they plan to hold onto loans that the sellers would typically roll off the balance sheet.

Their objective? To redeploy billions of dollars in deposits held by the acquirers, shore up net interest margins, and boost returns.

Rumor is that a further tightening of the Durbin Amendment is on the near-term horizon for card issuers. The most concrete evidence is the Fed’s May request-for-comment on regulations for debit routing of online transactions.

The Fed wants to clarify the regulatory requirement that at least two unaffiliated payment card networks must be enabled for all debit card transactions, including card-not-present (CNP), and card-issuing banks and credit unions will be held responsible. Some terminology will also see standardization.

While the Fed positioned its query as a “non-substantive clarification,” many of the 453 comments submitted so far express a belief that the proposal, if enacted, would have a significant impact on issuers. Meanwhile, bankers are entering a period of uncertainty as they closely monitor the situation for implications to P&L.

If there were any lingering doubts about the potential impact of the buy now, pay later (BNPL) installment credit model on card economics, Square’s recently announced $29 billion acquisition of Afterpay likely put them to rest. Nonetheless, we see Apple’s plan to enter the fray with a feature built into Apple Pay as the more significant near-term concern.

Though much is still unknown, the unofficially dubbed “Apple Pay Later” could potentially be more threatening to card issuers than existing BNPL products. It could also further complicate the Apple - bank/credit union/debit issuers relationship, which could already be described as “frenemies” at best.

It’s an inconvenient truth - the timing of customers’ financial needs don’t always align with balance sheet strategy or marketing campaigns. Due to the pandemic, banks and credit unions were flooded with an unprecedented level of deposits but faced muted demand for the loans that put these funds to work.

Although no one has a silver bullet to synchronize customer needs with portfolio strategy, there may be an equation. SRM’s latest white paper, How Financial Institutions Can Boost Account Growth to Move with Changing Margins, offers a disciplined approach to being present when customers are “in-market” as well as a “growth equation” to boost account growth performance.