The Art of Retention: Don’t Wake Sleepy Depositors
Banks and credit unions have been through the wildest year in a decade. Among macro challenges, the rising rate environment put a micro-focus on retaining deposits. But while it’s easy to find articles from experts and analysts on how to keep rate-sensitive depositors from leaving, most are overlooking the most important nuance in that challenge: walking the line between how to keep suddenly rate-sensitive, rate-seeking depositors engaged—without awakening the remaining “sleepy depositors.”
Sleepy depositors are waking up and smelling the returns
The last ten years saw low rates that lulled a large volume of depositors into hibernation, so to speak. That trend piqued as federal stimulus and other initiatives pumped cash into consumers’ pockets. Overall savings rates increased across the U.S., and a 2022 Federal Reserve report concluded that 2020-2021 saw the biggest surge in aggregate deposits in at least 30 years.
The Fed also kept rates hovering near zero, creating an extremely low-rate environment. The majority of relatively risk-averse, not extremely financially savvy consumers recognized it was difficult to find higher returns anywhere (without taking big risks). So, they were content to let their money sit.
Last year, within a matter of months, the tides turned, and a lot of those sleepy depositors woke up. Rising rates dominated the news, and many FIs went hard with advertising higher deposit rates. On top of these enticing offers, broader economic worries pushed more consumers to get serious about financial responsibility—and look for ways to make their money work harder for them. Deposits across U.S. financial institutions (FIs) started falling—the first decline in overall deposits in 80 years—and many experts predict shrinking deposits to continue through 2024 as depositors move to higher-yielding alternatives like US money market funds. In addition, the Fed has taken about $1 trillion out of circulation that originally came from the stimulus.
The balancing act of engagement: seeing the early signs
Banks and credit unions are prioritizing proactive deposit retention. They increasingly recognize that if they let competitors’ advertising awaken sleepy depositors, they’re already playing from behind in the retention game. Banks and credit unions need to build a strategy to proactively engage these awakening depositors.
But here’s the tricky part: You want to proactively engage depositors after they wake up. Your goal is to be their cup of morning coffee, not their alarm clock.
How do you walk this line? You need the ability to see the earliest signals that a depositor is waking up, such as increases in activity through online and mobile banking, new engagement with marketing communications, direct interactions in-branch or through the contact center, and other behaviors.
Total Expert helps you go even further. Our platform not only brings together all these internal customer data points—it enriches your customer profiles with relevant third-party data, so you can see early signs of activity outside your figurative four walls—giving you the ability to determine which depositors are waking up, which are getting ready to walk out the door, and which are still happily slumbering.
Slowly engaging awakening depositors
What you do with those early warning signs is critical to successful retention. You don’t want to fall right into direct rate competition with your competitors—that’s a race to the bottom. Rather, you should use early and predictive signals to deliver engagement and content that reinforces your role as a trusted financial advisor—a true value-added partner, rather than a transactional rate provider.
For example, using pre-built deposit Journeys within Total Expert allows you to stair-step awakening depositors through a whole library of self-education. Automatically triggered email newsletters can engage depositors with hyper-relevant information on how to navigate the many challenges and opportunities of this rising-rate environment, examine hidden fees, root out too-good-to-be-true rates, etc. This educational engagement helps to shift depositors away from the purely rate-sensitive mindset, toward a more measured perspective on how to make decisions with long-term financial wellness at the forefront.
CDs provide a great tool to engage rate-sensitive depositors
A depositor engagement Journey ultimately needs to drive to a product. And in this environment, certificates of deposit (CDs)—traditionally a less-attractive option—have become an ideal tool for providing mutual value to the depositor and the FI. The depositor is able to level up their returns on a significant portion of their deposits, without the hassle of shifting money to a new FI. And the bank or credit union gets a low-risk avenue to maintain cash flow and nurture account holder relationships.
Yet even after successfully “selling” a depositor on a new CD, the engagement Journey cannot end. Some of these new CD holders will fade back into sleepy depositor territory for the duration of their term. Others will remain active in considering other avenues and contemplating their next move. It’s vital that FIs proactively maintain engagement with their more rate-sensitive CD holders.
Here again, leveraging Total Expert’s pre-built Journeys gives FIs a powerful strategy for engaging in a personalized way—at scale. For example, approximately six months into a CD, FIs have a valuable opportunity to engage account holders by educating them on how to optimize their accounts within the prevailing rate environment. This engagement Journey can walk them through options for rolling over a CD and offer relative pros and cons of other deposit accounts and investment vehicles. This education-first strategy helps to once again walk the line between engaging the more rate-sensitive depositors, while not riling up the sleepy ones with marketing that puts the focus exclusively on rates.
From competing on rate to driving loyalty through value
Relationship pricing is another proven, value-based retention strategy that enables banks and credit unions to establish a clear value exchange for the depositor. With relationship pricing, the more products and services a customer/member has with an institution, the better the rates/rewards they will receive.
Done well, relationship pricing creates a mutually beneficial partnership that not only incentivizes cross-selling opportunities and increases satisfaction but also reduces attrition, as account holders are deterred from switching to competitors. Relationship pricing fosters long-term commitment, enhances the account holder experience, supports financial well-being, and provides FIs with a competitive edge.
Going even further, FIs can use Total Expert to take a data-driven approach to relationship pricing—using the previously mentioned signals of engagement and attrition risk to target personalized relationship pricing offers to the right depositors. This targeted approach connects with awakening depositors before they open their eyes to a higher rate being offered by a competitor—establishing a firm and sticky relationship that goes deeper than rate alone.
Getting the right tools to strengthen your retention muscles
Just like consumers, FIs have grown accustomed to the low-rate environment of the past 15+ years. They haven’t had to flex their deposit marketing muscles for nearly two decades; they’re out of practice.
But they’re also coming into this rising-rate environment with a whole new set of tech tools available to help them strengthen their retention muscles. Purpose-built platforms like Total Expert give FIs the ability to parse the nuances of sleepy vs. awakening depositors. This is intelligence that FIs couldn’t have dreamed of a decade ago when they went through similar challenges.
Perhaps even more transformational, solutions like Total Expert give FIs the ability to act on that intelligence at scale. You’re not sending out generic rate flyers to every depositor, and you can better manage the balance of digital and human outreach. With Total Expert, you can connect that intelligence with automated engagement Journeys—initiating financial education when a depositor’s activity levels tick up, or when an account holder's CD is up for renewal. And these well-timed, hyper-relevant Journeys can adapt based on the account holder’s behaviors and engagement—allowing you to send smarter, more personalized and more helpful messages over time.
James White, General Manager of Banking at Total Expert, has over 25 years of experience helping modern depositories grow market share and drive profitability. James’ leadership experience spans strategic planning, product development and delivery, professional services, sales and marketing, and customer success. Having worked with the largest banks and credit unions in the world, James believes in the power of an empathetic bank or credit union to create customers for life.