Dishing on Deposits: Where the Market Stands Today

Where does the deposit market stand today? Isio Nelson and John Rountree from ProSight examine current trends in deposit growth, interest rates and competition, while exploring how customer relationships, digital acquisition and emerging technologies could shape banks’ deposit strategies.

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For more information on this topic, watch the 2026 State of U.S. Deposits Quarterly Series Webinar.

TRANSCRIPT:

Frank Devlin: This is the ProSight Banking Strategies Podcast. We’re here to inform you on the top trends, challenges, and opportunities in banking today. ProSight is a leading non-lobbying connector of people and information with deep expertise in risk, fraud, compliance, and retail and commercial banking. Our purpose is to empower financial services leaders to strengthen and advance our industry through training and insights, as well as tools and resources like this podcast.

Hello, and welcome to this ProSight Banking Strategies Podcast. I’m Frank Devlin, the senior editor at ProSight. What does the outlook for deposits look like as interest rates shift, money market funds compete for balances, and consumers become increasingly willing to switch institutions?

Today, we’re going to discuss findings from ProSight’s latest State of U.S. Deposits research and what banks and credit unions need to know about attracting, retaining, and growing deposits in the months ahead. Now I’d like to welcome both of our guests who are instrumental in ProSight’s deposits research, Isio Nelson, managing director, research, fraud and thought leadership at ProSight, and John Rountree, director and research intelligence expert. Welcome, Isio and John, thanks so much for being here.

Isio Nelson: Thanks, Frank.

John Rountree: Thank you, our pleasure.

Devlin: Great. So Isio, let’s start with you. Can you talk a little bit about ProSight consumer benchmarking and the quarterly State of U.S. Deposits series, which is going to drive what we’re going to learn today? Sort of how many institutions are represented, how’s the data gathered, how long has ProSight been conducting this program?

Nelson: Yeah, let me start first with the consumer benchmarking. We’ve actually been doing that for close to 25 years now, and there was a part 25 years ago where banks didn’t really know what was going on in a fast-moving environment, and so they needed an agnostic intermediary that could help to be able to better understand where those interest-bearing, noninterest bearing deposits are, and really use that data to make decisions.

So the consortium is roughly 35 to 40 institutions, mainly above $50 billion in assets, includes most of the top 20 retail banks and also some of the leading direct banks. And the programs cover almost four and a half trillion dollars in consumer deposits and over $700 billion in small business deposits. And we get it on a weekly, monthly, and semiannual reporting. And the big thing is that it’s standardized observable data, so it’s coming directly from the institutions and then we use that to be able to help them make decisions.

Why we have The State of U.S. Deposits, that’s a little bit more recent. About three, four years ago now, SVB, when that happened, we really wanted to make sure that we were helping the entire industry understand what’s going on. And there was a lot of things that were in headlines, but it wasn’t really data-driven. So we started The State of U.S. Deposits on a quarterly basis to really keep the industry apprised using some of that consortium-based benchmarking along with some of the primary research that we do.

We go out and we interview small businesses, we interview consumers, and we interview bankers. We incorporate that in to then give a well-rounded picture of what’s going on in the industry. So we think it’s been a great opportunity to really set some data-driven insights that the industry can learn from at a high level, and then those that are in the consortium use that more detailed information to help drive their decisions on a day-to-day basis.

Devlin: Thanks so much, Isio, and I really appreciate what you said at the top about fast moving, and that really was so applicable during the SVB crisis, things were moving faster than people had ever seen and continues to be a huge issue. So before we get into the details a bit, can you share the main takeaways from the most recent quarter?

Nelson: Yeah, and maybe John can chime in here too. And first of all, I would say the main takeaways from the last quarter are really through the beginning of the year. So we actually saw overall deposit growth for the year, but the first nine months right when we did the webinar that the Fed announced the first increase in the federal funds rates in almost three years.

So what happened the first nine months isn’t necessarily indicative of what’s going to happen going forward, but it does help. We have some history that we can look at and say, “Okay, what has happened in rising rate environments before? What are the things that drive that?” What I will say, we also talked about in the webinar, is there’s a lot of uncertainty out there right now. There’s a lot from a geopolitical standpoint. Obviously we’ve got rates going out there, competition’s changing. There’s a lot of things that are going on with consumer behavior.

