The Dodd-Frank Act, aimed at regulating and reforming financial institution practices has been blamed for plenty of changes in the banking industry: the death of free checking, and the end of debit card rewards, to name a couple. Speculation remains around whether this consumer-protection act has really protected consumers at all. Whether the government intervenes in banking practices or not, the fact of the matter is that banks are for-profit entities, and have shareholders to answer to. The end result is that banks have been tasked with new ways to generate lost fee revenue that Dodd-Frank banished. Unfortunately, customers seem to be bearing the brunt of the reform.
But, because of Dodd-Frank, some financial institutions will see a significant increase in their insurance fees. One way to offset the fees is to increase deposit liquidity. How will they do this? By attracting new customers and deepening relationships with new ones.
Market Rates Insight Executive Vice President Dan Geller, Ph.D., expects that competition for retail deposits will heat up among all institutions, including credit unions. He expects to see promotions focused on acquiring long-term deposit customers, like relationship incentives associated with checking accounts, and potentially higher interest rates for the use of “sticky services” (the ones that make it a pain to switch banks), like direct deposit, automatic bill pay and automatic savings plans. Geller also pinpoints long-term CDs as a hot product for banks because inflation is growing.
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