Four Strategies to Grow Deposits

Fundamental activities establish a foundation. Gathering low-cost core deposits is a foundational activity for successful commercial banking, especially in these times of high interest rates.

“As interest rates have risen, depositors have new options for earning a return on their money,” says Joe Fielding, senior partner and lead of the Americas banking practice with Bain and Company. And S&P Global recently projects that global deposit growth for financial institutions will slow to single digits in 2024, down from about 13% from 2020 to 2022. Some say that inflation and rising housing costs are the primary reasons for deposit decreases, and that banks are intensifying their efforts to attract deposits through technology and other solutions.

As banks intensify deposit-capturing activities, the following strategies can accelerate these efforts.

1 – Data mining with the latest data analytics tools

Financial institutions can try to attract customers with higher deposit rates, but that tactic does not necessarily lead to increased customer loyalty.

With the appropriate use of high-powered data analytics, customer loyalty and wallet share can increase – leading to additional core deposits. Even if your bank actively gathers customer data with a CRM system, advances in artificial intelligence can yield very precise and targeted customer offers.

 Actionable intelligence is key to success and goes beyond collecting proprietary customer data for future analysis.

Actionable data mining tactics include:

• Review and scrutinize onboarding practices. Your organization gains new retail customers often through a campaign. With these new customers you should understand if they know how their deposit products work, if they have gone online, if they are paying bills electronically, and if they have used a debit card.
  
  
• Flag product gaps. Your data analytics tools should recognize product shortfalls and enable you to provide notification to front-line staff to make recommendations. Example recommendations might include bill pay and debit cards for young adults assigned to a household account.
  
  
• Assess how active a customer has been. Deposit accounts with low transaction thresholds indicate potential situations for customer attrition. Triggers to bank staff based on criteria such as no (or limited) debit card transactions can lead to important conversations about your bank’s suite of deposit products.
  
  
• Analyze customers and leverage external data, which can lead you to seek similar characteristics of current customers within prospective customers. External data content can align these profiles to improve the return on email or other direct marketing campaigns.

2 – Provide effective training and establish a sales culture

A hallmark of banks with high deposit growth is a strong sales culture harnessing the skills of the entire organization. The bank’s deposit goals and objectives must be understood throughout the financial services organization.

Each business unit and individual contributor realizes how his/her job can impact sales. And every employee with direct customer contact has a basic understanding of the bank’s deposit products and their respective value propositions.

High-performing banks value training as an investment and leverage a training program that creates empowered, skilled, and knowledgeable employees. Effective sales training directly impacts an organization’s sales culture. This in turn drives a bank’s ability to achieve vital relationships while cultivating profitable new deposit accounts.

3 – Offer treasury management services for small businesses

The evolving treasury management needs of small and mid-sized corporations present an opportunity for regional banks to differentiate themselves by offering new, more comprehensive, and sophisticated services. And the market for these services continues to grow.

According to Coherent Market Research, the global treasury management market is estimated at over $5 billion in 2023 and expected to grow to $12.6 billion in 2030.

Treasury management services can secure the operating (and other primary accounts) of small businesses to mid-sized corporations. Regional banks can acquire this business with a strategy that offers the right mix of curated treasury products and focused customer service that can become an important driver of commercial core deposit growth.

4 – Provide digital products that help secure deposits

Digital banking solutions can help secure and retain deposit relationships. Savvy bankers will conduct product strategy sessions with their technology partners annually to understand their new digital offerings and assess their fit within their bank’s given strategy. In addition, a review of the bank’s current digital offerings can provide insight into additional capabilities that can expand deposit wallet share.

The right digital offerings to appropriate segments within your bank’s customer base can secure core deposits without offering the highest deposit rates. These essential strategies can achieve the fundamental goal of low-cost core deposit growth.