Thee low or no interest savings accounts are referred to as “Sleepy Deposits” in a recent Harvard Business Review article.
Most people don’t think much about where their cash sits. A savings account gets opened, money goes in, and—more often than not—it stays there. That simple habit, repeated across millions of households, plays a much bigger role in the financial system than most realize. Recent research analyzing more than 25 million bank accounts over two decades reveals a striking truth: banks depend heavily on what researchers call “sleepy deposits”—money left untouched in low- or no-interest accounts, even when better options exist.
The Hidden Engine Behind Bank Stability
Roughly 94% of depositors leave their money in the same account year after year. Even in rising interest rate environments, when higher yields are widely available, most customers don’t move their funds. This inertia forms the backbone of the $18 trillion U.S. deposit market. According to Harvard researchers Mark Egan and Adi Sunderam, as much as 60% of a bank’s value is tied to this customer behavior.
Why does this matter? Because these stable, low-cost deposits allow banks to:
– Maintain predictable funding without constantly competing on rates
– Generate consistent fee income
– Reduce the need for expensive customer acquisition
– Weather economic shifts more effectively
For large institutions like JPMorgan Chase, Bank of America, and Wells Fargo, these “sleepy” accounts are a quiet but powerful advantage.
What Happens If Customers “Wake Up”?
The research makes clear that if customers became more rate-sensitive—regularly moving money to higher-yield accounts—the ripple effects would be significant.
– Default risk would rise: Large banks could see default risk increase by up to 10 percentage points in normal conditions, and up to 20 points during periods of economic stress.
– Customer acquisition costs would surge: Banks already lose about 15 cents for every dollar of deposits they attract, and it can take over a year to become profitable on a new account.
– Smaller banks would be hit hardest: Institutions with higher operating costs or less competitive products could lose up to 80% of their value if depositors actively chased better rates.
In other words, the system works in part because most customers don’t optimize it.
A Strategic Balancing Act
Banks constantly walk a fine line between two strategies:
– Investing in customers by offering competitive rates
– Harvesting value by keeping rates low on inactive accounts
When interest rates are low, banks tend to compete more aggressively for deposits. When rates rise—as seen in 2022 and 2023—they often rely more heavily on existing, less rate-sensitive customers to maintain margins. This dynamic becomes a critical lever in managing profitability and stability.
Why This Matters for Real Estate Professionals
For those in real estate and title—especially in markets like New Jersey—this insight connects directly to the broader financial ecosystem. – Lending capacity is tied to deposit stability.
– Rate environments influence buyer behavior and transaction volume.
– Bank health affects credit availability across the market.
Understanding how banks fund themselves provides a clearer picture of why mortgage rates move the way they do—and why liquidity can tighten or expand seemingly overnight.
The Bigger Picture
“Sleepy deposits” may sound like a minor behavioral quirk, but they are foundational to how banks operate. They stabilize balance sheets, support lending, and ultimately influence the cost and availability of credit across the economy. If that behavior ever shifts at scale—through technology, regulation, or changing consumer habits—the structure of banking could change with it. For now, though, the system continues to rely on a simple truth: most people don’t move their money.