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This Month in Commercial Banking: The Latest on Rates, Pricing and More…

The most recent Curinos data that reflect the July Fed hike show banks running lower commercial deposits betas relative to the end of the last cycle. Digging deeper into the data, however, we see significant risks that commercial betas accelerate through the end of the year. To offset the impact of higher deposit costs, banks are undertaking more ambitious pricing events this year. Our most recent data suggest there has been a strong focus on capturing premium pricing for labor intensive service codes. In addition to pricing, this month we explore in greater detail how commercial banks can leverage digital marketing to efficiently identify incremental solutions opportunities. And finally, we share insights from Treasury Strategies on how corporates can optimize their banking services through regular formal banking services reviews and by optimizing the implementation of treasury management systems.

Don’t Expect Betas To Stay Low For Long

The Fed Funds target rate has now reached the same level as it topped out at in the last cycle, but this time it took five months as opposed to the last cycle’s four years. Because of the speed of this cycle, betas have lagged the prior cycle so far, sitting at 21.4% for IB DDA and 22.4% for MMDA. We believe that continued re-pricing will push betas higher through the rest of this year.

There are two key drivers that will likely push betas higher:

  1. The back book. Today, 42.2% of MMDA balances are priced below 25 basis points (bp) compared with only 22.2% at the end of the prior cycle. But banks won’t be able to keep rates on these balances flat indefinitely. In fact, the share of balances priced below 25 bp is down by more than 8% in the last month alone.
  2. Prevalence of very high rates. Currently 10.2% of MMDA balances are priced above 150 bp compared with 49.2% at the end of the last cycle. The discipline that many banks have shown around offering very high rates so far is a function of the strong funding position most banks maintain as they come off the deposit surge. But this discipline has come at a cost – MMDA balances are down 16.5% year over year.

It’s clear that many banks are still enjoying lower betas relative to the past cycle. This makes sense since most of them entered the cycle with significant excess liquidity. As monetary conditions begin to tighten, however, bankers and investors should prepare for the possibility of sharply higher betas and funding costs towards the end of the year. (See Figure 1.)

Figure 1: Commercial MMDA Rates – Target Fed Funds Rate 225-250bp in each period

Source: Curinos CDA

Peter Serene ( and Jing Tang (

TM Fees Rise, But There’s Room For More

It took a while, but treasury management price increases are finally front and center for many providers. Many more banks have pursued material price increases in 2022, but only a small portion have sought increases that exceeded 6% or the current pace of inflation. This means that many banks will experience real-term price decreases in 2022 if inflation stays the current course.

This comes at a time when TM fee growth is increasingly important for banks – especially as fees in other parts of the bank decline. Furthermore, higher TM fees can help offset hard dollar fee losses from ECRs and keep balances in DDA accounts as interest rates rise.

While recent TM fee growth has been above long-term averages, much of it has been driven by increased deposit assessment fees (DAF) from the deposit surge. As commercial deposits level off and ultimately decline in the next years, so will DAF and much of this growth will be rolled back. The near term stop gap for this downside risk will be pricing. Banks should be aggressive for their 2023 pricing events because of this dynamic and the persistent pace of inflation.

But where should banks make their next wave of price increases? The first area are the services that are manually intensive and paper-based, i.e. those most directly impacted by the increases in rising costs. In 2022, these costly or “penalty” services had an average increase of 15% compared with 1% for core services and roughly no increase for value-added services. (See Figure 2.) Banks that haven’t focused in these areas should focus first here; those that have already targeted this area should consider another increase in 2023 to ensure they are keeping pace with inflation.

After that, there might be a chance to pursue a more broad-based approach to price increases. Curinos has found that 2022 price increases were focused on 5% or more increases in about a third of codes, while the other two-thirds of codes had immaterial changes. (See Figure 3.) Given all the factors in the market today – not the least of which being rising ECRs lowering the portion that clients would directly pay for – a wider net of increases would likely be successful in 2023 as a re-baselining for the post-pandemic area.

How can banks determine and pursue these increases? Critical inputs into this process are enhanced data analytics and benchmarking. Precision and differentiation will be two key elements in determining the optimal magnitude of increase. But these increases cannot be made in a vacuum of the bank’s position in the overall client relationship. That means primacy scoring will be more important than ever. Formalizing primacy measurement and goals and integrating these scores with TM fee discounting allows for more strategic relationship pricing.

The most successful banks in this TM pricing cycle will be those that can effectively combine a strategic view of primacy with detailed TM pricing benchmarking and advanced analytics.