So we’ll learn some from the past. We’ll also go ahead and start to understand how some of these new drivers are coming in, and as much as possible, try to help to understand some of that uncertainty can affect the go-forward deposit trajectory. John, anything else that you remember as we went through that webinar that’s the key points?

Rountree: Yeah, Isio, thanks for that summary. I think a couple of things are relevant. One, we’re trending a little bit north of where we were last year, but that led up to the Fed rate change. And, obviously, that’s going to have a big impact on both consumer and small business deposits through the rest of the year.

The other thing that will impact that is how quickly do banks respond? So in historical periods like when we were raising rates, the economy might’ve been overheated and right now it’s unclear where the economy is. And so some banks will be pressured to raise rates to bring in more deposits to try and fund some of their growth initiatives, be it geographic and/or acquisition expansion, whereas other banks might play it a little bit more defensively and see if they can maintain these lower rates and recoup some of the profits they might’ve lost in a higher rate environment.

So what’s going to happen over the next three to six months, I think Isio characterized it most appropriately, there’s a lot more uncertainty now than there’s been. Remember just a few nine months ago, most people were predicting one to two rate cuts this year, and it looks like we might end up with one to two rate increases. So it’s a very different period of time. And so the important thing is to keep your projections and your estimates dynamic relative to how quickly the data changes. And unfortunately, it’s changing a bit more rapidly now than it may have been over the long-term historical periods.

Nelson: There’s an overall industry number, and we call it de-averaging the average, and it’s fine, you can look at what’s going on, but once you start to click down and say, “Okay, it’s not the same for everybody. There’s a lot different for large banks than there is for regional banks and direct banks, and it’s different based off the business models they all have, the funding requirements they have.”

So we do like to talk about what’s going on in industry as a whole, but then you always have to remember to de-average the average and really figure out, “Okay, is this a regional thing, and not regional bank, but regional by the country? Is this driven by the overall type of business model? Is this driven off of different things?” So we also started to click down a little bit into how is it different amongst different types of banks that have different models?

Devlin: The uncertainty does seem to create such a challenge on how you want to position yourself. And I also appreciate that Isio said, “The last nine months are no guarantee of what’s going to happen in the next three months.” But given that, can either of you, what are you seeing, how would you project 2027 or the next few months? What’s going to happen to deposits? Big picture, what’s your gut?

Rountree: Well, if I could predict 2027, I’d be talking to you from a private island where I’d be running a hedge fund. But through the end of this year, 2026 at least, we’re estimating it’s going to be at an overall industry level flat to slightly above where it might’ve been last year. But a big piece of that depends on what happens in October.

As I think I’ve mentioned before, these rate increases take a bit of time to flow through. So if we get a rate increase in October, literally this month, things are going to be a little bit different than if it happens in December. So it’ll be a little bit better deposit performance if it happens later in the year, a little bit weaker deposit performance if it happens earlier between now and the end of the year. Because that means more banks… And actually there’s more movement in the public markets, which provides better yielding alternatives for folks, particularly money market mutual funds.

Devlin: So I’m wondering about the differences, which was mentioned already about sizes of banks and larger banks versus community and mid-tier. And we have the deposit betas, which as I understand it, have to do with how much Fed rate increase gets passed through to the depositor and how long it takes. Does size of bank determine whether a large bank needs to pass most of that through, whether a community bank does? What’s the arbitrage? What’s the difference there in how different banks approach that? What do you see out of this last increase, for example?

Rountree: There hasn’t been a whole lot of movement out of this last increase. Obviously it’s only been a few weeks, but I would articulate the difference is less related to large banks and small banks, but more related to what’s the bank’s strategy?

If they’re aggressively trying to grow into a market either by acquisition or building new branches, they’re going to be a lot more aggressive with their rates and promotion strategy. So promotions for cash, for checking accounts and more aggressive for rates on things like money markets.

In general, the large banks are doing most of the growth, so therefore it can appear as though it’s a large bank strategy, but in reality, they’re the ones who are trying to fill out their national footprints in most cases and acquiring and building branches in places where they haven’t historically been. And so the first thing they need to do is develop critical scale of deposits. Best way to do that is new checking acquisition, large dollar incentives, and then high money market rates both for consumer and small business.

