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Interest Rates, Cost of Funds are Financial Institutions’ Top Concerns for 2023

SCOTTSDALE, Ariz., Jan. 17, 2023 – Just-released research from Cornerstone Advisors reveals that the interest rate environment and cost of funds are community bank and credit union executives’ greatest concerns for 2023.


This is among the findings in What’s Going On In Banking 2023: Fighting the Headwinds, Riding the Tailwinds, authored by Ron Shevlin, chief research officer at Cornerstone Advisors and noted fintech expert. The report explores a wide range of banking industry trends, including new products, M&A, fintech, payments, digital transformation, and emerging (and submerging) technologies.

“Interest rates bumped last year’s top concern of finding qualified talent down a notch or two in this study’s ratings. But a more notable year-over-year change was the significant increase in the percentage of executives who mentioned cost of funds as a concern this year,” Shevlin observed. “That number climbed from less than 10% in 2022 to more than 40% in 2023.”

Other key findings in the report:

· Growing deposits will be a priority in 2023. Banks’ concerns over small business deposits soared to 72% from 41% in 2022. For credit unions, retail deposits topped the list, skyrocketing from 18% in 2022 to 70% in 2023.

· Banks and credit unions remain seemingly indifferent to the revenue growth potential of real-time payments. Nearly 40% have not determined an RTP strategy.

· 72% of banks place a high priority on growing deposits from small businesses.

· Banks plan to invest nearly $4 million in fintech startups in 2023 (an increase of $1 million over 2022) while credit unions plan to invest just over $1 million (a slight decrease from 2022).

· 28% of banks plan to invest in/implement application programming interfaces (APIs) in 2023.

Shevlin said this year’s report is written primarily for the “troublemakers” in the industry. “Cornerstone Advisors refers to ‘troublemakers’ as institutions that fight the headwinds and ride the tailwinds,” he observed. “They are forward-thinking in their use of technology, aggressively go after growth and market share, and they’re unafraid to take on megabanks, upstart fintechs, and anyone else competing with them for mind and market share.

“But it’s also for the institutions that want to be troublemakers, and for the technology providers that serve the troublemakers and want to know where their heads are going to be in the coming year,” Shevlin said.

What’s Going On In Banking 2023 identifies key industry trends as well as the strategic, operational, and technology-related concerns of 300 community-based financial institution executives surveyed in the fourth quarter of 2022. It is the eighth in a series of studies conducted annually by Cornerstone Advisors.

Cornerstone Advisors, a management and technology consulting firm, brings innovative insights and strategic execution to banks, credit unions, and fintech firms, helping them reach the next level of performance. For more information, visit crnrstone.com.