John F. Wasik
John F. Wasik Nov 7, 2019

As rates drop, four deposit-growth strategies

With the Federal Reserve making multiple interest-rate cuts this year, crafting a deposit growth strategy these days can feel like standing on a teeter-totter.

An ever-cautious Fed doesn’t want to run out of wiggle room if the economy shifts downward. Yet, with the economy possibly slowing and the yield curve inverting, rates may be still headed south, hardly an enticement for savers. This fluid environment calls for some creative marketing strategies.

Deposit marketing experts are keen on shifting the focus away from falling rates, which can be distracting banks from their core strategies. According to Philipp von Girsewald, CEO (US) of Deposit Solutions, “During times of declining interest rates, raising the volume of deposits can be expensive for smaller banks. This is partly because many smaller banks must still support the existing branch-based business model while at the same time updating older technology and providing additional resources for growth.”

“To combat this problem, small and medium banks must refocus their attention on their core value propositions. These banks should also seek out and partner with service providers like deposit brokers who can help with all kinds of procedural and infrastructural operations such as deposit gathering.”

Ultimately, the dour savings rate outlook requires a shift in strategy. Yield-starved customers will be demanding even better relationships, services, digital offerings and problem solving. Rather than focus directly on rates, shift your strategy to other marketing tactics.

Strategy 1: Keep Marketing Convenience

While some older customers still prefer to walk into a bank and use a teller, the long-term trend still favors remote banking. That means mobile banking with smartphone apps.

Ever-busier customers want the convenience of taking a phone picture of their checks for deposit. It saves them time and a trip to the nearest ATM. As profiled in a Fed study, about half of bank customers now use a mobile phone to access their accounts – up from about 20% in 2011.

“This trend is consistent with the increase in smartphone adoption over this period and the rising share of banks offering mobile banking services to their customers,” the study noted.

While not every customer will be attracted to fancy new apps – nearly every large and mid-sized bank now offers them – they should be a staple of any marketing strategy, especially for younger customers unlikely to set foot in a bank or use a drive-up window.

Strategy 2: Double down on digital

While smartphone apps are clearly boosting deposit growth, that’s not enough to engage and retain customers. The majority of customers who use digital applications may use their phones to only do one or two tasks, mostly checking account balances or receiving alerts, the Fed reports. That leaves plenty of other opportunities for generating deposits.

Only 21% of those surveyed used phone apps for depositing checks electronically; 15% used the technology to locate an ATM or branch, the Fed found. The research suggests that some users are less comfortable with the technology while others are likely to employ more of the apps’ features. Does that mean better education or information on how to best use banking apps?

“While some of the informational tasks (e.g., receiving alerts, checking a balance) can be done with a feature phone via text message or on a web browser on a smartphone,” the Fed research surmises, “transactional tasks may require the use of the bank's app. Task-only users are somewhat less likely to have a smartphone and they are much less likely to have their bank's mobile banking app. On average, they are also less confident in understanding and using the features of their mobile phone.”

Strategy 3: Be Persistent Problem Solvers

With financial planning and banking becoming increasingly sophisticated, customers want bankers to be problem solvers. Older customers may need to set up trust accounts for estate planning while younger customers need accounts while in high school or college.

The infusion of digital technology helps, of course, but personal relationship banking is also part of the formula. When customers become frustrated over lack of execution or trust, they are likely to change banks, reports a J.D Power U.S. Retail Banking Satisfaction Survey.

“The 2019 decline in customer satisfaction with retail bank problem resolution and the timeliness of banks in solving problems are reminders that failing to execute on the basics have negative effects on reputation,” the Power survey noted. “Customers have long memories and their brand image ratings for bank reputation decline dramatically when they experience problems. Reputation declines further when customers perceive that problems are unresolved or resolved in a manner put the bank’s interests ahead of theirs.”

According to Paul McAdam, Senior Director, Banking Intelligence at J.D. Power, “Highly satisfied and loyal customers keep higher deposit balances and deposit wallet share with their primary bank.  Metrics such as J.D. Power’s Overall Satisfaction Index and NPS are highly correlated with the belief that a brand has a `good reputation.’”

How do banks acquire a good reputation? By solving problems before they happen. They can start with making account openings a smooth process.

“Higher customer satisfaction with new account opening is statistically and positively associated with higher deposit balances, higher deposit wallet share and greater intent use reuse a brand (repeat purchase),” McAdam adds.

“The 60% of retail banking customers that rate their bank’s new account opening satisfaction as 900 or higher in J.D. Power’s 1000-point scale New Account Opening satisfaction index keep an average of $17,006 in average deposit balances with their bank, amounting to 73% of the deposit wallet.”

“Customer satisfaction and convenience have improved, but far too many customers have not re-established the trust and developed the deeper levels of connection required to improve the industry’s reputation. Personalization of important customer journeys—transactional, advisory and solving problems—will emerge as the ways to elevate customer trust.”

Strategy 4: Try Something New

Why focus on savers’ discontent and throw up your hands. They may be open to some new pitches. “Bankers focus on rates daily, but the general public does not,” notes Gary Zimmerman of MaxMyInterest. “Finding better yields is rarely the highest item on a personal to-do list. Other marketing strategies can also be effective. Some banks are catering to particular affinity groups, offering products or brands that resonate.

“For example, FitnessBank counts your steps each day and pays you a higher interest rate if you meet your goals. Redneck Bank offers a whimsical debit card that adds humor to banking. Of course, in both cases, the competitive rates on offer are only for small balance accounts. Rates typically decline above certain balance thresholds or after an introductory period. But like many financial advisors have found success in targeting specific demographics or affinity groups in growing their practices, the same can be true for banks.”

No matter which direction the Fed takes, brand and service matter more than ever. That’s why having a solid core marketing strategy is a winning game plan.

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John F. Wasik has written 17 books and contributed to The New York Times, Wall Street Journal, Forbes, Financial Planning, Bloomberg and Reuters. His firm JK Enterprises provides editing and writing services for financial services firms. He has spoken about investing, innovation and creativity across North America.

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