Why Businesses are Rethinking their Approach to Cash Deposits

Why Businesses are Rethinking their Approach to Cash Deposits

Would you choose to sacrifice returns on your company’s cash deposits? 

It sounds unbelievable, but in a recent survey conducted by Ampersand of more than 100 C-Suite executives, financial managers, and banking professionals, the majority answered “yes.”

One reason for this willingness to make the sacrifice is that 2023’s bank failures still loom large in the minds of depositors. In fact, 55% of depositors said they are concerned about the future safety of their deposits. As one survey respondent, a finance manager in the hospitality/retail sector put it, “It has got me thinking whether or not I want to put my hard-earned money there.”

Infographic illustrating the 55% of depositors concerned about the 2023 bank failures

Cash deposits held by America’s largest corporations are at record highs, with estimates in the trillions of dollars for top companies. Leaders across an array of industries from manufacturing to education are prioritizing safety when choosing their deposit partners. If a financial institution can assure them that their funds are well protected, taking a lower rate may feel like a fair trade-off.

It’s a good strategy for prioritizing safety, but losing out on higher interest rates on their deposited funds will eventually have ripple effects. If the interest earned was money earmarked for reinvestment in the company, a lower return may mean putting off improvements, or changing compensation packages for employees. 

Values Matter as Much as Safety

Along with safety, businesses are also under pressure to partner with institutions that are aligned with their values. Leaders need to show investors, employees, and customers that their organization is walking the walk when it comes to running the organization in a way that lives up to its stated ideals. It’s so important that nearly 4 in 10 value-inclined depositors are willing to give up 15% — or more — of return on their investments.

An infographic illustrating that 4 in 10 value-inclined depositors are willing to give up 15% or more of return on their investments

Some organizations are extremely concerned about how their deposit funds might be used by their financial services partner. For example, a nonprofit dedicated to environmental protection or sustainability may want to work with banking institutions that won’t lend their deposited funds out to companies involved in the fossil fuels industry or other industries at odds with their values. 

This misalignment can have real consequences for businesses. If their financial partner isn’t aligned with their values, it could damage their reputation — especially among younger generations —  if the relationship became widely known. On the other hand, banking with targeted community banks could support people in need and showcase an organization’s commitment to social equity.

Depositors Can Have Safety, Alignment, and Higher Returns

While financial institutions may have some catching up to do to meet the needs of their depositors, we do have some good news for business leaders who are concerned about their cash. 

Depositors who bank smartly actually can have it all: higher than average returns, alignment with their values, and safety. Vetting bank partners carefully is a crucial step in deciding who to work with, but it can be a time consuming process. That’s why savvy depositors are turning to experienced treasury management professionals like Ampersand.

Ampersand helps clients develop a comprehensive deposit management strategy that takes into account their need for safety, alignment with values, and delivers a stronger rate of returns. We leverage powerful, proprietary technology that places funds with our trusted network of financial institutions. It helps ensure our depositors funds are only going to organizations that meet our high standards, meet our clients criteria, and deliver the best rate of return we can find. The national average yield for consumer savings accounts is just .58%*. Ampersand can provide rates up to 7.7x that rate. 

Although some depositors are willing to sacrifice returns for safety and values alignment, it’s clear that anxiety doesn’t need to lead to lost returns. Instead, with the right cash management strategy, they may be able to have everything they need.

*Source: FDIC National Deposit Rate as of January 16, 2024

Wondering about the safety of your deposits? Find out where you stand. Contact Ampersand for a FREE risk assessment.