Raddon Roundtable Recap

Friday May 17, 2024  |  Greg Ulankiewicz, Performance Analytics Program Manager

Raddon hosted two Roundtable events in April. These sessions brought together community financial institution leaders to discuss the key strategic issues facing their industry today. For many attending institutions, primary concerns revolved around driving profitable growth, dealing with liquidity pressures and leveraging technology to better serve accountholders, attract new relationships and improve process efficiencies.  

A Bifurcated Economy

Bill Handel, general manager and chief economist at Raddon, set the stage with an overview of the economic environment. Stubborn inflation and a resilient though softening labor market suggest the Fed is likely to keep interest rates higher for longer. At the same time, the latest research from Raddon regarding consumer perspectives about the economy highlighted the emergence of a bifurcated economy. Some consumers – mostly higher-income and older households – are holding up well, but many lower-income and younger households are not feeling financially sound in this economy. 

When asked if they feel the economy is currently in recession, over one-third of consumers (36%) said they believe we are in the midst of a long-term recession. Another one in five consumers (21%) believe we are currently in recession but will soon be out of it. Despite many economic measures showing the economy remains relatively and perhaps unexpectedly strong, almost three in five households (57%) feel the economy is not performing well. 

Figure 1: Consumer perception of the current economic environment

Almost Three In Five Consumers Believe We Are in a Recession Now 

Q: What statement most closely aligns with your view of the current economic environment?  (n=1,500)

Source: Economic Sentiments. Raddon Research Insights, 2024

Inflation, student loans and high debt levels are key factors why most consumers hold this sentiment. Our latest research found:

  • On a scale of 1 to 10, with 10 indicating “inflation has impacted me significantly,” almost half of all consumers (48%) rated the impact of inflation on their financial situation at 8 or higher. One in five consumers (19%) rated the impact at a 10.


  • A third of all consumers (33%) and over 4 in 10 Millennial households (41%) somewhat or strongly agree that they have taken on too much debt over the past two years.


  • About 1 in 5 consumer households (22%) carry student loan debt. Among these households, 7 in 10 (71%) say their student loan obligations are impacting their ability to afford the lifestyle they desire to some degree.


  • Nearly a quarter of all households (24%) and more than a third of Millennials (35%) say they have had difficulty making on-time payments on their current loans or credit cards


Consumers are clearly feeling the pinch of inflation, higher debt burdens and rising interest rates. By all measures, our research shows younger and lower-income households are particularly impacted by these challenges.

Growth Has Been a Challenge; Earnings Pressure Mounts

Community financial institutions saw declining growth in 2023. Deposit growth continued its persistent retreat since 2021 as stimulus measures wound down and the economy opened back up. After strong gains in loan growth in 2022, many institutions were pressed into liquidity issues and saw loan growth tumble in 2023 as borrowers grew cautious amid higher rates and their regressing financial situations.  Net household growth also slowed in 2023, emphasizing the competitive challenges community institutions are facing today.  

Figure 2: Raddon Average - Trend in Year-Over-Year Household and Balance Growth 

Growth Was A Challenge for Community Financial Institutions in 2023

Source: Raddon Performance Analytics

Roundtable participants talked about the importance of focusing on lower-cost, core deposit relationships. Institutions will also need to be purposeful with their CD offerings and pricing, and to monitor these portfolios for a rise in hot-money, low-relationship households. How to compete with high-yield online accounts and the ever-optimizing branch networks of major banks was also a hot topic of discussion. As institutions seek to attract deposit dollars, effective cost of funds management will be essential to preserving margin.

The rapidly changing real estate market has impacted both earnings and growth. The higher-rate environment has killed refinance activity, and the purchase market is hamstrung by high home prices, high interest rates and homeowners who are hesitant to sell while sitting on low-rate mortgages and watching their home equity grow. Despite this apparent gridlock, Raddon Research shows consumers still aspire to own homes and purchase new homes. While first mortgage opportunities may be suppressed over the near term, institutions will be entirely shut out of the market if they are unable to develop strategies and processes that enable them to compete with major mortgage lenders, such as Rocket Mortgage. In the meantime, home equity lending should continue to offer opportunities for real estate loan growth.

Buy now, pay later (BNPL) has also upended consumer lending. Though consumer use of BNPL declined substantially from over one-third of households in 2021 (38%) and 2022 (37%) to just one in five households (20%) in 2023, consumers have been exposed to a new reality in point-of-sale lending. It’s not just BNPL offerings from stand-alone services, such as Affirm, Afterpay and Klarna. Many large card issuers from American Express to Chase and Citibank offer BNPL-type services within their card offerings. Here, cardholders are provided the ability to convert purchases from their open-ended line of credit into fixed-rate, fixed-term installment loans with a few clicks of a button in the mobile app or online. According to the J.D. Power 2024 U.S. Buy Now Pay Later Satisfaction StudySM, users of these in-card BNPL options are more highly satisfied with these services than users of stand-alone BNPL solutions. The competition is bringing to market near-instant, lower-cost consumer lending, and community institutions must adapt their credit card capabilities and strategy to remain relevant in the modern consumer lending space.

The New Face of Consumer Lending

In addition to increasing pressure on margins from higher funding costs, recent regulatory proposals stand to temper revenue from traditional sources of noninterest income. Proposals seeking to limit debit interchange rates, overdraft/NSF fees, credit card late fees and fees for access to “basic information” are all on the table and will compel financial institutions to seek alternatives to make up for any lost income.

Marketing in the Digital World

In the Roundtables’ afternoon session, Becky Summers, director of thought leadership and strategic guidance, led a discussion about the changing landscape in financial services marketing. Gone are the days of mass marketing. Segment-based marketing has served the industry well for decades but is still fairly inefficient and lacks a personalized touch. Today, one-to-one marketing has become increasingly essential to effective targeting, personalized messaging and marketing return on investment. Thankfully, there are few industries that enjoy the treasure trove of customer data that financial services does. Attendees discussed how they can better leverage their own accountholder transaction data to understand their behavior and tendencies, identify relevant sales opportunities and market more effectively through appropriate channels.

A Good Time to Recalibrate

Given the current state of affairs, roundtable participants discussed the need for community institutions to adapt their operating model to position themselves for long-term success. The hysteria of the COVID era is over, the outlook for near-term growth is slower, rates will remain higher for longer, borrowers are struggling to pay their debt obligations and fee income is threatened. In an environment like this, community institutions must refine their pricing practices, identify new service offerings that can generate noninterest income, and bring their processes and marketing into the 21st century.

Let’s Get Together

Our first two Raddon Roundtables in 2024 reinforced the notion that we learn better together. We look forward to hosting several more sessions throughout the year and welcome financial institution leaders to join us to collaborate with their peers and industry experts to unpack the key strategic issues in this evolving operating environment. Note our upcoming Raddon Roundtable dates and locations, and be on the lookout for invitations to register. We hope to see you there!

  • August 13 – Pasadena, CA


  • August 14 – San Jose, CA


  • August 15 – Seattle, WA


  • October 17 – Madison, WI


  • October 23 – Boston, MA


  • October 24 – Atlanta, GA


  • November 13 – Philadelphia, PA


  • November 14 – Baltimore, MD


  • November 19 – Chicago, IL





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