Banking Predictions for 2011

The following 8 predictions were gained from: DepositAccounts.com

Here are some predictions on banking and deposit accounts for this year:

1) Interest Rates Will Stay Low
Savings account rates and short-term CD rates will likely stay low in 2011 as the Fed continues its monetary policy while it waits for improvements in the economy and unemployment. This will force short term interest rates to remain very low. However, signs of growth have recently pushed up long-term interest rates for mortgage rates and Treasury yields. This will likely continue in 2011 and may spill over to long-term CD rates.

2) Free Checking Becomes Harder to Find
The large banks must make up for the revenue they are losing from the new regulations. Several banks have already announced changes to their free checking accounts. Customers may still be able to avoid monthly fees, but the new bank conditions will require larger balances and/or specific activities like direct deposit.

3) Debit Card Reward Programs
Suffer Large banks will be affected by the Fed’s caps on debit card interchange fees in 2011. Many banks offer debit card reward programs which provide checking account customers with various perks for debit card use. Large banks will reduce or eliminate these programs when the new regulation takes effect.

4) High-Yield Reward Checking
Growth Slows Over the last two years, hundreds of community banks and credit unions launched reward checking accounts with higher rates than internet savings accounts. The high rates were possible thanks to debit card interchange fees. With the Fed’s proposed caps on these fees, banks and credit unions reduce or discontinue reward checking accounts.

5) New Bank Products from Bank-Like Companies
More companies will partner with banks in 2011 to offer new bank products. Companies like BancVue, PerkStreet Financial and SmartyPig have grown in 2010 by providing innovative banking products. This growth should continue, and it should spur new companies to launch new internet based bank products and services.

6) Remote Deposit Capture Grows in Popularity
More banks will allow customers to deposit checks from home by using home PCs and scanners or from their smart phones. In 2010, internet banks and megabanks launched these services and this could increase as internet banks use remote deposit to compete with the megabanks.

7) Fewer Bank Failures
Bank failures peaked at 157 banks failures in 2010 but the number of failures dropped in the last quarter of 2010. The FDIC predicts fewer bank closures in 2011.

8.) Bank Failures Continue to Hurt Savers
The FDIC has done its job at protecting all insured deposits and no depositors have lost any insured deposits in bank failures. However, many depositors at failed banks have lost high interest rates on their CDs because the acquiring bank is allowed to reduce rates on existing CDs. Many banks did that in 2010, and many will likely continue this in 2011.

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