For the past 10 years, credit unions have consistently offered higher deposit rates than the biggest banks in the country.
However, the actual spread between banks and credit unions varies. The practice of credit unions offering better rates and lower fees is a competitive advantage that members have come to depend upon.
Maintaining this advantage is vital, and is likely to be a challenge in a rising-rate environment as banks launch a deposit acquisition strategy.
It seems like forever since financial institutions gave a tremendous amount of thought to pricing their deposit products. This malaise has lasted for at least five years, and sometimes it seems as if things may never change.
But is that true, or does it just feel that way? When things begin to change, will you be ready with the right offers to keep your members—especially since the world is much different than in previous rising-rate environments?
Your members are far more comfortable accessing financial services through the Internet and via their mobile devices, and even are looking to nontraditional financial services solutions. This time there will be even greater competition for the share of your members’ wallets.
As expected in a low-rate environment, certain deposit products that are advantageous to savers in a rising-rate environment are not being promoted. Over the last five years, the number of indexed money market products has dropped over 20% and the number of share certificates with “bump rate options” has dropped about 25%.
During this time, advertising spending for deposit products slumped as well. The number of newspaper deposit advertisements overall dropped 36% from a high in October 2008 to a low in January 2013.
But things seem to be changing. Since the beginning of 2014, deposit product newspaper advertisements are up over 30%. This is occurring even though the rate environment hasn’t improved.
Even with deposit rates still stagnant, certain institutions have begun promoting their deposit products. The number of newspaper advertisements has grown significantly.
Additionally, our deposit researchers have seen evidence of certain large banks preparing for a time when deposit rates finally begin to rise. Deposit product managers at certain financial institutions are looking at historical trends and are putting together pricing strategies for a rising-rate environment.
Conversely, other financial institutions seem to have become complacent, lulled by this drawn-out low-rate environment.
The deposit rate environment is not volatile, and your members have low expectations of deposit rates—at the moment. But keep in mind that not every institution is sitting on its hands.
Now may be your opportunity to plan your strategy.
When rates start to move up, certain institutions will be ready to act because they planned ahead. Consumers have waited patiently for an increase in deposit rates. At the first sign of movement, many of your members may jump at the chance to improve their rate situation.
Don’t be left scrambling for market rate information while your members are acting on more compelling deposit options offered by your competitors. Now is the time to plan your strategy.