February 14, 2023
Industry Heavyweights Take On Apple Pay, PayPal
Earlier this week, it was reported the seven leading banks behind Early Warning Services – the company that introduced Zelle – plans to launch a new digital wallet in the second half of 2023. But is this a case of being a day late and dollar short? Digital payments giants such as PayPal, Block, and Apple Pay have already carved out a solid footing in digital payments space are way ahead, having invested a ton in their offerings over the course of many years.
Furthermore, Venmo, Cash App, Apple Pay and other established digital-wallet providers operate under a singular vision, while the banks will need to work together to deliver this offering. However, given the banks’ massive customer bases, the potential is enormous. One look at Zelle—which has largely been a success and continues to grow—gives you an idea of how huge this could be. But it’s going to be an uphill battle, and that hill is much steeper than it was a few years ago.
Banks Race to Increase Deposits
Remember last year when virtually every bank was saturated with liquidity from pandemic stimuli? That trend is now reversing, and banks are paying up to keep customers. IntraFi’s most recent quarterly survey showed that over the past few months, 36% of banks raised rates on deposits—by a lot, in some cases. In fact, 20% of U.S. banks are now offering savings rates of at least 2%, a huge increase from a year ago.
A Falling Rate Environment Could Spell Trouble for Banks
Everyone is fretting about rising interest rates, but, according to one recognized bank industry analyst, “the worst scenario for this industry would be for rates to do an about-face and head lower.” Read more.
Inflation Concerns Trigger Reappraisal of Money Supply
The total amount of money in the U.S. economy shrank last year for the first time ever. Many economists believe this will have a deflationary effect as fewer dollars chase the same amount of goods and services. This is essentially a reverse of what happened in early 2020, when M2 soared 40% as the Fed embarked on an aggressive bond-buying program to prop up the economy. Which, by the way, many experts say contributed to a rapid rise in inflation starting in 2021.
Investment Bankers Predict Uptick in Bank M&A for 2023
Although M&A activity was somewhat tepid in 2022 (and many analysts expect it to remain subdued this year), two Piper Sandler executives believe it could accelerate. The reason> They say the biggest and most unpredictable factor is not economic uncertainty or regulatory scrutiny, but credit quality.
Uncertain Future Looms for Leading Crypto Players
Several key crypto players have filed for bankruptcy, including Celsius and BlockFi, and regulators have advised banks to be wary. Farmington State Bank, the itty bitty bank in which SBF’s Alameda Research invested $11.5 billion, is fleeing the space entirely and going back to providing agricultural loans. But is crypto lending finished? Not if crypto endures as a concept, some argue. But before that can happen, get ready for the inevitable calls for rules and regulations to once again be heard.
U.S. Economy Cools Slightly in Fourth Quarter
As has been widely reported, the U.S. economy grew 2.9% last quarter, down from 3.2% in Q3, 2022 but still above analyst expectations. Consumer spending, business investment, and government spending contributed to the better-than-expected numbers, though many economists don’t anticipate the good times rolling for much longer.
Efforts to Thwart Bias May Impact Home Appraisers
Appraisers say the Biden administration’s efforts to fight discrimination are pressuring them to artificially inflate home values, undermining protections under the Dodd-Frank Act, and creating undue risks for borrowers and lenders.
Financial Services, Like All Industries, Must Nurture Talent
Development is also critical—not just to keep people around, but also to a bank’s long-term success, argues one industry exec. “There is no university diploma that can be obtained for many areas of the bank … the further you get into the back office, the truer this is.” Read his suggestions on how institutions can build key skills for the next generation of banking leaders.
Still Seeking More Industry Insights?
Each week, IntraFi’s Chief Content Officer (and former American Banker editor) Rob Blackwell’s Banking with Interest podcast offers in-depth analysis and insights into the policy changes reshaping the banking industry.
