Quick Summary: Banks rely on multiple revenue streams from each and every client to maintain profitability. When one source of income declines, especially more profitable income, such as interest income tied to lending and deposit spreads, banks find ways to avoid absorbing the loss. They reallocate revenue expectations elsewhere – most often deposit and service products.

As an example, when the Federal Reserve lowers interest rates, many treasury teams expect to see overall financial relief. Borrowing costs decrease, liquidity feels more accessible, and the assumption is that banking costs should follow the same downward path. But does this expectation align with the reality of how banks respond to rate decreases?

Between September and December 2024, the Federal Reserve implemented three consecutive rate cuts, and Redbridge reviewed cash management fees during this same period to evaluate whether changes in fees aligned with those policy shifts.

After reviewing our data, Redbridge observed an expected and unfortunate pattern across our monitored clients: total bank fees increased, while deposit yields and earnings credit rates decreased.

Treasury teams that expected savings instead found themselves paying more for using the set of banking services across their banking structure. As illustrated in our data (and shown below), corporate clients experienced an average 4.84% increase in total monthly bank fees from December 2024 to January 2025, despite transaction volumes and account structures remaining largely unchanged.

This isn’t an isolated trend and is not just tied to a decreasing interest rate environment. This happens every year unless your treasury team has undergone contract negotiation with your banks.

Without defined Contracts, Your Banking Costs will Likely Increase (Especially if Interest Rates Decrease)

Banks frequently adjust pricing across cash management and deposit-related services. Sometimes this is to offset reduced interest income, other times it is simply because there is no contract in place. For clients without formal, negotiated pricing agreements, annual increases are common and often implemented automatically.

According to Redbridge Senior Advisor Constance Veron, whether rates fall or not, banks are looking for ways to preserve and increase revenue. For many corporate clients, this results in routine annual increases between January and March, often ranging from three to five percent, and sometimes significantly higher depending on the service category.

These adjustments are typically communicated through short notice letters that offer limited opportunity for response, and worded in such a way to confuse clients into believing they do not have a choice about the increase in fees. Without a documented pricing agreement in place, treasury teams absorb these increases by default.

What the Data Shows

Across the past three year-end pricing cycles, Redbridge observed consistent increases in total bank fees each January. 

Average total fee increases were: 

• 5.26% from December 2022 to January 2023 

• 6.31% from December 2023 to January 2024 

• 4.84% from December 2024 to January 2025 

This data suggests that total bank fees continue to trend upward despite the expectations of rate cuts for borrowing. Over three years, it becomes clear that fee increases are a common occurrence in bank pricing when no formal negotiated rate exists rather than a direct response to rate policy. Services involving manual labor such as depository and cash handling were most affected, while fees for electronic payments and information reporting also trended upward. 

Earnings Credit Rates follow a similar pattern. As interest rates decline, ECRs are often reduced quickly, diminishing the offset they provide against bank fees. In practice, this means treasury teams lose earning power on balances at the same time service costs continue to rise.  

Without negotiated rate protections, banks recover lost interest revenue through a combination of lower credits and higher fees. 

In fact, this past week a prospect we are speaking with shared with us a pricing offer notification they received from their bank with the following language included: “Our pricing is subject to change and without notice.”

Benchmarking helps Identify Price Drift

Benchmarking allows treasury teams to determine whether fee increases reflect broader market conditions or individual pricing drift. Through the Redbridge HawkeyeBSB platform, clients are able to analyze year-over-year fee data organized by 13 distinct AFP service categories, including:

• Depository services 

• Information reporting and bank communications 

• Electronic payments such as ACH and wires 

• Check processing and lockbox 

• Cash order and vault services 

This analysis isolates price drift, defined as the natural rise in fees that occurs even when activity levels and account structures remain unchanged. By comparing pricing against peer benchmarks within similar industries and volume tiers, treasury teams gain clarity on whether increases are reasonable or warrant challenge. 

Cash Management Advisory: Looking Ahead in 2026

If rate reductions continue in 2026, treasury teams should expect further upward pressure on bank fees. While lower borrowing costs create opportunities, they also reduce the bank’s interest income and profitability, prompting an increase in service-based pricing.

Act Before the Next Pricing Cycle

Annual fee notifications typically take place between December and March, with the actual changes to fees occurring soon after, making these months the best time to act.

Treasury teams that engage early are better positioned to reduce cost exposure and avoid reactive negotiations once increases instituted and have been in place for some time.

As Constance noted, “Acting before the increases are applied is always easier. Once the new rates are active, it becomes a price negotiation effort possibly combined with a retroactive recovery effort.”

Treasury leaders who benchmark proactively and manage their relationships through data will be best positioned to: 

• Protect yield on cash investments 

• Maintain transparency in banking relationships 

• Preserve control of cash management expenses 

If you did not negotiate your rates and terms prior to the new year, the second-best time to act is now.