The unprecedented COVID-19 pandemic has had an astronomical economic impact on consumers and businesses alike. As a result, the United States government provided economic relief in the form of stimulus payments and loans. But this assistance won’t last forever, making it crucial for financial institutions to get ready to offer responsible and transparent solutions that meet the long-term liquidity needs of their account holders.

To talk more about the importance of deposit liquidity solutions, PaymentsJournal sat down with Jeff Burton, Director of Financial & Risk Management Solutions at Fiserv, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

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Consumer and small business account balances spiked amid COVID-19

With stay at home orders that resulted in reduced work hours and skyrocketing unemployment rates, one might expect that consumer account balances are decreasing. In reality, however, there’s been a year over year (YOY) jump in account balances, coinciding with when consumers began to receive government stimulus checks intended to offset the economic impact of COVID-19.

Similarly, small businesses have furloughed employees and reduced spending while receiving government assistance in the form of the Paycheck Protection Program (PPP) and EIDL loans and grants. As a result, small businesses have seen a similar jump in account balances, which is apparent in Fiserv’s charts on YOY weekly balance changes in consumer and small business accounts for the weeks of 4/13 and 4/20:

This is leading to a “false narrative in the market where customers look better off from a balance perspective, but that’s really being driven by government stimulus money and slower spending,” explained Burton.

“While customers are being rather pragmatic now, forbearance won’t continue forever, and payments are going to come home to roost at some point,” added Grotta, referring to currently suspended payments such as mortgages, rent, and other expenses business and consumers will soon face.

The long term liquidity needs of consumers and small businesses

Government relief funding related to COVID-19 will not last forever, but consumers and small businesses will continue to have the need for immediate access to funds to pay bills. Banks can play a huge role in bridging the gap between services currently offered and truly meeting the liquidity needs of their custo...