New
Analysis Using MRI's TrendSpotter Report Shows that Reducing Fees Has
Little or No Impact on Deposit Growth.
San
Anselmo, CA, USA -- According to a recent analysis published by
CenterState
Bank, banks are reducing fees on deposit accounts
despite the fact that fees seem to have little or no impact on the
current increase in deposit balances. The analysis was developed
using TrendSpotter, a new research tool that tracks accumulated fee
trends for banks and credit unions nationwide produced by Market
Rates Insight, Inc., the leader in financial
services pricing intelligence for deposits, personal loans,
mortgages, and fees.
According
to the TrendSpotter analysis, service charges have been declining for
banks of every size over the last quarter - deposit fees averaged
$8.42 per month in December and declined to $7.92 the end of first
quarter. At the same time, balances required to open accounts have
dropped by 15 percent since December, and the average balance to
waive fees has dropped 6.6 percent. The decline in deposit fees seems
counterintuitive in a market climate where deposit balances are
increasing as a result of behavioral economics rather than fee
elasticity.
"We
have looked at this all different ways and find this borderline
irrational. Our only conclusion is that banks are not looking at the
data," wrote Chris Nichols, Chief Technology Officer of
CenterState Bank and author of the analysis. "As long as you are
not drastic, you can raise fees, lower fees or leave fees the same
and you are still going to get more deposits. If you are not, it is a
marketing/value problem, not a fee problem."
As
Nichols notes, that fee elasticity is negative in most markets, and
even banks that have not lowered fees on deposit products are still
increasing deposit balances. Banks that did not raise deposit fees
for the quarter saw an increase of 2.3 percent, while banks that did
raise fees increased deposits 2.1 percent, indicating that consumers
are clearly not fee sensitive.
Nichols'
conclusion is that this is the perfect market climate for banks and
credit unions to consider raising fees without risk. Banks that are
lowering fees in order to attract new customers and increase deposit
balances, and are ignoring the market data and abandoning possible
revenue at a time when banks and credit unions are facing near
record-low net interest margins.
About
TrendSpotter
TrendSpotter
is a unique tool that gives bank and credit union executives an
understanding of accumulated fee trends in the marketplace. Data is
extracted from Market Rates Insight's FeeBuilder, the first database
of retail deposit fees that tracks overdraft, non-sufficient funds,
monthly service charges, ATM fees, wire transfer, on checking, money
market, savings, certificate of deposit, and more. TrendSpotter
extracts trends from the FeeBuilder database and provides a picture
of fee pricing and penalties for banking products nationwide. User
can overlay their own fee pricing to create a trend line that shows
how the competition affects revenue, attrition, and volume for their
own fee-based products.
TrendSpotter
is issued quarterly on an annual subscription basis. For more
information, visit
http://www.marketratesinsight.com/news/MRI_TrendSpotter.aspx.
About
Market Rates Insight
For
over 30 years, Market Rates Insight has helped banking executives
make better informed pricing decisions. The company serves banks and
credit unions nationally with competitive information on deposits,
consumer loans, mortgages, and fees. Market Rates Insight provides
the most granular historical and refresh pricing data in the
industry, helping financial decision makers plan and prepare for
likely changes in rates and products. The company's cloud-based
system provides timely and precise competitive data supported by
usable graphs and charts.
Market
Rates Insight is located in San Anselmo, California. For more
information, see http://www.marketratesinsight.com.
Contact:
Tom
Woolf
Market
Rates Insight
(415)
259-5638
