As financial institutions face one of the most competitive deposit environments in recent memory, credit unions are looking for new products and growth avenues to attract deposits and long-term member relationships. Current deposit growth initiatives are largely focused on rate competition, as demonstrated by the sharp rise of CD specials and high-yielding accounts. Over the past year, total regular on-demand shares, where rates did not increase by much on average, declined by 10.6%, while high-yielding share certificates accounts, where rates increased by 2.50% on average, surged by 43.0%.
While rate is an effective lever to attract deposits, it does not always result in the long-term funding and member relationships that a credit union truly desires. Instead, most institutions would prefer to rely on enhancing customer experience, leveraging technology, and building strong relationships to grow deposits, which result in stickier funding and lower interest expense.
To that end, credit unions are leveraging ModernFi CUSO’s deposit network to grow deposits and member relationships, especially with large-value members. Through the ModernFi network, credit unions can offer accounts with extended NCUA insurance* to attract and retain large members without relying on rate. Armed with these accounts, credit unions can now compete for high-net-worth individuals, businesses, municipalities, and others. For many large individual and institutional depositors, such as public funds, extended insurance is a must-have. Not only do these accounts power strong deposit growth in the short term, but they also create long-lasting, sticky relationships; indeed, extended insurance accounts have shown over 100% retention on average since 2018.
As participants join the ModernFi network, we’ve seen many leverage accounts with extended insurance to grow deposits without high rates. Most set interest rates for their insured sweep accounts below the rate of their money market accounts, as the main draw for members is the insurance, not the yield.
As the credit union industry continues to evolve, extended insurance accounts represent a forward-thinking approach to deposit growth. By focusing on security rather than rates alone, credit unions can build lasting relationships with their most valuable members.
Best,
The ModernFi CUSO Team
* NCUA insurance provided by program credit unions (subject to meeting certain conditions)
Sources: Credit union data provided by NCUA Call Reports. Retention data from S&P Global.
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