How to Compete & Win in the Battle for Deposits
Deposits are ready to move again as consumers look for opportunities to get higher yields from their investments. While inflation remains high and interest rates continue to rise, more Americans are actively looking for ways to make their money stretch further and oftentimes, this involves moving their deposits to a different financial institution to get a better rate. In fact, JD Power data shows that 26 percent of consumers have moved their money to another institution in the last month and on average, they moved about one-third of their deposits.
Now that deposits matter again, so does deposit stickiness. In addition, today’s consumers are faced with economic uncertainties and more recently, the collapse of Silicon Valley Bank. As a result, they are now more conscious of where to keep their money. Many consumers are looking to move their assets to a bigger financial institution, with the assumption that their funds will be more secure, leaving smaller financial institutions with new challenges when it comes to growing deposits. That’s why now is the time for regional and community financial institutions to bolster their deposit growth strategy by incorporating a few key digital capabilities.
To start, community financial institutions should not underestimate the importance of a strong digital account opening experience. Today, a majority of Americans are happy to bank digitally. As of 2022, 78 percent of adults prefer to bank via a mobile app or a website. Therefore, it’s crucial that financial institutions make it easy for new customers to open an account on the device they prefer.
Why? Because Oliver Wyman research shows that less than one-third of prospective customers will visit a financial institution’s product page, and of those, only 13 percent will complete an application to open an account. Cornerstone Advisors research shows similar trends, with around one-third of larger financial institutions seeing account opening abandonment rates of 75 percent or higher.
At the same time, offering online account opening is just one element of an effective deposit growth strategy. According to Oliver Wyman, brand preference is actually set before consumers consciously decide they want to open a new account at a different financial institution. Most consumers, 87 percent, start the switching process with one or a few institutions in mind and typically spend less than a month researching options.
Effective Deposit Marketing is Crucial
Statistics like these demonstrate that effective marketing campaigns play a key role in driving digital sales and help ensure a financial institution’s investment in online account opening positively impacts deposit growth. To increase deposits, your bank or credit union must not only invest in a frictionless online account opening experience, your institution must also invest in its overall digital presence. This includes your institution’s search engine optimization efforts and making sure your brand stands out online.
Even if your institution is geographically closest and offers the best rates on deposit accounts, a prospective customer may not be aware if your competitors dominate the search engine results. It’s become the norm for potential customers to turn to a search engine to research a product or service before they make a decision. With a solid SEO strategy, along with paid advertising tools, such as Google Ads, financial institutions can prominently display their brand and deposit products to their target customers, and be ahead of their competitors.
Beyond boosting search engine rankings, community financial institutions can also utilize social media advertising to reach their target audiences. According to Bankrate, 72 percent of millennials say social media impacts their buying decisions. This is the most likely age group to be influenced by social media in their spending, followed by 66 percent of Gen-Z, 49 percent of Gen X and 45 percent of baby boomers.
With social media ads, banks and credit unions can target ads to specific audiences based on their life stage, interests and more. For example, a bank may want to target small business owners in certain geographic markets to encourage them to open an account. Social media makes it possible to target these entrepreneurs with specific ads and offers that are timely and relevant to their financial needs, which ensures the bank optimizes their ad and marketing spend.
Minimize Abandonment, Increase Conversions & Grow Deposits
Once a prospective customer or member is ready to open an account, banks and credit unions must make it easy with a seamless account opening process. While many of the nation’s top financial institutions already offer online account opening, actual conversion rates remain low across the board. According to data from Cornerstone Advisors, only 14 percent of financial institutions in the U.S. said that their abandonment rate for digital applications for deposit products was less than 10 percent. A quarter of the same firms said they were experiencing abandonment rates higher than 50 percent.
One of the biggest reasons for high abandonment rates is because oftentimes, online account opening cannot be easily completed on a mobile device or without a visit to the branch. When people choose to open an account digitally, they now expect to complete the process fully online. Requiring documents or signatures in person poses a major inconvenience and as a result, this often prevents a new member or customer from completing the account opening process.
Additionally, online account opening should not just mirror the in-branch process with online forms. Instead, online account opening should reimagine the account opening process to give new members or customers a simple, well-designed user experience that’s perfectly suited for opening and funding an account on their preferred digital device. For example, a bank or credit union can save time and errors by allowing applicants to upload an image of their drivers license and then auto-filling the applicant’s name and address information, rather than requiring the applicant to re-key that information.
Offering a digital account opening experience with the right features and UX can make a dramatic difference in conversion rates. Rather than assume what prospective customers and members want, Insider Intelligence shows the most desired online account opening features include the ability to easily set up direct deposit, push notification updates on progress with the application process, the ability to chat with a live agent, provide a list of information needed at the beginning of the process, and being able to easily fund a new account with a debit card, payment app, or mobile deposits. In order to successfully drive deposit growth, community banks and credit unions must understand what account holders actually want to avoid the most common pitfalls that result in high abandonment rates.
Lastly, financial institution leaders should recognize that online account opening influences the overall customer or member experience and impacts how internal teams operate, so the effort should not be done in isolation. Marketing teams will need to collaborate with digital teams to manage the campaigns and application conversion funnel. This, along with measuring results of any campaigns on a consistent basis, will help team members identify ways to test and optimize campaign performance. In addition to sales and marketing, involve key stakeholders from teams across the organization, such as customer or member experience, products, marketing, and compliance.
By fostering cross-departmental collaboration and incorporating these tactics into your institution’s deposit growth strategies, community financial institutions can even deepen engagement with existing account holders through more effective cross-sell offers. For example, your team may opt to target customers who have a loan but not a checking account with your financial institution.
Between email marketing, social media, digital ads, SEO campaigns, and more, banks and credit unions are spending significant time and resources on new customer and member acquisition. In fact, research shows that the average cost for a financial institution to acquire a new member or customer is approximately $200. To maximize ROI from deposit marketing efforts and achieve your deposit growth goals, a strong online account opening experience is essential.
Shaw Taylor, SVP of Sales and Marketing at Bankjoy