Vince Passione, the CEO and founder of Lendkey, echoes our findings, emphasizing the urgent need for credit unions (and community banks, we may add) to reassess their deposit strategies. In his recent presentation at the America’s Credit Unions Strategic Growth Conference, Passione underscored how deposits fuel your lending in two crucial points that align with FlowTracker’s industry messages:

1. While credit union core deposits continued to grow in 2023, that growth came at a cost. Passione highlighted the rising cost of funds across the industry, averaging approximately 218 basis points. Additionally, he pointed out the changing deposit mix, emphasizing the need for credit unions to adapt to evolving consumer preferences.
2. Passione emphasized the importance of proactive measures in response to shifting deposit dynamics. He warned against complacency, citing the increasing popularity of apps like Venmo and Square and the dominance of major banks, which now hold 60% of deposits. Credit unions and community banks must recognize the challenges posed by these trends and implement strategic adjustments.

Passione introduced the concept of the “new deposit normal,” which aligns with our Active Deposit Management approach. Key considerations include accurately measuring cannibalization, enhancing operating efficiency, and prioritizing deposit retention through continuous vigilance and innovation.

The New Deposit Normal and your lending

According to Passione, the “new normal” environment coincides with what we present to credit unions and community banks as the rationale for Active Deposit Management:

• The cost of funds will be much higher.  Yes, you need to accurately measure, not estimate, your cannibalization and understand how it relates to your portfolio’s various geos and demographics.
• Increasing operating efficiency will be paramount. Banking is going back to normal. 
• Deposit retention will require constant vigilance and new strategies. As we always say, stop tracking deposit loss by closed accounts. When the funds disappear, and the account remains open, it costs you even more.
• New member acquisition and relationship-building strategies are critical.  Better relationships demand you understand the behavior of your members.

Banking is an industry in which deposits are the raw material, and lending is a by-product.  Paying attention to your deposits will lead to more lending opportunities.

Effective deposit management is foundational to banking success

Some final thoughts:

• Nobody can control the future, but you can take steps in the present to be more ready for it.  Better deposit management is an excellent place to start.
• Good deposit management creates lending opportunities. Understand the financial behavior of your members/customers and uncover untapped opportunities. That is use your deposit to fuel your lending.
• Partnership with compatible Fintech enables you to increase speed to market and efficiency.

Contact us to discover how DEPOSIT EDGE insights can empower your institution to revamp deposit management strategies and thrive in today’s competitive landscape. Don’t miss out on the opportunity to stay ahead in the war for deposits.