Recently, Federal Reserve Chair Janet Yellen indicated that continuing positive economic metrics could portend an increase in interest rates by the end of the year.
Even with no affirmations on rate normalization timing and process, financial institutions are already moving aggressively to gain an edge on their competition in deposit pricing. In a recent webinar titled Overcoming Your Deposit Pricing Challenges, FICO Analytics Segment Leader Matt Stanley mentioned that 2014 witnessed a 30% increase in deposit pricing advertising, while some organizations have even started increasing rates in anticipation of Fed movement.
It’s not just economic events that are helping change the deposits game. As Matt indicates in the webinar, empowered customers – who now have access to more data than ever through mobile devices and real-time connectivity – have the ability to significantly transform the Deposit environment. The transition from brick-and-mortar banks to e-Banking is just one indicator of the evolution.
Regulations also weigh heavily on deposit pricing. In short, banks need to demonstrate they have sufficient liquidity and capital to withstand economic or other challenges. Stress tests, Liquidity Coverage Ratio (LCR) rules and other mandates demand well-managed and documented deposit pricing policies.
Gaining an edge on the competition requires gaining more transparency (to help ensure compliance), efficiency and agility around deposit pricing. A new white paper, The New Normalization: Three Keys to Successful Deposit Pricing Management covers several areas where organizations can move beyond elasticity models to develop the next generation of deposit pricing solutions, powered by both organizational planning and powerful analytic and mathematical innovations now available in the marketplace.