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Articles by Peter Serene
The Advice Gap: Customers Expect More, and What Banks Can Do About It
What consumers are saying across all segments—Paycheck-to-Paycheck, Stable Mass Market, HENRYs and Affluent—is increasingly clear: they expect financial guidance from their bank. But fewer and fewer see value in what they’re currently receiving. For example, banking is increasingly going digital, yet only 25% of current customers use their bank’s digital advice tools. Only one in five affluent customers feel that whoever is providing them in-person interaction knows them personally.
Everyone Wants to be a Bank. How to Compete?
The scale of their networks and their unique charters have long provided moats for banks, but these moats are evaporating thanks to digitization and greater regulatory openness to granting charters to disruptors. The intensified competition comes at a time when growth is constricted by low population growth and when profitability is squeezed by skyrocketing customer acquisition costs and margin compression.
With Deposit Growth Flat, Retention is Your Hidden Profit Center
This is the second in a series of reports on the current state of consumer banking and how decision intelligence is quickly and dramatically altering the industry as we enter the first full year of AI-native banking. All banks are fighting to grow deposits in the early going of 2026, but some may be under-appreciating the value of retention. Industry data show that average balances on lost checking customers is materially higher than balances on new-to-bank accounts.
Finding a Lane and Shifting into the Growth Gear
This is the first in a series of reports on the current state of consumer banking and how decision intelligence is quickly and dramatically altering the industry as we enter the first full year of AI-native banking. Flat growth. It’s an oxymoron that’s exciting to no one. Yet it’s where most regional banks find their consumer franchises. Population growth is about one percent.
Will Stablecoin Decimate the Deposit Market?
Where stablecoin is headed is anyone’s guess, but that’s all the more reason to plan for a range of scenarios, some of which could have a profound impact on bank deposits. If customers adopt stablecoin for day-to-day payments, this could transform stable low-cost operating deposits into concentrated high-cost collateral pools held at the largest banks. Stablecoin adoption won’t spread like peanut-butter across customer segments.
The Fed is Back in Action
In a move that was widely expected, the FOMC cut the target range for the Federal Funds rate by 25 basis points to a range of 4.00% to 4.25%. The decision was nearly unanimous, with only one dissenting vote. (Newly confirmed Board member Stephen Miran would have preferred a 50-basis point reduction). The headline news from the Summary of Economic Projections (SEP) now suggest three 25-basis point cuts by the end of 2025, up from two 25-basis point cuts in the June SEP.
New Growth Paradigm in Commercial Banking
Three sea changes are disrupting the traditional commercial banking business model: the repeal of Reg Q, private credit and the proliferation of tech vendors and APIs. To meet the moment, banks will need to rethink where they’ll compete, how they’ll win and how winning in the new commercial market will translate to their financials.
How to Capitalize on this Year’s Growth Opportunity
From It’s Go Time for Commercial Banking: Are You Ready?, a webinar presented by Curinos on February 25 & 26, 2025, that featured Margarita Vacanti, SVP, Commercial Banking and managing directors Peter Serene and Bob Warnock. After several years of challenges, the commercial sector is poised for growth, thanks to what appears to be an increasingly favorable economic and regulatory environment.
Strategic Retail Planning - 5 Takeaways
From the Curinos webinar, “Harnessing the 4 Most Crucial Drivers of Growth in 2025,”presented on December 3, 2024, and featuring Curinos managing directors Peter Serene, Adam Stockton and Bob Warnock and SVPs Olivia Lui and Rich Martin.
Fed Cuts Another 25 bp
As was widely expected in the markets, the FOMC cut the target range for the Federal Fund rate by 25 basis points to a range of 4.5% to 4.75%. Chair Powell reiterated sustained confidence that the economy remains on a path toward a long-term goal of 2% inflation despite a modest monthly uptick in the October CPE print. The committee also noted that, despite moving up modestly, the unemployment rate remains low.
