American lenders are offering promotions to attract customers after the banking crisis scared off depositors.
Banks have begun offering signing bonuses for customers who start new accounts or regularly deposit funds, Reuters reported Thursday (April 6). These offerings are happening in the wake of the collapses of and Silicon Valley Bank (SVB) and Signature Bank, which led customers to pull $119 billion from smaller banks.
Capital One, Discover and LendingClub are among the companies offering bonuses to customers, according to the report, although in some cases, these offers predate the bank failures. Analysts told the news outlet paying more for deposits can help build customer loyalty.
“As rates have risen, high-yield savings accounts have become fashionable once again with some banks competing aggressively to stay at the top of the rate tables that consumers rely on for comparison purposes,” Andrew Davidson, chief insights officer at the market intelligence firm Mintel, told Reuters.
“The intense competition has been further fueled by an overall drop in deposits, with more firms reaching out to customers in the last few weeks,” he added.
Banks are also hoping to keep customers by educating them on the rules governing deposit insurance, offering different products or stressing ties to the community, per the report.
The rush for consumers to move their funds out of smaller banks seems to have abated.
Data released last week by the Federal Reserve shows that deposits actually went up for smaller banks in the week ending March 22, to $5.386 trillion from $5.380 trillion the prior week.
“We’d hesitate to say that it’s business as usual,” PYMNTS wrote. “But it’s interesting to note that the deposit activity for larger banks shows what seems to be a bit of reversal.”
For those banks, Fed numbers show, deposits between March 17 and March 22 fell from $10.74 trillion to $10.65 trillion.
“The read-across is that consumers and enterprises are moving money around, to be sure, and have been moving them back to smaller players,” PYMNTS argued.
Meanwhile, J.P. Morgan Chase CEO Jamie Dimon said this week that larger lenders will come to play a lesser role in the world financial system, due to the rise of shadow banking.
“The new reality is that some things — for example, holding certain types of credit — are more efficiently done by a nonbank,” Dimon wrote in his annual letter to shareholders, arguing that regional banks “simply cannot” handle the scale and complexity of certain transactions.