There are two sides to every coin and in banking the question is often to you want to chase the depositor of that coin, or lend it out?
Well the Federal Reserve’s decision to hold interest rates at record lows since the economic downturn gave the banks’ in the United States loan portfolios a nice boost from 2010-2011, but the subsequent actions and banking environment resulted in deposit growth outpacing loans – leading to a marked reduction in loan-to-deposit ratios across banks since 2011. In fact currently there is almost $1.30 in deposits for every loan out there today. This, in turn, has manifested itself as a reduction in net interest margins for all U.S. banks over the last three years – a situation unlikely to improve until the Fed hikes interest rates.
Additionally, the banks’ have found that while they are now holding on to more of these deposits that additional regulations in the form of the CFPB looking to evaluate account origination processes, Basel III Liquidity concerns, CCAR and CIP & KYP have all made the burden of holding these deposits more costly. In fact the CFPB suggests four items they believe will improve financial institution’s checking account screening policies and practices:
- Increase the accuracy of data used from CRA’s
- Identify how institutions can incorporate risk screening tools while not excluding potential accountholders unnecessarily
- Ensure consumers are aware and notified of information used to decision the account opening process
- Ensure consumers are informed of what account options exist and how they access products that align with their individual needs
Lastly, to add to this already challenging environment, technology has switched the channel of choice to your smartphone and has introduced a barrage of risks associated with identity authentication – as well as operational opportunities.
As leaders in retail banking and in addressing the needs of your customers, I would like to extend an invitation on behalf of Experian for you to participate in our latest survey on the changing landscape of DDA opportunities. How are regulations changing your product set, what role does mobile play now and in the future, and what are your top priorities for 2015 and beyond? These are just a few of the insights we would like to gain from experts such as you.
To access our survey, please click here. Our brief survey should take no more than seven minutes to complete and your insights will be highly valued as we look to better support you and your organization’s demand product needs. Our survey period will close in three weeks, so please respond now.
As a sign of our appreciation for your insights, we will send all participants an anonymous aggregation of the responses so that you can see how others view the retail banking marketplace.
So take advantage of this chance to learn from your peers and participate in this industry study and don’t leave your strategy to a flip of a coin.