Deposit retention and pricing in times of rising interest rates – smart ways to avoid the outflow tsunami

Interest rates in the Eurozone are at their highest points in years. And with inflation rates still elevated, there is no sign of the current trend to reverse. Deposit customers are the beneficiaries of that development and smart shoppers can already enjoy up to 4% on overnight and fixed term deposits in some EU countries. Unsurprisingly, more and more deposit clients are realizing, that moving their balances from low-margin accounts to high yield deposits will make a difference in their pockets.

For most banks, the consequences of this behavior are less desirable. Having mostly underprioritized the capabilities to manage this product in the last decade, they now are faced with two options: accepting severe deposit outflows or offering higher rates to their customer base, often lacking product options or an analytical approach to effectively differentiate those rates. In our experience we are noticing that for that reason banks need to pay significantly more for achieving…