Price velocity threat on rate-sensitive balances

Nomis Insights identifies threat on money market balances for 90% of consumer deposit-holding institutions, led by a minority of fast-acting pricing leaders.

“Current market conditions present a window of opportunity for more agile intuitions to poach price-sensitive balances from slow-moving banks”

Through an in-depth analysis of over 3500 institutions' rate changes and price-sensitivity, Nomis Insights (powered by Nomis Solutions) has identified a pricing threat for over 90% of the market to retain money market share through increased velocity of price changes and rate alignment with price-sensitivity. These threatened institutions will require tools that provide weekly competitive rate information as well as price-sensitivity to preserve and grow their balance positions.

Over the past 20 weeks, fewer than 10% of the market have changed money market rates more than once per month, indicating a largely static marketplace led by a few fast actors. More than a third of the institutions analyzed had no pricing changes over the period, presenting a window of opportunity for more agile institutions to poach price-sensitive balances from slow-moving banks.

A closer examination into institutions with high price velocity shows a clear alignment of frequency of rate changes to price-sensitivity by these players, creating a hostile environment for the remaining 90% of the market with infrequent pricing cycles.

This minority of fast-acting institutions demonstrated a higher price-velocity for more price-sensitive, higher balance segments, suggesting the overall market need for a more rapid pricing cycle to retain and acquire highly sensitive, high balance accounts.

In order to compete effectively against the faster moving institutions in the market, Nomis Insights recommends financial institutions adopt pricing solutions which provide timely competitive information, price-sensitivity data, and pricing guidance to align rates with sensitivity in a weekly cycle.

For more information on this research note or to access weekly updates to competitive and sensitivity information, please go to www.nomisinsights.com or contact us at (650) 588-9800 x237.