Weekly Term Accounts APY Spread and Premium Index–May 23

by tom 23. May 2016 17:06

Market Rates Insight features 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.

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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:

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Banking Trends | CD rates | National Pricing Indicator

Weekly Term Accounts APY Spread and Premium Index–May 16

by tom 17. May 2016 05:06

Market Rates Insight features 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:

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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:

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National Pricing Indicator | CD rates | Deposit Products

Think Your Fees are Too High? That’s Not What the Data Says!

by tom 15. May 2016 19:19

We provide the research data but it usually takes other industry experts to help interpret that data. Such is the case with last week’s findings posted by Chris Nichols, Chief Strategy Officer of CenterState Bank, who used our TrendSpotter report to reveal that banks aren’t charging as much for deposit products as they might.

We have been issuing our TrendSpotter report for a while now, which provides a national snapshot of fee trends nationwide. Fees have become such a vital part of revenue for banks and credit unions that we developed TrendSpotter as a tool to help predict the impact of fee changes. After analyzing the numbers, Chis discovered that as the big banks lead the way by increasing deposit rates, across the board banks and credit unions are reducing deposit fees. However, fees seem to have no impact on deposits:

“…after several quarters of increasing fees, the first quarter of this year saw a decrease in service charges generated from deposit accounts. The result has been negligible as balances are increasing more because of behavioral economics than fee elasticity.”

What TrendSpotter data revealed was that monthly service fees for banks fi all sizes were decreasing. At the close of 2015 the average bank was charging an average of $8,42 per month for deposit products, bu imagethree months later the rates were down to $7.92. The smaller institutions (less than $100mm in assets) were the fastest to drop rates, despite the fact they are most in need of fee revenue. Even the banks with more than $10B in assets have been “quick and aggressive”  when it comes to cutting fees.

At the same time, the balance required to open new accounts has dropped by 15 percent. The minimum balance required to avoid service charges dropped as well from $2,519 in December to $2,284 three months later, a drop of 9 percent in one quarter. And the average balance needed to waive fees dropped by 1 percent.

“All this adds up to lower per account fees and fewer accounts paying fees. This, of course, means less revenue at a time when banks are facing near-record low net interest margins. More importantly, with more than half the banks making below their cost of capital, every dollar to the bottom line helps.”

Since fee elasticity is negative in most markets, there is no rhyme or reason for this trend. Even those banks that haven’t lowered fees are increasing deposits. The average increase is 2.3 percent for the quarter, but for those banks that raised fees the average was 2.1 percent – no statistically valid difference.

Chris’s conclusion is that “banks are not looking at the data.” What the data shows is that fees have no real impact on building deposits. In fact, those banks and credit unions that aren’t raising fees, or at least ensuring their fees are competitive, are clearly ignoring a proven source of  potential revenues.

Identifying these kinds of trends isn’t rocket science, nor does it rely on tea leaves. The data is available to reveal the trends that visionary executives can turn into revenue.

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Banking Trends | Building Deposits | Market Research

Weekly Term Accounts APY Spread and Premium Index–May 9

by tom 10. May 2016 13:33

Market Rates Insight features 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.

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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:

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Consumers Ready to Borrow, But Are Banks Ready to Lend?

by tom 9. May 2016 14:47

According to the latest economic reports, consumer borrowing is growing at the fastest rate we’ve seen in over a decade. At the same time, mortgage rates continue to remain low, and more consumers are looking to take advantage of the current rate climate to borrow or refinance. This presents new opportunities and new challenges for the banking community.

Consumer borrowing was up 10 percent in March, mostly due to an increase in credit card debt.  Non-real estate debt rose $29.67 billion in March, far exceeding analyst expectations. This is the biggest increaseimage in the use of revolving credit since 2001, and financial experts say that following the holidays more consumers are spending on household goods and travel. At the same time, nonrevolving credit, such as auto loans and student loans, increased at a rate of 5.50 percent in March, compared to 5.17 percent in February.

Despite the increase in revolving debt, consumers are less confident in the U.S. economy. The University of Michigan’s consumer-sentiment index fell in April to the lowest point seen in the last seven month, dropping to 89.0 percent in April from 91.0 in March. The Conference Board also reports that the consumer-confidence index fell in April from 96.1 in March to 94.2 in April, with fewer people reporting on planning a trip or a major purchase within the next six months.

So what do these seemingly contradictory indicators mean for the banking industry? It seems that consumers are tiring of bad economic news and are looking for reassurance that spending, or more specifically, borrowing to spend, can fit within their household budget. This could mean a resurgence in loans and borrowing in addition to extending credit card debt. It also means that banks and credit unions have opportunities to offer new financial products and new criteria for loan approvals.

