Weekly Term and Accounts APY Spread and Premium Index–Jul 21

by tom 21. July 2014 16:48

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.

APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

image

Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

image

Will Apple and IBM Bring Big Data and More to Mobile Banking?

by tom 17. July 2014 16:15

For those of you watching the technology market, Apple and IBM announced a strategic alliance on Tuesday that would target have an impact on mobile computing and cloud users. What the deal gives IBM is access to the most popular consumer mobile computing platform on the planet. What the deal gives Apple is access to Global 2000 IBM customers looking to expand their reach into the commercial mobile market. To quote the news announcement:

The partnership should see Apple’s iOS devices flourish with "a new category of mobile apps" that will target “retail, healthcare, banking, travel and transportation, telecommunications and insurance,” among other industries. And of course, these apps will be backed by “IBM’s renowned big data analytics” capabilities.

So what has this all to do with banking? JJ Hornblass of Bank Innovation figured it out. This alliance now brings Apple’s outstanding mobile development capability coupled with IBM’s commercial development capability and security technology to create an as yet undreamed-of cadre of mobile banking products. Security has been the big stumbling block for many banks looking to harness mobile technology, and this deal brings “a corps of 6,000 security researchers and developers in 25 security labs worldwide” to address the security issue.

And here’s another consideration worth noting – IBM’s big data analytics. Basically, big data lets you analyze streams of information from multiple sources in real-time to reveal hidden patterns and trends. IBM is already delivering big data solutions to banks to address things like fraud prevention. Big data is already saving millions by stopping fraudulent transactions. Imagine what big data can do for mobile banking.

Big data allows you to create personalized profiles of consumers, including banking habits, shopping patterns, and more, and react to that information in real time, enhancing the relationship by creating custom offers in real-time at the ATM or while they are banking online. Of consider using big data to analyze mobile banking patterns, cell phone data, social media streams, and other data sources to identify what kinds of products and services consumers want from mobile banking.

To date, banks and credit unions have been struggling to find the right combination of mobile services to resonate with customers. Big data analytics can eliminate a lot of that guesswork. What the Apple/IBM alliance brings to banking is the potential to unlock more insight about the needs and, more importantly, desires of customers, and they bring the mobile computing power to help banks realize those desires.

Mobile banking and big data analytics seem to be made for each other. It will be interesting to see how the Apple/IBM alliance will affect mobile banking in the months ahead.

Tags: , , , ,

Banking Technology | Banking Trends | In The News | Mobile Banking

Weekly Term and Accounts APY Spread and Premium Index–Jul 14

by tom 14. July 2014 16:21

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.
 
APY Spread Index

The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

image

Premium Index

Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

image

Tags: , , ,

APY | National Pricing Indicator | CD Balances | Deposit Products

Prepaid Cards Have a New Look for Overdraft Protection

by tom 10. July 2014 18:56

There is a new “neobank” strategy that is gaining momentum to appeal to millennials and others who hate to pay overdraft fees. In a story this week in American Banker, new companies like R.C. Giltner Services are betting that mobile apps like PaySound are going to appeal to consumer with the promise of “no overdraft fees, ever,” at least to the degree where they are willing to pay $14.95 per month for protection.

PaySound is the software Giltner is offering to smaller banks and credit unions who want to offer mobile and online banking with no overdraft fees. While pricing for the peace of mind is up to each financial institution, the average fee seems to be around $15 per month. The idea is that consumer are willing to pay for online or mobile banking in exchange for the peace of mind of no hidden overdraft fees.

"Our research shows consumers are troubled by hidden fees," says Susan Weinstock, director of consumer banking research at The Pew Charitable Trusts. "They need to be transparent."

The gamble is that banks and credit unions are going to make more money on prepaid online accounts than they will for overdraft fees. The prepaid fees can provide a new means of non-interest income. In essence, these new “neobanks” operate like prepaid debit cards with only online and ATM access. They are custom-designed for the new generation of bank customers; millenials who don’t want to deal with overdraft fees and are used to doing all their business online or on their smartphone.

Services like PaySound are banking on market confusion and consumer reluctance to pay penalties for profitability. They also are counting on banks’ willingness to forego overdraft fees in favor of monthly fees. In reality, these services look a lot like prepaid bank cards and may become a model for future entry-level banking, without the third-party participation.

