Winning Deposits Overnight: How to Watch Your Competitors and Price Effectively

Timing is crucial for institutions gathering time deposits, not just because time is a key feature of CDs. Depositors consider the offers available when they’re in the market for a time deposit. How institutions time their CD promotions can place them in top consideration or prevent their consideration altogether. So how does an institution “time” its promotions and offers?  

Timing offers is about competitive information. Institutions with sufficient clarity of their marketplace – such as the terms available, gaps in rate-term pairings, and pricing changes from competitors – can choose their place in that market. They can defend against new top-of-the-market promotions launched by competitors, craft combinations for new segments, and carve out niches in unserved spaces. 

The industry landscape also has elevated the opportunity to use information to enhance CD competition. A 12-month maturity has been very popular among savers entering CDs or U.S. Treasuries. Given that popularity, a host of time investments – across CDs, share certificates, and U.S. Treasuries – are coming to term in 2024 and 2025. 

As depositors consider where their funds land next, institutions can go after strategic priorities such as controlling rising cost of funds. Using information to navigate competitive offers, they can control pricing and still gather volume through information excellence when it comes to the pricing landscape of their markets.  

A Wave of Mandatory Depositor Shopping 

Depositors tend to focus on three features of CDs. Certificates pay a higher rate than fully liquid accounts, come with a “locked-in” time commitment, and often auto-renew at a low “disclosed” rate if not negotiated. If depositors want a market rate of return, shopping for the best rate is nearly always mandatory at CD maturity. 

The volume of certificates reaching maturity in 2024 and early 2025 is historic. According to industry data, banks and savings institutions have more certificates on their books now than ever before. And they may receive more as rates incentivize locking savings at a high fixed rate.  

Data from the FDIC indicates that time deposits have grown significantly in recent years. From a low point where CDs accounted for just 6.8% of total domestic deposits, they have surged to nearly $3 trillion, making up 17.7% of industry domestic deposits as of June 2024. This unprecedented growth highlights the growing role of CDs in the financial landscape. 

Depositors read the news; they see the headlines about the Federal Reserve moving rates. Change breeds curiosity, and many will shop institutions because of that curiosity.  

Rates above near-zero levels also incentivize curiosity because deposits can provide meaningful returns. When people become curious, they commonly visit their institution’s website. They also check the websites of the two or three other institutions they work with. And then, they check Google. Google will favor those institutions paying for top promotional placement or those that have made significant investments in search engine optimization. (For these reasons, community financial institutions choose to work with CD Valet, a digital marketplace where banks and credit unions can leverage the authority and consumer traffic that the marketplace has earned with Google.) 

Let’s look at how market intelligence can help your institution ensure it receives more consideration than the competition when depositors are in the market. 

Winning Consideration: Using Information as a Competitive Advantage 

Institutions can only outprice competitors so much. Competing on consideration through market intelligence offers a means of acquiring funding volumes. Here’s how. 

To begin with, banks and credit unions can assess depositor interest in CD terms and compare that data to their and competitors’ offerings. Is there demand for a term that has lower supply from institutions in your local market?  

Promotional CDs are an excellent place to start. For example, six-month and seven-month CDs commonly take first and second place, respectively, for consumer demand of promotional CDs as measured through browsing data collected by CD Valet. Third and fourth place, however, vary widely. Some markets have no offerings for specific terms.

According to CD Valet’s Market Intelligence Tool (MiT), a healthy contingent of depositors shows interest in terms less commonly offered on institution rate sheets.  

In 2024, Six-month CDs (24%), seven months (15%), and nine months (13%) command about 52% of the demand on CD Valet for promotional term CDs. Ten months (10%), eight months (10%), and three months (7%) receive over a quarter (27%) of the promotional CD browsing activity, according to CD Valet’s Market Intelligence Tool, which has data from over 4000 U.S. banks and credit unions.       

Pair your institution’s offers with CD terms that receive low to—or no—supply from competitors, and you can serve depositors’ unmet needs. Your institution then receives consideration through other means than a high deposit rate; you’re competing where there is demand and less competition. Your institution may even be the only one offering a term in their market.  

After finding those supply-demand mismatches, an institution must design the offer. What are other institutions offering? MiT’s Yield Curve makes it easier to complete these opportunistic offerings by showing all competitors’ select specific competitors to research, and you can isolate data to banks or credit unions.  

That decrease in the time needed to put a new offer into the market can increase funding volumes gathered materially.   

Opportunity Cost: The Time Value of Information 

When the Federal Reserve shifts rates, how much does it cost an institution – in terms of interest expense – to respond slowly with new offers? We don’t have a clear way to measure that cost. The opportunity cost, however, is easier to quantify if you look at it in terms of volume.  

Consider a small independent gas station that updates prices slower than its competitors but shares a stop with larger corporate stations. When prices change, which station receives the most consideration, and what is the opportunity cost of being slower to update prices? The answer depends on how many drivers pass by in a day.    

Banking institutions have a similar situation in their pricing operations. They don’t usually have faulty signs; they conduct a slow and manual price survey by visiting their competitors’ websites. That slow and manual market intelligence process affects their standing in depositors’ consideration for deposit dollars that must find a new home on any given day. Industry data suggests that opportunity cost is significant.  

EXAMPLE FROM SEPTEMBER 2024

Dividing the $2.5 trillion in bank CDs maturing before April 2025 across the 12 months from March 2024 to March 2025, that’s $208 billion in deposits that reenter the market each month. About $6.85 billion will “drive by” banks and credit unions daily until March 2025. And that’s just the volume maturing in CDs. When the Federal Reserve announces a rate policy, the volume can be even more significant than that – whether it raises or lowers rates.  

Information Arbitrage: The Opportunity in Better Timing 

As interest rates rise and fall, executives should add a new question to their strategic plan: What if we knew overnight how and when competitors change pricing? What if we could respond much more quickly?  

When competitors remain dependent on longer manual processes, the institutions with faster feedback loops receive far more chances to woo CD holders by simply addressing the market in closer to real-time. All banking institutions need a certain amount of deposit volume to operate. Pricing acumen improves the institution’s success in executing promotions to attract that volume. In turn, that decreases the likelihood that a bank or credit union will need to obtain funding by raising prices or going to wholesale markets.  

Another question for executives:

Do you know your competitors’ cadence for promotions and pricing changes?  

HOW MIT ENABLES COMPETITIVE INTEL:

Using CD Valet’s MIT, a financial institution can establish a customized portfolio of competitors to easily track their CD offerings and rate changes.  This simplifies that traditional “rate surveying” activity and allows you to track and analyze real-time pricing trends in your market or throughout the nation. 

Often, institutions follow a somewhat bureaucratic timeline – manual information gathering and pricing committee meetings – before releasing new promotions. If you know how and when competitors release new promotions, you also know how long you have to air relevant offers before a competitor responds. Again, while this removes price competition, it can allow an institution to grab volume without a price increase – at least for a while.   

With institutions scrambling to gather deposits while managing pricing, timing is a new tool institutions can utilize to affect depositor consideration as they shop in unprecedented numbers.  In 2024 and 2025, banks and credit unions utilizing market intelligence can grab historic CD volumes by competing on consideration. The result can be higher profits driven by savings in interest expense.   

Free Trial:

Activate your free 14-day trial of CD Valet’s Market Intelligence Tool—a comprehensive dashboard of CD market data tracking daily rate trends from thousands of institutions, including competitors—by filling out the form here.  

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