A growing number of financial institution marketers are deeply challenged to attract deposits in a hyper-competitive environment. Nearly half of U.S. banks saw a decline in deposits in 2017, according to The Wall Street Journal. A significant contributor to the trend is the low savings rate in the U.S., currently hovering around 6%.
Regional and midsize financial institutions in particular find themselves buffeted by threats from both ends of the financial spectrum. On one side, the megabanks account for the lion’s share of deposit growth. Indeed, the top three U.S. banks — JPMorgan Chase, Bank of America and Wells Fargo — captured 45% of all new checking accounts in the U.S. in 2017 using their massive marketing budgets and digital investments to lure new customers.
“Since 2016, U.S. digital banks have achieved a 14.2% deposit growth rate, compared to 5.4% for traditional banks.”
At the same time, digital-only banks are beginning to make an impact. Since 2016, U.S. digital banks have achieved a 14.2% deposit growth rate, compared to 5.4% for traditional banks. Chime, for example, has opened over two million online checking accounts and is signing more new customers each month than either Wells Fargo or Citibank. Others, including Goldman Sachs Bank’s Marcus unit have had notable success attracting deposits.
Traditional banks and credit unions, sandwiched between market behemoths and progressive challengers, have attempted various efforts, including incentives and education, to drive organic growth — but have seen mixed results. Enhanced financial education hasn’t proven actionable enough for most consumers, who tend to respond by feeling guilty and tuning out.
Marketing incentives — higher interest rates and deposit bonuses, for example — are difficult to sustain and can materially impact margins. Fixed automated transfers are simplistic and have met with low adoption rates, while “keep the change” or “round up” type programs tied to increased spending have only a modest impact on savings.
To Help Consumers Financially, You Must Truly Know Them
Despite the shortcomings of traditional approaches, most consumers believe that their primary financial institution can help them improve their financial well being. According to J.D. Power, nearly four in five consumers are interested in receiving financial guidance from their bank or credit union. However, only 28% claim they have received meaningful advice. Of those that did receive such advice, more than half (58%) felt that it met their needs when the advice was delivered in person, but that number slipped to 45% for advice through digital channels.
Critical to delivering meaningful advice, in-person or digitally, is to truly know the consumer, and this remains an elusive goal for most banks and credit unions. Celent finds that only 43% of consumers believe their primary financial provider really knows them. This issue is not due to lack of intent. The vast majority of retail banking institutions consider customer centricity a core element of their proposition. The top impediments to knowing the customer are common to many banks and credit unions: lack of strategic focus, data silos, poor data quality, insufficient data analytics talent, and convincing use cases.
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3 Regional Banks Use AI to Attract Deposits
To break through this myriad of challenges, financial institutions are investing in tools powered by artificial intelligence that harness data analytics and deep insights, enabling the institutions to provide each customer with a personal banking experience without an increase in manpower. The three examples below range include both large and small regional institutions. Although not all banks and credit unions will be able to do the same, the capabilities in use by these three institutions are increasingly becoming available further down the size spectrum.
U.S. Bank’s complete rebuild of its flagship mobile app was informed by extensive customer research. Consumers suggested they wanted a banking experience that could help them through any financial situation, and the bank responded with features such as Money Mentorship enabled by personalized insights. The app is heavy on personalization where the experience is the differentiator. Leveraging advanced AI capabilities, U.S. Bank is striving to anticipate consumer needs and be prepared to deliver the right solutions.
Huntington Bank launched Heads Up in 2019, a feature that uses AI to boost customer engagement by enabling them to optimize the way they spend and meet their financial goals. Heads Up provides customers with a wide array of features, from insights into their expenses to proactive alerts that let customers know when their account balances are insufficient to cover upcoming expenses.
Heads Up also offers subscription payment alerts, informing users when payments will come due and alerting them that a free trial is about to end. Such personalized insights and advice help foster trust among customers.
Royal Bank of Canada (RBC) introduced NOMI (a play on “know me”) to leverage AI capabilities to improve both customer experience and financial well being. NOMI is fully integrated into RBC’s mobile app experience and offers customers personalized insights, AI-driven budgets, and intelligent automated savings.
NOMI Find & Save, for example, proactively analyzes customers’ cash flow patterns to identify extra money and sets it aside as savings. This intelligent automation makes saving money effortless for RBC customers, resulting in a win for customers and the bank. According to RBC, Find & Save has been enthusiastically embraced by customers, with the average customer saving more than $180 per month. (Fifth Third Bank offers a similar proactive mobile savings tool called Dobot, an app it acquired in 2018.)
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Personalization is Raising the Bar
While these three banks are forging new ground by leveraging AI and a deep understanding of customers, many others are actively considering such capabilities. Innovation cycles are accelerating and customers are embracing solutions that are highly personalized and tailored to their needs. Soon, personalized insights and advice will become the new bar of what customers expect. Bank of America, for example, is actively considering incorporating a proactive savings feature into its Erica chatbot app.
Furthermore, personalized automated savings is potentially the first in a series of future innovations where banks will combine a deep understanding of each customer with advanced AI capabilities that will think and act on behalf of their customers to improve their financial well being.
Offering proactive solutions to help customers better manage their day-to-day finances positions banks as a source of trusted advice for major moments in their customers’ financial lives. Banks that embrace such smart innovation that puts knowing the customer at its core will benefit from more robust deposit growth, deeper customer relationships, and a stronger customer franchise.