Nelson: I just think that overall, as we continue to look at the way that the rest of the year’s going to happen, what’s going on in the overall market, to John’s point, it’s large banks have kind of been in a place where it’s flight to safety at times when there’s uncertainty in the market, they have a more stable ground, people understand the brand better, and so they’re not competing necessarily on rate all the time, where that then shifts the dynamics. So smaller institutions that are trying to still meet their funding targets need to then compete more on rates.

So a lot of times what happens here is the rate driven is going to be after a segment of customers, but the primacy, that operating a relationship with the consumer or the small business is based off of the trust. Overall, you still have to be in the ballpark for rate, but you don’t have to be the highest rate. And then the overall way that you service that relationship is where those customers tend to bring a good majority of their dollars.

Devlin: So you mentioned primacy, and I definitely want to dig down on that a little bit later, but I’ve been talking about the money markets and flight to safety from smaller banks to larger banks that we saw a couple years ago in the liquidity crisis. I’m wondering if right now, are there any lessons that were learned then in terms of bringing in deposits and deposit concentration risk? Are people or banks and credit unions acting differently in how they bring these deposits in and who they’re taking them from that does reflect any lessons learned?

Rountree: I think the liquidity crisis you’re referring to was more driven by large corporate deposits as well as a high concentration of risk within Silicon Valley. And yes, that did create a lot of unfounded fear and confusion by consumers. A lot of consumers are a bit more educated now, and so look, they may not want to say, “Hey, look, if I’ve got three or $400,000, do you want to leave that in a savings account or am I better off putting that in a money market mutual fund, which isn’t risk-free, but isn’t subject to the losses that might occur above the FDIC insurance levels?”

And there’s also just a general knowledge and perception, for better or for worse, that when some of these big failures occur, the government’s going to step in and make consumers whole one way or the other. So going back to the point earlier on primacy, primacy matters a lot more because it gives you the right of first refusal in some ways regarding additional dollars.

So if rates are rising and I’ve got a bunch of money in a checking account, I’m like, “Hey, can I get a little bit more bang for my buck?” And that typically means somewhere in the 3% or north range. Often the first place I go is my primary bank. And if I’m within a reasonable stone’s throw of the other estimates I get, I’m more likely to do that.

So the primary banking relationship can be that right of first refusal, but it also has to be something that has to be managed carefully. Because if you don’t provide a competitive offer out there, you as a large bank with lots of primary checking customers lose some of those dollars to the directs or the fintechs. Who are saying, “Hey, I can give you 50 basis points more and I can get you that money transferred back and forth within 24 hours,” which is obviously something that can be done today and couldn’t be done, call it, 10 or 15 years ago.

Devlin: It sounds like there’s a balance then between benefiting from that right that you have as the main primary bank versus you can’t just depend on that 100%, you still have to choose the right deposit rate that’s going to keep folks. Is that sort of that point that you’re making?

Rountree: Yeah, that’s what a lot of the larger banks are doing is trying to figure out what is that sweet spot and at what point do they see dollar flight from primary checking going to rate-oriented players?

And so what you need to understand there is have a really good ability to track your flow of funds, which is something some banks do really well and other banks have a bit more of a hard time doing. And something we’re exploring as one of our benchmarking programs that would enable you as a midsize regional bank to say, “Great, if I’m losing dollars, am I losing it to people paying off their credit card, people paying off their mortgage, or am I losing it to rate-driven players who are siphoning off, call it, some percentage of my checking balances that may or may not be needed because I can get an extra 50 or 100 basis points from a direct player versus what I can get from you as my primary bank?”

Devlin: Is data helping with that quest or AI? Is that something that’s very difficult to do unless you have great data and great AI?

Rountree: I can’t speak to how the banks are doing it. I’m assuming they’re using AI to track their flow of funds. It’s much easier to move money today than it was before. And so tracking those flows is an increasingly important element of your overall deposit strategy, customer growth strategy, and ultimately your pricing strategy.

Nelson: And I would just jump on that a little bit to John’s point is I think banks have a lot more access to information, a lot better ways to be able to sift through it with what they have with AI or other tools, but it still is understanding what is the norm. So outflows or inflows, is that what I should be expecting at this time as the environment continues to change and that norm continues to change?