In a separate report from FactorTrust, which maintains the Underbanked Index, new lending criteria imposed by the Consumer Financial Protection Bureau (CFPB) will make it harder for some borrowers to qualify for credit or loans. According to FactorTrust, “deserving consumers will be more likely to obtain loans when alternative data is taken into consideration.”

The CFPB is expected to require lenders to apply stricter criteria for consumers who want to borrow,specifically qualifiers designed to ensure that consumers can repay short-term loans, deposit advance products, installment loans, and open-end loans. Lenders now will have to take into account income, financial obligations, borrower history, and other factors while considering a 60-day “cooling off period” between loans. According to FactorTrust, these new rules do not take into consideration the underbanked who may need those loans, and should qualify without waiting.

The market climate seems ripe for banks and credit unions to come up with new loan products and lending criteria to help consumers borrow and manage revolving and short-term debt. Rules and regulations for borrowing are going to become stricter based on ability to pay, but with creative repayment terms, new types of loan products, and different qualification criteria, financial institutions can make it easier to borrow without breaking the rules.

This is not to suggest that the financial industry start embracing high-risk lending policies or offering junk loans. However, lenders can work with consumers to help them borrow when they need it, and help them better manage their debt and reduce risk of default. Relationship banking is the best way for banks and credit unions to compete with direct banks and online lenders, and many consumers will come looking for a better deal on loans before thinking about deposit rates. Those institutions that can make borrowing simpler and safer have a better chance of attracting new customers looking for a better way to manage their money.

Weekly Term Accounts APY Spread and Premium Index–May 2

by tom 3. May 2016 08:35

Market Rates Insight features 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.

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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:

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Do Consumers Really Care about Overdraft? You Betcha!

by tom 2. May 2016 17:32

The Consumer Financial Protection Bureau (CFPB) has been under a lot of scrutiny of late. a federal appeals court has been questioning the structure of the CFPB, claiming the watchdog agency has too much power centered in its top official, Director Richard Cordray. At the same time, banks have been calling for the CFPB to back off on its call to banks to offer more products without overdraft fees, as well as to clean up credit reporting. Overdraft fees have become the rallying point for the banking industry – financial institutions rely on overdraft for much of their income while the CFPB continues to claim that overdraft fees are punitive and target those who can least afford them.image

With all this industry ranting and railing, you have to wonder how much consumers really care about overdraft? If you talk to the experts at the Pew Research Center, they care a lot!

What seems to be misleading about the response to overdraft is the level of public complaint. The CFPB reports having 8,000 complaints in its database compared to more than 150,000 complaints about mortgages. When you consider the difference between thousands of dollars and the possibility of foreclosure against a $35 fee, overdraft seems like small change. However, just because consumers aren’t complaining to the CFPB doesn’t mean they aren’t upset about overdraft.

In a  guest editorial by published in American Banker, Susan Weinstock who directs the consumer banking project at the Pew Charitable Trusts notes that according to their research, a disproportionate number of American are being penalized with overdraft fees. In a follow-up editorial published last week,  she defends the Pew research, explaining that one in four complaints to the CFPB have to do with overdraft:

“The Pew Charitable Trusts' nationally representative survey research shows 87% of overdrafters are somewhat or very concerned about the cost of overdraft service. Furthermore, 80% believe that overdraft practices and fees should be more closely regulated. And the majority would prefer to have their transactions declined rather than pay a $35 overdraft fee. With the friendly sounding labels for some overdraft services – such as “courtesy pay,” “overdraft privilege” and “bounce protection” – overdraft fees might appear to be products that are helpful to consumers as the author suggests but our research suggests otherwise.”

A related Pew study shows that it’s younger and poorer depositors who are most affected by overdraft fees. Of those paying $100  or more in overdraft fees each year, seven out of 10 make less than  $50,000 per year. The Pew research also shows that more than half of consumers paid more than $300 in overdraft and in one quarter of cases the equivalent of one or more week’s wages.

Consumers want consistency and predictability from their bank. A survey by the FDIC of underbanked/unbanked households reports that 31 percent don’t have a bank account partly because of unpredictable of high account fees (13 percent say it’s the primary reason). Even those consumers who are not considered members of the underbanked balk at paying overdraft fees. Eighty percent of those surveyed by Pew feel overdraft needs to be better regulated, and the majority would rather see a transaction declined than pay a $35 overdraft fee.

