Dos and don’ts of deposit marketing: Smarter strategies for sustainable growth

Recent market disruption among regional banks triggered a financial earthquake that rocked public confidence, upset the financial markets and hammered the banking industry. While the panic has now cooled – and the deposit runoff drain appears to be plugged for the moment – financial institutions are not entirely in the clear. Following a historic flight of deposits, banks can no longer simply trust depositors to be a reliable source of sticky funding – active deposit management is now king.

Avoid these 4 pitfalls in deposit marketing

Of course, there are multiple ways banks can drive healthy deposit growth. There are also some strategies that seem to promise tantalizingly quick results but, like a fad diet, they have the potential to cause more harm than good. Here are four pitfalls to avoid in the fight for deposits.

1. Don’t engage in rate wars

As banks watch the deposit rates from traditional and digital competitors go up, the inclination to jump over the ropes and into the ring to battle it out is real. But matching aggressive prices to retain all existing depositor relationships increases your institution’s cost of funds, slicing into potentially juicy profits thanks to the current environment’s potential for stronger yields on earning assets. Before you engage in aggressive rate hikes, know your numbers. Dig into your deposit profile so you can be selective. Instead of joining an all-out war, engage in hand-to-hand combat. Pay for the accounts that will help power healthier profit margins and allow the less valuable ones to walk away.

2. Don’t cannibalize current funds

For any repricing strategy, the value lies between parameters and profits. Unnecessarily shifting existing deposits to higher-interest products without a significant lift in stickiness, loyalty or new money will only cannibalize your current funds. Start by determining the boundaries that will help maximize growth potential. Lean into data analytics to identify your high-value customers by investable assets and then segment those who have deposit accounts across multiple banks. Use targeted, compelling offers selectively to encourage those customers to consolidate their dollars at your financial institution. This tactical approach will help avoid needless giveaways while growing key relationships – and new funds.

3. Don’t focus exclusively on HNWIs

If we’ve learned anything from bank failures of the past, it’s that high-value depositors can pull their money fast. If too much of your deposit portfolio relies on clientele in the ultra-, very- and “standard” high-net-worth individual (HNWI) categories, it increases your vulnerability when the market (and consumer confidence) gets shaky. Make sure your most valuable funding eggs aren’t all nestled in a gilded basket. Build up a stable deposit base by growing depositors across multiple product relationships. There’s strength in numbers, so nurture a diverse customer mix and lean into relationship banking. Position your bank as a partner in helping everyday customers achieve their financial goals.

4. Don’t turn a blind eye to friction

Making it fast and easy to open new checking and savings accounts is a solid strategy for growing low-cost deposits. But consumer expectations for what “fast and easy” looks like today are vastly different from even just a few years ago. Clunky, multi-step online forms or even a required branch visit can kill a new account in seconds. Don’t make it easy for prospects to ghost you and fire up a relationship with your competition. Optimize your digital account opening process for consumers and small businesses and you’ll be better positioned to sit back and reap the rewards of a deposit base that grows in the background.

Try this: A multi-pronged deposit growth strategy

The health and stability of your bank are dependent on safeguarding core funding; the time to mitigate deposit attrition and secure new depositors who can fund accounts at attractive levels is here, now.

View this five-pronged approach as a flexible gameplan that can be customized to help give you the most bang for your marketing buck. Adjust your investment in each area according to your institution’s weaknesses and opportunities:

1. Do listen to your customers

Are your customers rate shopping? Tracking their intent signals can help stop their deposits from walking out the door. Upsell those who have outgrown their current products and boost engagement by offering a little incentive to those who activate services like direct deposit or online banking. Targeted TLC can help increase loyalty – and lifetime value.

2. Do win a bigger share of wallet

In banking, some consumers and businesses are game to commit while others would rather play the field. The latter group spreads their cash across multiple institutions. Identify this segment of your customer base and engage in personalized cross-selling to help attract deposits away from your competitors and increase your share of wallet.

3. Do bundle products in the pursuit of low-cost deposits

Increasing your low-cost deposit base is vital to sustainable, profitable growth. Bundle products (think checking, savings and money market accounts) and offer personalized companion accounts and strong promotional rates to help gain additional ground within a household. Not every customer will be interested, but some consumers will be drawn to the idea of having their funds together with one bank they can trust.

4. Do target high-value depositors

A tried-and-true source of deposits is those who have experienced a wealth event or have strong liquid deposit potential. By introducing your institution to these prospects via enticing deposit accounts that meet their unique wealth management needs, you’ll be positioned to serve and satisfy a highly lucrative segment.

5. Do start by analyzing the bank’s data

Data is the foundation of any winning deposit growth strategy. Without a clear understanding of your institution’s deposit trends, customer behaviors and product performance, even the most well-intentioned marketing efforts can fall flat. Start by taking a deep dive into key data points to help uncover valuable insights that drive smarter, more profitable marketing decisions.

• Analyze total deposits. What percentage of outflows are uninsured? What percentage of inflows are insured? What is your core deposit ratio? What are your primary sources for new deposits? How does the current rate environment impact your net interest margin (NIM) and loan-to-deposit ratio?
• Assess depositors. Take a look at your customer demographics and behaviors. Review everything from age ranges and life stages to online rate shopping and product searches. Are they seeking alternative financial instruments? Do they use direct deposit? How long have they been with your institution? Since depositors who have been with a bank longer are less likely to exit, segmenting by tenure may be an important metric.
• Examine product mix. What is your ratio of time to demand deposits? What percentage are interest-bearing versus non-interest bearing? Look at your deposits through multiple lenses. Checking and savings accounts each carry their own loyalty levels, with checking accounts commanding the upper hand. Evaluate the rates and maturity dates of your term deposits so you can determine which are the most effective in locking up deposits.

One of the most important marketing decisions a bank can make is to choose the right data partner. Deluxe provides high-quality multi-sourced life event data, with deep data lakes that offer banks the intel necessary to help expand customer loyalty, drive customer acquisition and accelerate overall growth. Whether your financial institution is looking for actionable data attributes and insights, audience targeting engines or agency services including campaign design and execution, Deluxe is a one-stop-shop for your bank’s data-driven marketing needs.