And so there’s always going to be a reasonable amount of differences out there between different institutions, but you should say, “Okay, is this something that is happening across the industry? Is it just happening to me? Do I have an opportunity here?” So there’s a lot of ways that the data, you need to be able to add one more layer on top of that and not just to say, “Do I know what’s happening within my walls, but what’s happening in the broader industry through other people that are similar to me or others that I’m trying to compete against?”

I think the other piece, and I love data, I’ve been in the data world for a long time, is understanding data regards to is my acquisition strategy, we talked a little bit about marketing incentives, there’s a lot going on right now, but am I getting what I want out of it? Am I retaining those customers? Am I growing those customers?

And then that even leads into other questions outside of marketing about my digital acquisitions. We all know, and we’ve seen all the data on our side at least, that digital acquisitions are about a third of the value, if not less, than a branch originating. So what does that mean and is that normal? And how do I start to figure out how I maximize those digitally originated relationships instead of just put on more of them?

Rountree: Digital acquisition is a great thing, and lots of banks are very good at putting out some very high numbers. Say, “Hey, I’m acquiring 50% of my checking accounts digitally.” It’s great. However, what you do with those accounts once you acquire them is really, really critical because it’s much harder to build a relationship and onboard someone digitally than it is if they walk into your branch. And so that’s why you’ve got very, very high attrition ratios.

So in some ways, yes, digital acquisition is the front-end money spending, we’re putting dollars against the cash incentives or the rates, but at the end of the day, what matters is how many of those accounts you acquired do you keep past the 90 to 120 days? And it puts a real big emphasis back on something that isn’t very exciting or sexy, to use a different word, but it’s all about onboarding and how do you build a relationship with people who’ve come to you through a channel where you have very limited ability to do that?

And so what are the things you do from a blocking and tackling or from a client experience or from even understanding where they’ve come from? How do you build a relationship with them so that they don’t leave after they’ve done what they needed to do to get the $500 for signing up for a checking account after 90 or 120 days?

Nelson: Yeah, completely agree with that first 90, 120 days and customer deepening, relationship deepening is the key. We’ve seen that time and time again. And I think we’re still in the early innings even with the digital acquisition about where banks can do better there and reduce that attrition rate, increase the overall relationship that they have with those customers. I think that high churn that we’re seeing on the digital acquisitions is an untapped opportunity.

Devlin: That serial switching activity, is there research that talks about younger consumers or any group being more willing to switch financial institutions for that better rate, for that incentive than move on when that 90-day period is over?

Rountree: In general, younger consumers are more willing to switch for better deals. And deal is an interesting word because it could be defined by it’s a better rate, it’s a better cash incentive, or at some point it may actually be, “You give me the products and services I need now that my financial needs have evolved from needing something other than an early paycheck.”

And so, one of the conversations we’ve been having with our clients and just in general in the industry is, “How willing are you to spend a lot of money to acquire very young consumers who are very early in their financial journey and likely to be unprofitable for a substantial period of time?” Because they’re chasing, “Hey, I need three-day access early to my paycheck.” You make a little bit of money on that, but it’s not a long-term relationship. It’s basically a product service bargain slash you’re basically trading dollars for that service.

As those consumers age and their financial needs become more complex, at what point do they either age out of these, what I call, single service product-focused fintechs into something where they need a much more valuable and more complex financial needs? So they might need a credit card, they might need a mortgage, an auto loan, a bunch of other things that lead to longer-term relationships.

And so some banks have said, “Hey, we’re going to go after these young folks and be willing to take on the couple years of unprofitability until they have more needs that we can then serve them.” And others are saying, “Hey, I’m happy to let the fintechs train them to early access to paycheck, but then at some point they’re going to become more valuable and actually I can acquire them at a better economic value equation when they’re five or 10 years into their financial journey versus the first five to 10 years where they might not be very profitable.”

Nelson: I know a lot of listeners here maybe have not listened to the actual webinar itself. I encourage everybody to go back and take a look at it, but we talk about those primary switchers being higher for the younger generations. Some of our primary research and some of the stuff we actually see in some of the benchmarking as well is still only about 15%. When you think about Gen Zs and millennials, it’s anywhere from 14% to 17% that say they’re willing to switch.