Perception is reality, and if customers believe they are being unfairly treated by overdraft fees, then banks will have to address those concerns. There are more financial options from non-banks than ever, and if financial institutions are seen to be uncaring about overdraft, it may drive customers to look elsewhere for checking services. Of course, banks will continue to use labels such as “courtesy fee” or “overdraft protection,” but that’s just putting lipstick on the pig. Even if they opt in, consumers don’t want to feel they are being penalized for spending their money, and smart banks are starting to treat overdrafts as small financial loans, linking them to a line of credit or some other small credit options that are sustainable and affordable.

Customers aren’t being fooled by overdraft fees with pretty names. It’s time for for banks and credit unions to wean themselves away from overdraft revenues and look for new profits centers.

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Consumer Confidence | Overdraft | Regulations

Weekly Term Accounts APY Spread and Premium Index–Apr 25

by tom 26. April 2016 06:53

Market Rates Insight features 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.

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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:

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The New Market Reality of Deposit Rate Promotions

by tom 25. April 2016 14:25

Market Rates Insight has just celebrated its 31st anniversary, and over the last three decades we have seen trends come and go. Throughout that time, deposit rate promotions have proven to be the mainstay of banking business development. Bans and credit unions have continued to promote the best deposit rates to attract new customers and, once they’re hooked, offer additional products and services to increase share of wallet.

Things have changed.

Coming out of a climate of ongoing depressed deposit rates, banks are credit unions are dealing with a new typeimage of customer and a new market climate. Deposit rate promotions don’t have the impact they used to, and they don’t have the lasting returns terms of customer retention and cross-sell and upsell. Let’s consider what has changed:

  1. A new generation of banking customers has entered the market that has no appreciation for the competitive landscape for deposit rates that ruled before the Web. Today’s college graduates and Millenials want convenience over returns. They are saving their money, but they are shopping for frictionless transactions, mobile banking, peer-to-peer payments, and services that make their lives visibly easier. Convenience trumps returns, at least for those just entering the workplace who are still new banking customers.
  2. There is more competition than ever. Consumers have more financial services and banking options than ever before. Most of today’s consumers have become accustomed to using hyper-specialized services, so they think nothing of depositing their savings in one location while using another institution for checking or simple transactions. There isn’t the  same perceived need to find a single bank or credit union that can serve all your needs, and as a result there isn’t the same sense of customer loyalty as in the past. Plus there are new tech competitors emerging to compete for consumer financial services.
  3. The Web also has contributed to deposit churn. In addition to more competition, finding better deals has become easier than ever. Online promotions and the simplicity of Web search has made alternative deposit options easier to find, so consumers will shop for deals.
  4. It’s easier to switch institutions. The Internet has changed the way we bank, and it has become easier than ever to change banks or credit unions with the click of a mouse. Some customers chase rates looking for better returns, especially since deposit rates have been stagnant for so long. Many consumers however, are starting to split up their money, using different institutions or opening multiple checking, savings, and credit card accounts to meet different needs.

When you consider the alternatives and possibilities presented to consumers in this new market climate it’s no wonder that they look beyond deposit rates when looking for a home for their money. So how do financial institutions compete in this new market? They have to play the game and look beyond deposit rates to attract customers and build profits.

Consumers want simplicity, convenience, and to a degree a “cool” factor from their financial institutions. They may consider deposit rates for savings but the return on deposits doesn’t offer the immediate appeal it once did. Deposit rates aren’t sexy. So while maintaining competitive deposit rates is still vital for customer retention, what is bringing new depositors in the door are promotions that offer something new and innovative.

One of the side effects of the Web is promotion fatigue. Consumers are bombarded with offers from vendors of all kinds, including banks. All it takes is a simple Google search for “best deposit rates” to set off a steady stream of promotions delivered to your Facebook and email box. So how do you compete in this new market climate? As the old saying goes, “If you can’t beat them…”

Banks and credit unions need better “hooks” to gain consumer attention. They need to appeal to the new demand for convenience, offer better customer service, and an target promotions to what consumers expect from the new generation of financial services. Banks need to do more consumer research, gather more competitive data, use more analytics, and gain a more in-depth understanding of what makes their customers expect and want. Then banks can develop the right mix of products and services including mobile banking, peer-to-peer  transfers, security, and so forth to attract new customers.

Those financial institutions that gain a better handle on the needs of the new consumer will be in a better position to retool their promotions to attract new business. Today’s consumers are going to come for the latest “cool” services and features, but they will stay for the deposit rates.

Weekly Term Accounts APY Spread and Premium Index–Apr 18

by tom 18. April 2016 16:38

Market Rates Insight features 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:

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