Down-Pricing in a Falling Rate Environment
From “How to Optimize Down-Pricing in a Falling Rate Environment,” a Curinos webinar presented on September 24, 2024, in conjunction with Consumer Bankers Association featuring Curinos managing directors Peter Serene and Robert Warnock. With the Fed having cut rates in September, banks and other financial institutions are eagerly awaiting a reprieve in funding costs. But in prior cycles, deposit costs have proved stubbornly slow to come down.
The Fed Goes Big
The FOMC cut the Federal Funds target rate by a decisive 50 basis points to a new range of 4.75% to 5%. The dot plots in the summary of economic projections indicate an expectation, on the part of FOMC members, that rates will likely fall an additional 1.5%, or more, through 2025. With this turn in the rate cycle, we’re entering what may be, in many ways, uncharted territory.
Commercial: How To Deal With Declining NIB Deposits
Non-interest-bearing deposits, a key pillar of commercial banking profitability, are at risk because of higher interest rates and changes in the regulatory environment since the last time rates were this high. In response, banks should shore up existing treasury management pricing. Tiered pricing for clients who “pay with deposits” versus cash is another option. Should neutral rates stay higher than expected, institutions may consider a more radical rethinking of pricing for payments services.
The Implications Of Higher For Longer
The FOMC held the Federal Funds target range flat at 5.25% to 5.5%. As previously communicated, the Fed has tapered quantitative tightening by $35B, lowering the redemption cap from $95 billion per month to $60 billion per month. The real news, however, was in the Summary of Economic Projections (SEP). In the previous SEP, 10 of the 19 FOMC participants expected three or more 25 bp rate cuts in 2024.
Commercial: Falling Rates Won’t Stop Deposit Flow To IB
Migration from non-interest-bearing (NIB) commercial deposits to interest-bearing (IB) continues. It’s no mystery: The market rate for IB is about 400 bp, nearly five times what NIB deposits earn. By the end of this year, Curinos expects that some additional transfers will take place and NIB balances may be only a quarter of total commercial deposits, down from almost half in early 2022. This migration might have been even faster if not for institutional inertia.
Banks May Have Turned The Tide On Commercial Outflows
After well over a year of significant outflows, commercial deposit balance levels stabilized in the second half of 2023. The average bank ended the year down 7%, but many managed to end up flat for the year and some even printed a little growth. What changed? Three key factors contributed to stabilizing balances. First, strong GDP growth provided an offset to the impact of quantitative tightening on overall money supply.
2024: The Year Of The Liquidity Manager
In commercial, the key challenges in managing deposit betas in a falling-rate environment are the back book of interest-bearing deposits and non-interest-bearing DDA. In consumer, interest expense will increase until the first Fed rate cut as deposits continue their rotation from lower-rate checking and savings into high-rate products. In small business, deposit costs are likely to stay lower than other lines of business, while in wealth, the worst has passed, though some headwinds remain.
Taking Stock Of The Rate Cycle And Its Implications
As expected, the FOMC held the Fed Funds rate unchanged at a target range of 5.25% to 5.5%. The Summary of Economic Projections (SEP) reflected the market consensus coming into the meeting that the Fed Funds rate has reached a peak level for this cycle. The forward–looking outlook in the dot plots was modestly more dovish than the September SEP and now indicates a most likely outlook of 75 bp of rate cuts in 2024.
Harnessing The 4 Most Crucial Drivers Of Growth In 2025
As 2024 draws to a close, we’re bringing our experts together for a deep-dive on what’re likely to be the four most consequential and influential factors on banking performance in 2025: the direction of rates, changing customer behavior, personalization and accelerating AI, and regulatory changes and possible restructuring.
Curinos Perspective: Fed Holds Rates Steady Again, Home-Lending Pressures Continue
As expected, the FOMC maintained the Federal Funds rate at a target range of 5.25% to 5.50% at its November meeting, remaining unchanged from the previous September pause. Looking ahead to December’s final meeting of the year, Fed futures contracts suggest a 20% chance of a rate hike, according to the CME FedWatch tool. This brings a few questions readily to mind: Are we at the cycle’s peak, and if so, how long will it last?
