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Historically, pricing differentiation in the consumer deposit space has been used mainly by traditional brick-and-mortar institutions. It’s been a way for them to realize greater efficiency by leveraging promotional offers, regional pricing, and various on-sale products to attract new customers with better offers, while keeping a lid on overall portfolio costs. Direct banks with High Yield Savings accounts, on the other hand, have typically embraced the one-rate-for-all structure, marketing the simplicity as a key draw for consumers. But that landscape is starting to change.
With the Fed in a holding pattern for now, and money in motion sluggish as a result, some direct banks are embracing pricing differentiation as a way to advertise a higher savings headline rate closer to the key 4.00% round-number, which is a psychological hurdle point, without incurring the costs of repricing their entire back book. They’re doing it with new client promotional rates, checking-linked benefits, balance tiering, and multiple savings or money market products.
Source(s): Curinos Analysis, Curinos Consumer Deposit Analyzer
And based on data from Curinos’ Retail Deposit Analyzer, these strategies are starting to make a difference. Within cohorts of direct banks that hold a similar weighted portfolio rate, those that differentiate pricing in their savings book have seen much higher balance growth, at 12.8% in the past 12 months, compared with those in similar cohorts that don’t.
But the jury is still out. If the Fed pivots to increasing rates, as the latest dot plot suggests, this practice may recede as more High Yield Savings account base rates naturally surge past that 4.00% hurdle point. For now, however, some direct banks have found that pricing differentiation is certainly one way to drum up consumer interest.
