Last week, The Wall Street Journal's "Heard on the Street" column featured a piece titled, "In the Age of AI, Cash Is Still King." Author Telis Demos writes, "When it comes to financial stocks these days, investors seem most concerned about their ability to attract, and hang on to, customers' cash. For many years, cash was trash, as the saying goes. Savings accounts, short-term Treasury bills and money-market funds paid little yield when interest rates were near zero. And when the Federal Reserve was growing its balance sheet, adding reserves into the banking system, banks looking to hoover up deposits at times just needed to hold out a bucket." (Note: Thanks again to those of you who attended our European Money Fund Symposium in Paris last week! Mark your calendars for next year's show in London, Sept. 23-24, 2027!)
He explains, "Fast forward to today. The Federal Reserve's rate hikes starting in 2022 reset the bar for what cash could pay out to investors. Fed Chairman Kevin Warsh has talked about shrinking the Fed's largess. And the market is now pricing in higher rates for a longer time. On top of that, the advance of technology and new forms of banking and money not only add new competitors for cash -- neobanks, stablecoins, tokenized or exchange-traded Treasury bills -- but make it increasingly easy to switch cash from where it earns little, to where it earns more."
The Journal says, "Just [last] week, the growing interest in Meta Platforms' artificial-intelligence agent Muse `once again spooked markets into worrying that cash will be ever easier to move. If it is as simple as directing your agent to find the highest yield, then the inertia that used to protect financial institutions is going away. While Meta shares have surged more than 11% this week, the KBW Nasdaq Bank index has tumbled almost 3%. Shares of Charles Schwab and LPL Financial were down over 6% and 7%, respectively, on Tuesday. Bank of America, JPMorgan Chase and Wells Fargo were down more than 3% that day, alongside other banks, brokerages, wealth managers and wirehouses -- all of which collect customers' cash and earn a yield on top of it."
They tell us, "Many bank stocks this year have at times moved in the opposite direction of interest rates, largely because of concern about rising deposit costs. Though banks can earn higher yields on loans, bankers have also told analysts that it is becoming harder to avoid also having to pass along higher rates to deposit customers."
The article also says, "Cash was also at the heart of the debate over the crypto regulation Clarity Act. The high-stakes lobbying battle about whether or not crypto firms should be able to pay 'rewards' to holders of stablecoins, which banks said would compete with yield on deposits, illustrated how vital it is to any flavor of financial company to be able to attract and hold customers' cash."
It adds, "Additionally, the fact that yields have now been high for several years, tracing back to 2022, means that brokers already aren't relying as much on cash lying around. 'Compared to the last zero rate era, [the] cash mix is way down for most brokers,' Truist Securities analyst David Smith wrote in a note. 'It has already been sorted into higher yielding options.' The dash for cash is well under way. And it won't end any time soon."
Apollo's Torsten Slok also writes briefly about the issue in, "Is an Agentic Bank Run Coming?" He says, "Muse and similar agentic AI assistants could soon sweep household cash automatically into accounts paying 3.3% to 5.0%, instead of the 0.1% national average on checking accounts. If every household used AI agents to optimize the return on their cash balances, banks could lose a large share of the cheap deposits they rely on to make loans, which would be a problem for the entire financial system."
For more on AI and Cash Sweeps, see our recent Crane Data News stories: "WSJ Says Investors Clinging to Cash; RIA Biz Says Schwab Shifting Sweep" (8/13/26), "Money Funds Low Profile on Q2 Earnings Call Radar; Schwab, Northern" (7/23/26), "Barron's Writes Again on Sweeps and AI; Crane 100 MF Index Up to 3.44%" (6/2/26), "LPL Sees No AI Risk of Cash Sorting" (5/4/26), "Raymond James Call Responds to 'Agentic AI Cash Sweep Optimization'" (4/24/26), "Barron's on Schwab AI Sweeps Worries" (4/21/26), "Earnings: JP Morgan Talks AI Cash Allocation Tool; BNY on Tokenization" (4/20/26), "Schwab Says AI a Tailwind, Not a Threat to Cash Sweeps on Q1 Update" (4/17) and "Morgan Stanley Q1 Call: AI & Sweeps" (4/16).