Figure 2: Average YoY Price Change by Key Driver – Top 70 codes

Source: Curinos CDA

Figure 3: Distribution YoY Price Changes – Top 70 codes

Source: Curinos CDA

Scott Musial (

Digital Corporate Platforms Can Support Sales, Too

Sales teams, take note: sophisticated corporate digital platforms can help generate leads and close deals. As corporate platforms facilitate workflow across transaction processing, investments and information services, providers are taking advantage of the communication path between client and bank to identify growth and revenue opportunities.

Like other aspects of banking, the buying process for commercial is being reinvented and incorporated into digital channels, including mobile. Most products offered by banks today are identified and sold under traditional methods, although some are slowly becoming digitized. This evolution is supported by digital marketing that creates awareness. The process of managing and closing the sale can be made possible through onboarding and self-servicing.

Treasury solutions, which are the foundation of the relationship by providing accounts and payments, can become more efficient in digital channels. The automation and streamlining of standard banking services allow sales and relationship managers to focus on complex solutions and advice, building strong relationships that drive growth.

There is more opportunity to drive efficiency and revenue, especially in deposit and payment products that currently require manual intervention from sales teams. (See Figure 4.) For example, Curinos data show that 6% of banks have digitized the buying process for commercial cards and fraud tools. (See Figure 5.)

Digitizing the lead generation process and directly pushing to clients creates the most efficiency from a sales, client and relationship manager perspective. The client’s ability to select products, turn them on and begin interacting the same or next day is a customer-centric approach. In essence, the client’s needs are meet immediately. Furthermore, sales teams have immediate insight into buying patterns and growth opportunities.

Figure 4: What is the perceived value of the following categories in contributing to revenue growth & efficiency?

Source: Curinos CDA
Source: Curinos CDA

Figure 5: Which of the Following Opportunity Types Do You Systematically Identify Through Your Digital Platform and How is the Lead Advanced?

Source: Curinos CDA

Jennifer Sypal (

Re-Bidding Services Can Pay Off For Banks And Clients

It may not be high on the to-do list, but corporates can often benefit from re-bidding their banking services. And a new deal can help the bank too.

Of course, companies always want to know if they are getting the best price for their bank services. In order to effectively answer this question, corporations need to understand how much they are currently paying – and whether they have been subject to yearly price increases. This is especially important as a company grows since bank deposits typically increase when revenue goes up. And as these companies get larger, they can deepen their bank relationships.

That said, the longer an organization is with a bank, the more it will expect some benefits from relationship longevity – especially when it comes to pricing. The bank, meanwhile, will want the growing client to use more of its products and services.

Pricing isn’t the only important aspect of a bank relationship, of course. The responsiveness of a bank to a customer’s needs and the alignment of a bank’s products to those needs is critical in evaluating current and future bank partners. Treasury Strategies, the corporate treasury consulting division of Curinos, has found that most bank RFP projects are initiated as a result of quality-of-service issues and an inability of a bank to provide certain services to the corporate client. The inability of a bank to provide needed credit support to a client is also a frequent factor in initiating an RFP for bank services.

Corporations that initiate a bank services RFP should structure the project using the following steps:

  1. Provide the competing banks with background on the company and its banking needs. The company should clearly identify the scope of services included in the RFP and the objectives of the project.
  2. Provide a list of qualitative questions to be answered by the banks in their proposals. The questions should reflect the specific objectives and scope of the RFP.
  3. Provide a pricing template for each bidder to complete. The structure of the template should be similar to an account analysis with the volume of transactions prepopulated by the company.

As for banks, it is essential to respond quickly and comprehensively to these requests. Otherwise, a current or future client could slip through their fingers.

Kasandra Jones-Wells (

How To Implement A Treasury Management System

In the last issue of “This Month in Commercial Banking,” we explored the challenges that corporates face when selecting a treasury management system (TMS). Now it’s time to address how that system should be implemented.

Putting a TMS system in place is a major undertaking, with inevitable budget constraints, overburdened staff and tight timelines. Strong project management is the key driver of success.

Treasury Strategies, the corporate treasury consulting branch of Curinos, has found companies that used an external project manager are markedly more satisfied with their implementations than those that used a treasury staff member or other internal resource to manage the project. Furthermore, those companies that only used internal resources were disappointed with their implementation results.

Not surprisingly, the most frequent source of dissatisfaction with implementation is delayed timelines. Overburdened vendor resources and lack of access to internal resources also are cited frequently in low satisfaction rankings for implementation. Another frequent obstacle is scarcity of internal resources and access to stakeholders during implementation.

These challenges underscore the need for a project manager and bankers who are familiar with treasury implementations. They are the ones who can identify and solve problems as they arise, marshal internal resources, oversee the vendor relationship and keep the project on track.

Because the TMS is the technology portal that interfaces with banks, bankers who have experience with corporate-facing electronic products can help with this implementation that will closely connect a bank and its corporate customer.

Paul LaRock (


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