The experts believe the $14.95 average fee is expensive for this service, noting that most customers don’t expect to overdraw their bank account. And many banks are charging less in overdraft fees. Bank of America recently introduced  SafeBalance Banking for $4.95 per month and Key Bank offers a Hassle-Free account with overdraft fees.

As the prepaid debit card continues to evolve, services like PaySound will continue to emerge, and smart financial institutions will find ways to offer their own alternatives. For many banks, it may be a matter of repackaging current fee-based services and products and doing a better job of educating customers and simplifying terms to eliminate hidden fees.

Tags: , , ,

In The News | Fees | Banking Trends | Mobile Banking

Weekly Term and Accounts APY Spread and Premium Index–Jul 07

by tom 7. July 2014 16:50

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.
 
APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.
image

Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:
image

Tags: , , ,

National Pricing Indicator | Deposit Products

Do Promotional Deposit Rates Really Attract New Money?

by tom 7. July 2014 09:23

We recently compiled a new research report,"Likely Scenarios of Rising Deposit Rates in 2014 and Beyond,” which draws from 25 years of cumulative data here at MRI to consider the future of deposit rates based on past performance. This article was written by Dr. Dan Geller, executive vice president for Market Rates Insight, for this BAI Banking Strategies about some of his research findings.

Specials on deposit accounts are promotional rates designed to attract new money or to shift balances to term accounts, which provide stable and projectable liquidity to the institution. In the 12-month period from June 2013 to May 2014, neither of these objectives has been reached overall by the use of promotional rates. Moreover, it is likely that institutions incurred higher interest expense with specials on balances they could have obtained for a much lower regular rate.Dan Geller Ph.D.

Analysis of the percentage change in regular annual percentage yield (APY), special APY and balances of deposit accounts shows that specials on long-term certificates of deposits (CDs) of over three years were the most ineffective in attracting new money. During the 12-month period, the average APY of specials on such CDs increased by 75.7%, yet balances fell by 5.9%. Similarly, the APY on promotional mid-term CDs (one to three years) increased by 15.7% while balances decreased by 3.5%. For short-term CDs (up to one year) the specials’ APY rose by 13.3% while balances dropped by 2.3%.

The picture is slightly different but not any better for checking and money market accounts. The APY on promotional checking and money markets was flat in the past 12 months, yet balances increased by 14.1% and 6.6% respectively. Moreover, the balance increase in these accounts occurred despite a decrease of 4.1% in the regular APY of checking and 6.5% for money market accounts.

Perhaps the most revealing finding of this analysis has to do with savings accounts, which experienced a 13.7% increase in specials’ APY during the period while balances increased by 9.1%. However, it is not very likely that these promotional rates contributed much to the increase in savings balances since balances of other liquid accounts increased as well even while the rate on their specials remained flat. Thus, it is plausible that savings account balances would have risen anyway without institutions having to pay a higher APY for specials.

The obvious conclusion, then, is that promotional rates are not very effective in attracting new money or in shifting balances to long-term accounts. It is possible that gains might be achieved for individual institutions and/or in specific markets, but overall, nationally, the specials aren’t working in the current rate environment.

Tags: , , , ,

Market Research | Banking Trends | Deposit Products

Are You Ready to Compete with the Bank of Facebook?

by tom 3. July 2014 16:16

Alternative payment strategies have been around for as long as there has been bartering for goods and services, but today’s financial institutions have to worry about competing with a whole new generation of online payment systems. For example, Google and Facebook are beefing up their online payment strategies, joining the ranks of PayPal, iTunes, and start-ups like Square and Stripe.

Facebook recently announced that it is close to obtaining a license from Ireland’s financial regulator to accept payments on the social media site. Apparently Facebook is also looking to partner with three London technology start-ups specializing in mobile money and online transfers. Since Facebook already has a rich advertising delivery platform, the ability to add instant online transactions could turn Facebook into a shopper’s paradise. And it could be a banker’s nightmare since those transactions would bypass the normal bank transaction channels.

Google also introduced its own plastic debit card tied to Google Wallet, the company’s smartphone payment app. Now Google Wallet users can use their debit card instead of their smartphone to pay for transactions, which means they can use their Google Wallet account instead of their bank account to pay for purchases anywhere a debit card is accepted. Google Wallet also offers users a single location to store loyalty programs as well as 24/7 fraud detection, making it more attractive to use than bank cards for many consumers.

