Though it is unclear how far the Federal Reserve might go, or when it might act, there is a growing consensus that interest rates will start to come down later this year.
For several years, federal stimulus dollars swelled the checking account balances of many consumers, who found few, if any, safe alternatives to earn higher yields. That era has now receded into the rearview mirror.
The deposit market, which had been remarkably dull and easy to overlook for over a decade, continues to deliver new twists. The latest shot across the bow comes courtesy of Apple and Goldman Sachs – in the form of a savings account with a 4.15% annual rate and no minimum balance.
We were already seeing banks and credit unions step up efforts to attract and retain deposits before last month’s bank fallout resurrected discourse about the importance of liquidity.
Financial institutions of all sizes are doubling efforts to hold onto depositors while serving people who have moved their accounts from Silicon Valley Bank, Signature Bank, and others. Deposit balances have become a hot topic – the Independent Community Bankers Association just announced that it would be a focus of its next fintech accelerator season.
The prolonged period of taking deposit gathering for granted seems to be nearing an end.
Financial institutions have been awash in deposits for years, flush with liquidity. According to data from the Federal Deposit Insurance Corp, deposit balances at banks have risen by 35% in the past two years alone.
The bigger challenge has been finding ways to put those deposits to use in profitable ways.