Commercial Deposit Balances Stabilized In The Third Quarter
Commercial deposit balances grew on average 1.1% during the third quarter, a significant turnaround from the first half of the year when the average bank saw outflows of 11%. Curinos attributes this growth to three primary factors: Most banks showed they were willing to use rate aggressively to retain or buy back balances that otherwise would have moved to money market mutual funds.
The Risk Of "Magical Thinking" In A Fed Funds Plateau
As expected, the FOMC in September held the Federal Funds rate flat in a target range of 5.25% to 5.50%. The process of balance sheet reduction (quantitative tightening) will continue at the previously communicated rate of $95 billion per month.
Commercial Balance Levels Stabilize, But Betas Continue To Rise
Fed Funds rates are leveling off in a higher-for-longer range, but quantitative tightening continues. In this environment, commercial banks will have to balance the difficult tradeoff between deposit levels and deposit costs. Curinos’ most recent data suggest that more and more banks are prioritizing the former, offering betas of nearly 100% to attract commercial deposits.
Commercial Deposits: Market Disruption Means Heated Competition
Even though the Fed sat out hiking rates during the June meeting, commercial customer behaviors didn’t miss a beat. During the month of June, with no change to the Fed Funds rate, average portfolio rates on commercial interest-bearing DDAs increased 21 bp, from 2.55% to 2.76%, while commercial money market demand accounts (MMDA) portfolio averages increased 17 bp, from 3.28% to 3.45%.
Commercial Deposits On The Front Line
A commercial profitability squeeze is coming as net interest margin (NIM) is squeezed. There are factors on both sides of the balance sheet that contribute to these headwinds, but for the time being the most acute pressure is being applied to the deposit book. Starting with the left side of the balance sheet, both loan demand and risk appetite are in decline. Combined with an expectation that the Fed is at or near the peak of this hiking cycle, asset repricing is set to slow down.
Fed Pauses, But What Lies Ahead Is Less Clear
Today, the Fed announced a pause in rate hikes, leaving the benchmark Federal Funds rate unchanged at 5.00% — 5.25%, while leaving the door open for future rate increases. Following a series of rapid increases, the Fed has signaled less certainty about the path forward. Statements from FOMC members have offered multiple possibilities, from rate decreases as soon as the fourth quarter to continued aggressive increases.
Market Disruption Heats Up Competition For Commercial Deposits
In the immediate aftermath of the failures of Silicon Valley Bank (SVB) and Signature Bank (SBNY) in March, commercial deposit markets experienced higher volatility, flight to perceived quality and an increase in flows to money market mutual funds. As measured by commercial deposit growth, the week following the failures saw more than 10 percentage points in divergence between the top and bottom half of regional banks.
Fed Plateau: Key Insights
The Fed again slowed the pace of rate increases, raising the target Fed Funds rate 25 basis points to 4.50%-4.75%. If inflation figures continue to show progress, markets are anticipating a plateau, with the Fed pausing rate hikes to examine the effectiveness of the increases to this point. That doesn’t mean it’s time to start celebrating. Historically, Fed rate plateaus have introduced their own set of challenges for the industry.
Future of US Deposit Levels
U.S. bank deposits are in decline, down 2.4% since peaking in April 2022. That doesn’t sound like a lot, but those declines are unprecedented. And they translate to $440 billion in deposit outflows from banks. Still, about 90% of the surge, or $3.4 billion of balances, is sitting on bank balance sheets. Given the current balance of monetary tightening and growth, these balances are set to decline by between $50 billion and $100 billion per month with some seasonal variance.
This Month in Commercial Banking: Staying Ahead
Welcome to the May issue of This Month in Commercial Banking. There is little doubt that rates and pricing will be a big juggling act for the rest of the year as bankers weigh customer needs against the institution’s strategic and economic goals. It certainly won’t be easy, but the way to stand out from the rest is to know your clients deeply by using analytics and other tools to segment them based on factors that are most important to the bank.
Retail Banking’s Final Countdown
It’s the final countdown. This will be our last issue of This Month In Commercial Banking prior to the March FOMC meeting, which is widely expected to mark the start of the next rising rate cycle. And as we’ve written for several months now, this cycle promises to be like none other.
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