Attracting & Retaining Deposits with Innovative Products and Attractive Offers
As digital disruptors continue to disrupt the banking industry, increasing pressure is being placed upon more traditional brands in the space to develop new ways of attracting new customers and retaining existing ones.
The global retention rate for banks is actually fairly high compared to other industries with the sector keeping 75% of customers on board. However, with many brands in the space making it easier than ever for customers to switch, no banking institutions should be complacent regarding the deposits they already possess and certainly don’t want to hold back on their own efforts to bring in fresh business.
How then can banking institutions leverage innovative products and services, and attractive offers to both attract and retain deposits in this increasingly competitive atmosphere?
Rising Rates
Obviously a massive concern for both banking brands and their customers in 2023 are the rising rates of interest brought about by subsequent global crises and geopolitical events such as the COVID-19 pandemic and the Russian invasion of Ukraine.
These rising interest rates are leading deposit customers to search around for accounts which are able to offer them the best yield for their money. If anything is to start reducing that impressive 75% retention figure, it’s this fact and banks need to be ready to act if they are to retain customers tempted to wander whilst simultaneously grabbing the attention of competitors’ customers beginning to shop around.
"We can all agree that a lot has changed in the last two years,” said VP of Financial Institution Marketing, Product, and Strategy for Vericast, Stephenie Williams. "The universal push toward digital in a variety of industries introduced people to a broader range of options than ever before — and not just in banking. This exposed issues around privacy, personalization and technology preference and accessibility. As economic uncertainty continues, banks and credit unions must be diligent in retaining deposits as customers part with their money on an increasingly growing scale.”
To retain core deposits without triggering a significant rise in costs, banks are seeing results in switching to products where the big selling point is flexibility rather than fixed rates. Banks need to have a single system which does away with one-off exception pricing and replaces it with one which works for all deposit customers.
The best way to begin getting both existing and prospective customers on board is to take the initiative and start having those conversations with them sooner rather than later – especially those currently under rate-sensitive deals who will likely be exposed to advertisements from competitors which offer higher rates than the ones their accounts are currently enjoying.
You need to train your staff to break the ice and initiate these conversations, starting out with building a rapport before delving deeper with needs-based questions which will help customize a product package which meets their needs and adds value to their existing deal.
Data Shows the Way
As is so often the case in modern business data is the key which unlocks these strategies. Your bank needs to employ analytics, not simply to target marketing, but to identify specific customers which are vulnerable to being tempted away.
Social media was in its infancy the last time such intense competition existed in the banking industry. However, now these channels are fully embedded in the fabric of society, customers are under constant exposure to alternative banking solutions – especially from the aforementioned digital disruptors which are perfectly at home in those spaces.
"To help compete in this competitive environment, monitoring the market to understand competitors’ moves while using data analytics to identify account segments is critical,” says CEO and Cofounder of Sievewright & Associates, Mark Sievewright. "This enables credit unions to develop appropriate strategies along the way. Understanding member demographics and the broader market will help determine which accounts offer the most-promising opportunities to deepen relationships – helping to identify the best candidates for outreach and the correct messaging.”
Leveraging data in this manner will allow banking institutions to attract and retain deposits with offers and products which resonate with them at this point in time. Both first- and third-party data can be deployed to this end, but banks must be prepared for Google’s withdrawal of third-party cookie support from Chrome and be ready to adapt if they wish to continue to meet this challenge.
Final Thoughts
The banking business is about to enter a significantly more challenging period than it’s become used to. As interest rates continue to rise, impressive customer retention rates will be threatened and brands in the space will need to change tact if they want to attract and retain deposits in this rapidly evolving environment.
Attracting and retaining deposits is sure to be a hot topic at Future Branches Boston, being held in June at The Westin Copley Place, Boston, MA.
Download the agenda today for more information and insights.