The Bank for International Settlements has published a working paper on US retail deposit pricing that finds digital banks offer higher deposit rates than traditional branch-based banks and adjust those rates more strongly to changes in the Federal Reserve’s policy rate. The effect is most pronounced for savings and small time deposits, pointing to greater interest sensitivity in retail funding and faster monetary policy transmission in a more digital banking environment. Using branch-level data, the paper compares digital and traditional banks across chequing, savings and small time deposits. Chequing rates are the least responsive to policy moves and small time deposit rates the most responsive. Pass-through is asymmetric, with deposit rates reacting more when policy is easing than when it is tightening. The paper also finds that in counties with higher Twitter usage in 2016–19, branches of digital banks raised deposit rates more strongly after policy rate increases, particularly for small time deposits, indicating that faster information flows through social media intensify deposit competition. The publication notes that the views are those of the authors and not necessarily of the BIS or its member central banks.
Bank for International Settlements2026-06-08
Bank for International Settlements working paper finds US digital banks pay higher deposit rates and pass through policy changes faster especially where Twitter use is higher
The Bank for International Settlements published a working paper finding that US digital banks pay higher retail deposit rates than traditional branch-based banks and adjust them more strongly to changes in the Federal Reserve policy rate, especially for savings and small time deposits. The study reports asymmetric pass-through, with stronger reactions when policy eases, and shows that higher Twitter usage is associated with larger deposit rate increases by digital banks after policy rate hikes, suggesting faster information flows intensify deposit competition.