We talk a lot about getting those that are churning over and they have different needs, as John talked about, but it’s still about 15% that you’re trying to all fight for. And then you drop what it’s very contrast though to the older generation, like myself, the boomers are at the 1% range and Gen Xers are about 5%, meaning that there’s very little of those that have a higher overall net worth that are willing to make the change. Because the overall incentive and the value to make those changes generally just isn’t there as much as it is for the younger consumer.

Devlin: That’s really interesting because I think if you read certain places and sections of the media that it seems like it’s so very important for financial institutions to retain and attract younger depositors, younger customers, particularly. I know that we’ve done surveys of community banks where they said that’s a major issue, is making sure that they keep customers and that they get the children and grandchildren of their current customers.

But from what you’re saying, that’s another trade-off. It’s not going to be super profitable and maybe it’s more of a long-term investment. You’re not going to see that return right away. Very interesting take on that.

Nelson: Yeah, and John can comment on this too. I know we’ve talked about it with our institutions. It really is a difference of looking at a customer lifetime value and understanding how you model out how those customers as they move through their maturity stages, their needs for financial services and that investment early with that primary relationship and what it eventually pays off to instead of a product value.

And if you can get the lens of that customer lifetime value, and it’s hard to do, it’s hard to convince people to look beyond one, two, three years, but if you do it right, I do think that there is an opportunity there, but you have to be willing to service those customers at their different life stages.

Devlin: Deposit accounts opened in the branch versus digitally. Is that something that is an issue for banks at all? Is anything changing there? It’s been thought that maybe the in-branch deposits that they open there are stickier, but everything is changing and things are changing quickly. Maybe not the case anymore. Is that something that banks are looking at and what are they saying about it?

Rountree: They’re still concerned about it because you’re attracting a slightly different customer base and it’s harder to build that relationship. So you may get some portion of relationship with someone who might have a bit more money or not. And so the thing that you can’t do in a lot of those digital onboarding journeys is have the conversation with a banker about, “Well, what else is going on in your life stage?”

Because you’ll gather some data from them. “Are they a renter? Are they an owner? How old are they? Are they single or married? Yada, yada.” Some of that will point you towards a life stage intervention digitally, but you’re basically using data to try and predict stuff as opposed to having a conversation in a branch with a banker, which is obviously a much richer discussion and you get at needs that you may not get purely from a third-party data set or just a particular generational or wealth-related pen from a third party as well.

Nelson: When you think about the number of accounts, as John said, we still see the number of new accounts opened digitally, but the value of those accounts, and any way you measure it, whether it’s the balance of the account, whether it’s the term, how long they stay with you as a customer, there’s a lot of challenges still with that digital side that banks are trying to figure out.

I still think that relationship banking, I go back to, I came from a small town where we went to the bank and they knew us. They knew that we were ready for a new auto loan. They knew that the kids were getting ready to go to college. They knew what the goals for retirement were. And that knowing the customer, I think there’s some you can do with data, but it’s really hard to replicate that relationship that you build with the customer who trusts you to have their best financial interests in mind and then being able to provide the financial services that you can provide to them.

So it’s still a journey. I think we’re still in the early innings. I do think eventually AI can help that a little bit. You would actually think there’s more consistency from a digital experience than there is from branch to branch and rep to rep, but I think it’s still a ways to go.

Devlin: That’s really interesting what you said, Isio, because I think a lot of this new technology, whether it’s AI or even automation, the play, the idea is that if you’re in the branch, maybe you’re using AI or technology and you’re actually spending more human time, more face time with folks. It’s the opposite of what maybe you would think about AI and technology. It’s actually freeing up time is the good narrative that banks want to follow to have those more valuable conversations with people one-on-one. So really interesting time.

And I wanted to end from talking about old-school banking and knowing people in the community and talking to them in person to something more new-school and technology-based, and that is stablecoin. There was a bit of talk about this in your webinar, and it seems like, at least for the time being, that the most effective use of it would be cross-border transactions. But there’s also that sort of lurking fear that some have that long-term, we’re going to see a lot of deposits drain out of traditional banking and be held in stablecoin and digital assets outside the banking system.

I’m wondering, does that come up when you’re talking to folks in your consortiums? Is there concern about it? Is it fear? A lot of people think that some of the estimates out there have been overblown, so I’d be super interested to hear both of your takes on that.