The challenge to banks, of course, is that the popularity of these emerging financial applications is detracting from the use of fee-based banking services. Medill Reports quotes an analyst at the Aite Group:

“When consumers have so many alternative options with technology companies, those banking relationships become less sticky,” said Nathalie Reinelt, analyst with Aite Group, LLC. “Additionally, banks could face a loss in revenue via transaction fees, depending on the technology products consumers adopt.”

Reinelt also notes that Facebook and Google make much more revenue from their advertising business than they are likely to make from online transactions. However, the data acquired through their transaction services about  consumer buying habits will prove invaluable.

Still, these types of technology-driven financial services continue to pose a challenge to banks, especially since they are unregulated.

Some banks are stepping forward with their own mobile apps and streamlined transaction systems, but regulations and other factors, most banks limit mobile apps to doing business with the bank, supporting mobile deposits, bank transfers, and account management. Most purchasing transactions are still made through debit and credit cards. What technology companies like Google and Facebook bring to the party is frictionless transactions – no entering credit card numbers of authentication information to make a secure online purchase. And it’s hard to compete with the “cool” factor.

So how big an impact are the technology upstarts going to have on the banking industry? They will probably be subject to government oversight at some point but will they steal market share before they are regulated? Or will pressure from tech startups and established tech giants force financial institutions to change the way they do business? What are your thoughts?

Weekly Term and Accounts APY Spread and Premium Index–Jun 30

by tom 30. June 2014 15:09

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices. 

APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

image

Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:
image

Adding Valves in the Pipe Between Banks and Customers

by tom 26. June 2014 09:35

For those of you who missed it, earlier this month Apple announced that iPhone users will be able to scan credit card data using Safari in iOS 8. So this doesn’t seem like a big deal in the new age of web-driven commerce. PayPal has been accepting smartphone payments for some time, and there are other ecommerce solutions that make link credit cards to their payment services to make  transactions easier. The banks and credit unions still hold the credit card accounts so they are still getting their cut and control the transaction, right? Maybe not.

As JJ Hornblatt noted in his post on Bank Innovation, “Death by 1,000 Cuts: Apple, Facebook and Bank Fees,” he who owns the pipe controls the transaction. Everyone is jumping onto the ecommerce bandwagon, and while the banks and credit unions may hold the cash for those transactions, the pipe that powers the transaction still matters, and it’s increasingly being controlled by third parties.

Consumers are using PayPal, Facebook, their iPhone, and other online platforms for transactions encompassing everything from online purchases to buying coffee at Starbucks to paying their bills. The reason consumers are adopting these new digital payment channels is because of their convenience and the “cool” factor. College students, for example, are abandoning cash in favor or peerTransfer and peer-to-peer payment services, and as a result the new crop of twenty-somethings are woefully ignorant of bank practices.

Suddenly we see banks in control of the cash, but not the pipeline their customers use to access that cash. There are a number of risks here.

First, there are the added fees that banks will have to pay just to service their customers. All those technology transactions are valves in the pipeline that control cash flow between the bank and the consumer, and that access has to be funded by fees. Fees are going to be charged to the consumer, the financial institution, or both, but in order to Apple or Facebook or PayPal to open the valves to allow transactions,they have to be paid.

And then there is the danger of becoming even farther removed from the transaction and from your customers. If consumers increasingly use online transaction services they will identify with the online service more than their financial institution. That direct connection between banks and credit unions and depositors and members will erode. Consumers will rely less on their checking accounts and banking services and more on online transaction providers. Losing that direct connection makes it more difficult to build a personal relationship with customers to increase share of wallet and offer additional financial services. Banks could find themselves feeding the transaction pipe without ever interacting with customers.

So if whoever “owns the pipe” controls the market then banks are rapidly losing their hold on financial services to digital intermediaries. Innovative financial institutions are developing their own digital strategies, but increasingly banks and credit unions are entering into “coopetition” with online transaction services.

What do you see as the future of banking and ecommerce? Will banks have to start competing directly or are their ways to maintain relationships with customers and still have the convenience of online transactions?

Weekly Term and Accounts APY Spread and Premium Index–Jun 23

by tom 23. June 2014 16:20

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.
 
APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum. 
 image
 
Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:
image


Become MRI Fan on FaceBook!

FaceBook Icon