Phoenix Synergistics: Savings Products in a Rising Rate Environment

May 2018 | Savings, CDs, and MMAs | Rate Competition vs. Other Selection Criteria | Traditional and New Competitors

According to recent polls, Americans’ views of economic conditions are more positive than they have been in years. However, the U.S. savings rate dropped in December to its lowest level since September of 2005.  The U.S. Federal Reserve steadily raised interest rates this past year, and it’s reported that Fed Fund rates may go up as much as 1.5% over the next two years.  There is an expectation that rising rates will spur a renewed interest among consumers in deposit savings products – regular savings accounts, money market accounts or funds, and CDs.  If the stock market experiences a pullback from its recent unprecedented gains, consumers may seek more stable or conservative alternatives.  A key aim of this study is to assess how consumers and key market segments may potentially react to rising savings rates. Will increases in take home pay due to the new tax code be channeled to savings products?  At what rate level will consumers move funds from the stock market to more stable savings products?

To attract and encourage savings deposits, some financial institutions offer incentives and rewards such as tiered rate programs based on deposit or relationship level, automatic savings programs and transfers, and rate bumps for recurring transfers and account  linkages.  Online banks have long been a factor in this market – being able to offer higher interest rates than traditional providers.  Will this competitive advantage erode in a rising rate environment, or will online providers be able to maintain this rate differential?  Also, the entry of newer fintech organizations into this marketplace may present an entirely new disruptive effect.

Beyond direct rate competition, financial institutions may be able to differentiate their savings programs with relationship-oriented features – such as positioning savings products in the context of broader financial advice or planning and offering pricing discounts for other banking services.


  • Profile households’ savings and investment activity – with an emphasis on deposit products: regular savings accounts, CDs or savings certificates, money market deposit accounts, and money market funds. Capture provider relationships and examine the role of online-only providers in this market.
  • Examine past year money movement or changes in savings and investment activity – such as movement from one asset class to another or provider switching. Determine the reasons for this movement or changes in behavior. Measure potential near term money movement in relation to a rising rate environment and stock market performance.
  • Detail activity related to specific savings products and accounts – including purposes for holding, balances, reasons for changes in balances, and the future attractiveness of these products. Gauge interest rate sensitivity in terms of opening an additional or new account. Evaluate experience with and potential for innovative CD features.
  • Assess consumer attitudes and motivations impacting savings behavior – including aspects such as expectations for interest rates and the stock market, preferences for conservative investments, and risk acceptance/avoidance. Determine goals for saving and investing. Evaluate the importance of savings product features and benefits.
  • Evaluate the relationship aspects related to maintaining balances in savings products – covering aspects such as discounts on credit services, reduced fees on certain banking services, checking account fee waivers, bonus rates on savings products, free ATM usage, and reward programs. Determine the percentage of savings and investment balances held at the main provider.
  • Explore reaction to fintech or other technological innovations designed to assist consumers in their savings behavior – such as automated savings apps, goal planning programs or apps, and budgeting apps. Measure experience with and interest in these types of apps or programs.
  • Identify those consumer segments that may be primary markets for obtaining new savings products in a rising rate environment. Determine which variables – such as age, household income, asset level, or other attitudinal and behavioral factors – are best for developing marketing and communications strategies.

Survey Topics

  • Current Environment
  • Financial Goals and Investment Approach
  • Deposit/Savings Products
  • Money Movement and Provider Share Shifting
  • Product and Relationship Issues


National Internet Survey – The survey will include 1,500 online interviews with consumers age 18 or older.


Key Finding from the Report:

The largest number of holders view CDs as a long-term investment. A significant minority use CDs as a reserve for emergencies or unexpected expenses..

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