Rountree: The vast majority of stablecoin use cases today are two things. One, buying and selling crypto, which is a very large institutional and/or non-institutional thing depending upon your views of organized crime. And then secondly, large-dollar cross-border transactions, because as people have said, it reduces the timeframe from 72 hours to 72 seconds.

And in today’s world, that timeframe reduction matters a lot, particularly as it relates to cross-border exchange rates. And digital assets and stablecoin can reduce the risk and the time frame for large institutions that are transferring, what I would call, hundreds of millions of dollars over some period of time.

Will this activity ultimately come down next into small businesses and into consumers? The answer is yes. The question is, when will this actually occur and when will we have sufficient institutional controls to define the value proposition? So today, if I’m a consumer, I can hold Bitcoin and I am subject to the volatility of the asset price, and potentially I could hold a stablecoin, but I don’t know yet whether or not I can earn interest or rewards or whatever you want to call that.

So what I like to say is, “Look, it’s a phenomenal technology for large institutions and crypto traders and things like that because it solves an existing problem. Does it solve an existing problem for consumers and small businesses today? The answer is pretty unclear. I can still earn interest on my deposits. I don’t know if I can earn interest on stablecoins. I can always transfer my money from one bank to the next using any one of a hundred different money transfer capabilities. But if I’m in stablecoin, am I limited in that regard?”

So there’s still a lot of questions to be answered before it becomes a default choice for consumers and/or small businesses. And today there is still unclear legislation on whether or not you can actually make money and earn interest or rewards, which hasn’t been resolved and was recently deferred. So therefore it doesn’t solve that use case and it doesn’t solve a faster transfer use case than it does for large corporates today.

Nelson: And I agree with John. We talk about this a lot. We hear a lot about it in the headlines, but when we look at the data, we don’t see it yet. Now, how fast that will move. I think we both agree that the small business and commercial will move before the consumer and the consumer adoption curve will probably take a while and the value proposition’s very different there.

On the small business commercial side, a lot of it has to do with we’re still waiting for clarity on the Clarity Act as far as what happens. But even if you think about the last couple of years before that Clarity Act was even brought up, there was rewards out there and we haven’t seen a major shift just yet. Now, there’s always the early adopters and then you have the mass adopters. So I think there’s still a lot to be seen.

Any type of payment transaction usually adds overall and takes time. So I don’t think it’s going to be 2027, you’re going to see huge shift. Will you see it above what it is this year? There’s a potential and a lot of it has to do with what happens with the regulations and what happens with the traditional providers and what they bring out. But I just don’t think it’s one of those that’s going to flip overnight.

What it looks like in five to 10 years, I go back to John’s original statement, “If we knew what that was going to be, then we’d probably be doing something different than being on a podcast.” No offense, Frank, but there’s a lot we just don’t know yet.

Devlin: Isio, when you talked about the traditional providers, are you talking about the idea that say folks, customers, they’ll be interested in digital assets, but they’d also prefer to have them offered through a bank or a brand that they trust? So maybe the traditional bank has a third party that provides it and then they feel comfortable having those digital assets and then the traditional system doesn’t lose all those deposits?

Nelson: Consumers, businesses, they go to what they can trust and banks have done a really good job of that, especially for the last 10, 15, 20 years as they have really brought that overall trust level back up with the consumers and the businesses.

So if you could get the service that you need that John talked about, about 72-second reconciliation, be able to get those cross-border vendor payments or cross-border payroll or other types of financial services done in 72 seconds from an institution that you trust already, I think that goes a long way.

There’s always going to be adopters who are looking for some of the non-traditional financial providers, but I do think that banks have a role and an opportunity to make sure that that new payment transaction or that payment method is something that they can offer as well as the other things that they do.

Devlin: Thanks so much Isio and John for sharing your perspectives with our ProSight Banking Strategies Podcast audience today. To our listeners, thanks for spending your valuable time with us. And if you liked it, please spread the word. I’m Frank Devlin.

The views expressed by the speakers are the speakers’ own and do not reflect the views of ProSight Financial Association, BAI, or RMA. The views expressed and information shared are of a general nature and are not intended to address the circumstances of any particular individual or entity. No one should act upon any such views or information shared during this podcast without appropriate professional advice after a thorough examination of the particular situation.