With the threat to traditional bank core deposits increasing, now is the time to revamp your bank’s deposit strategies. There are no silver bullets; increasing core deposit growth requires successful strategies across product, sales, marketing, pricing, digital, and analytics. We recommend starting with these five:
- Deepen and Strengthen Existing Customer Relationships
We start our deposit growth consulting engagements with the lowest-hanging fruit: existing customers who already bank with you but have deposits elsewhere. Strategies to deepen and strengthen these relationships include:
- Offer a promotional savings or money market rate to active checking customers with low or no savings or money market balances. You don’t have to set your rate at the top of your competitors’ rates to attract deposit dollars from customers who already bank with you.
- Analyze account transaction activity to identify recurring transfers or withdrawals to other banks or money market funds, then target those customers with tailored, timely offers.
- If you have a relationship product requiring higher balances, target customers with balances just below the entry level to upgrade their relationship with you and get more benefits.
- If you don’t have relationship products for consumers and businesses, build them.
- For consumers, provide incentives for direct deposit of payroll, government benefits, and pensions, as well as incentives tied to debit transactions. Note that 61% of baby boomers view their direct deposit bank as their primary financial institution. Still, only 35% of Gen Z consumers consider their direct deposit account to be their primary institution, according to a December 2024 survey by Cornerstone Advisors. For younger consumers, their primary financial institution is defined by their top-of-wallet payment method. Credit and debit card rewards programs help here, although these can be expensive.
- Improve Pricing and Products
Products and related pricing (and rewards programs) must be designed to encourage and reward balance consolidation and self-selected “upgrades”. The following strategies help drive core deposit growth:
- Introduce tiered savings accounts or high-yield savings with higher balances earning better rates.
- Use relationship-based rate boosts with a bigger boost for higher balance tiers.
- Offer limited-time promotions for new money, using highly targeted offers.
- Offer one-time bonuses or “free” premium checking accounts to customers with higher savings, money market, or CD balances but no active checking accounts.
- For younger consumers, introduce goal-based savings products and solutions to aid these consumers in building financial strength (e.g., budgeting apps, credit score monitoring, etc.).
- Target Small Business and Commercial Operating Accounts
Small businesses and commercial enterprises must be primary targets for deposit growth. Consider these four strategies:
- Require operating accounts from businesses to whom you lend money. While this is often specified in loan covenants, compliance is not always monitored or enforced at many banks. Revisit protocols to ensure that operating account money is moved to your bank when the loan is funded.
- Strengthen treasury products and sales processes. Treasury solutions are sticky; once embedded, businesses rarely switch banks. Treasury can be a strong lead solution set, especially when bankers who sell these solutions can speak effectively to the specific benefits they deliver. Packaging certain treasury or cash management solutions for small businesses makes them easier to buy and sell. Options to extend FDIC coverage for large balance relationships are a must.
- Target deposit-rich industries and build out industry vertical solutions. Typical deposit-rich industry targets include property management/real estate, healthcare practices, professional services such as law firms, construction and trade contractors, and insurance companies.
- For small businesses, a strong digital solution is table stakes. It’s estimated that 70% or more of small businesses prefer a digital-first banking experience. The solution should include an automated cash flow forecasting, integrated invoicing, integrated accounting (Autobooks, QuickBooks, Xero), and efficient mobile deposits with higher deposit limits.
- Strengthen Marketing and Sales Capabilities Using Data
Improving your ability to target your marketing and sales efforts to the right customers and prospects is critical to cost-effective growth. We cringe when we see banks advertise broadly high-rate promotions – essentially building a base of highly rate-sensitive balances and customers. Instead, we advise our clients on how to build the capacity for much more highly targeted, data-driven marketing and sales execution. With the right mix of analytics, campaign design, incentives, sales engagement strategies, and tracking, bankers can grow core deposits by:
- Predicting which existing customers are most likely to bring in additional deposits.
- Reducing deposit attrition through offers and banker-customer engagement strategies.
- Identifying prospects who fit the profile of the bank’s most profitable deposit customers and creating highly targeted offers and campaigns.
- Creating personalized savings and treasury management recommendations.
- Providing solid leads to sales team members (whom to contact, what to offer, when to reach out) as well as more personalized sales support insights and materials.
- Continue to Strengthen Digital Deposit Capabilities
Cornerstone Advisors estimates that roughly 50% of all new consumer checking accounts are opened by digital banks and fintechs. And although many of these consumers maintain checking accounts at traditional banks, there’s no denying that fintechs and digital competitors are gaining share. Banks are responding, as they must, by continuing to invest in stronger digital banking capabilities, digital onboarding solutions, data insights, and personalization platforms often provided by third-party partners. These new digital platform capabilities are critical to deposit growth, especially for consumers and small businesses.
According to a recent survey by CSI, data analytics using actionable insights and digital account opening are 2 of the 3 top technology spending priorities for banks this year (with efficiency drivers like AI as the third). You cannot compete for consumer and small business deposits without a strong digital banking/account-opening and data-driven marketing platform.
CPG’s Deposit Sprint
These are just some of the strategies we help our clients build and execute to grow core deposits. CPG has developed a unique process, based on our work with bank clients, to rapidly identify and implement deposit growth programs across retail, commercial, and private banking/wealth management business lines. CPG’s Deposit Sprint is designed to rapidly identify and implement specific strategies and tactics to grow low-cost core deposits. Contact Mary Beth Sullivan at msullivan@capitalperform.com or 202-422-5261 for more information.
