Total Expert General Manager of Banking James White wrote an article for The Financial Brand that aims to help banks and credit unions across the country prepare for (and hopefully avoid) a historic deposit term tsunami in the next 12 months.
In the current rate environment, depositors—even the ones who have been content to keep their money with the same financial institution for years—will be enticed to move their money once their current CDs, share certificates, or U.S. Treasury bonds mature. The challenge for banks and credit unions as those terms end will be twofold: attracting new deposits while retaining existing ones, and all without engaging in a rate war that prioritizes short-sighted wins over long-term growth.
Here’s a short snippet of the insights James provides in his article:
“In three months, nearly $950 billion in bank CDs will come to term. And that’s the first and smaller wave of a coming maturity tsunami for time investments. Some $2.5 trillion in bank time deposits will mature within 12 months; a record $8.9 trillion of government debt is set to do the same.
After the biggest time-investment origination boom since before 2009, savers using CDs, share certificates, and U.S. Treasury bonds will be in the market for time investments en masse. As they receive emails and letters notifying them that their maturity date approaches, they will decide: Where should I place my money next?
Most depositors have a tremendous amount of opportunity in that question right now. Banking has never been more disunified in its approach to deposit pricing, and the industry has also never been more varied in its marketing acumen. Marketing sits at a focal point as bank and credit union executives consider how they keep deposits without getting cornered by rate-matching demands.
Loyalty may seem like it’s dying, but it’s really just become different today. Improved deposit pricing and segmented engagement via the marketing department can build a new form of relationship banking. It’s become an enormous opportunity to retain and attract deposits—and to do so profitably.”
