The fight for deposits has become fierce, with rising rates and even cash bonuses being offered to attract more of them. But many of the deposit-gathering strategies of the past will not work. Innovation will absolutely be required.
As Millennial and Generation Z consumers have begun to generate wealth, tying up their money for 12 months, even to earn 4% or 5% is hard to fathom. Consider the popularity of products like the Apple Card‘s high-yield savings account, currently paying 4.15% APY with no time commitment required and eligible to grow through deposits of Daily Cash awards given for card transactions.
Yet playing punch for punch isn’t a winning game for financial institutions. Offering promotional rates, tiering rates to encourage larger deposits, and promoting “special” rates for new customers to fuel short-term inflows leaves banks and credit unions with a host of problems — higher costs, short-lived gains, churn and even reputational and regulatory risk.
But point the resources going towards all this in another direction and you’ll enjoy far better results.
The Key to Better Customer Relationships
I was a member of the founding team, and spent 21 years as a senior leader, with ING Direct in the United States (now named Capital One 360) and Canada (now named Tangerine Bank). My teammates and I learned a great deal about consumers and their saving patterns and behavior.
Among the fundamentals is that banking is about trust. In all relationships, trust is created by being fair and transparent and balancing outcomes for all parties. Consumers need to do well and banks and credit unions need to do well too.
If your financial institution can strike this balance, customers will be loyal. As they grow their savings they will also share more of their broader financial lives with you, increasing the potential for profitable relationships. If they trust you, they will recommend you to their friends and family — which study after study indicates remains a key factor in how new banking providers are picked.
The key to cultivating these relationships is data. Few industries compare to banking in terms of the information we have about our customers. Financial institutions need to harness this data and use it in the following ways to personalize their offerings and their marketing messages in ways that help people reach their goals.
1. Segment Customers into Personas
Banks and credit unions need to use their data to group customers into “personas.”
Personas describe the characteristics that represent people who use a product or service. They are archetypal models based on the goals, needs, motivations, attitudes, perspectives and behavior patterns of a specific collection of similar individuals. Personas contain rich detail that brings a human picture to life, allowing organizations to step into the shoes of the people who might use their products or services.
Getting to know these segments can get your institution smarter about how to serve each.
Read more: How to Deal With Banking’s Data Privacy Paradox
2. Tailor Experiences to the Personas
Once you know the specific personas that make up your base, you can use them to create experiences that will be most appealing to a specific persona group.
For example, which channels will it be most fruitful to interact with the people within this persona grouping: branches, mobile, web, email, text, newsletters or social media? What should be the nature of that communication: education, promotions, new mobile features, events? How do you turn communication into engagement?
Often the communication tools and the skills to engage with your customers already exist in your organization. But you need to focus them on the appropriate personas to maximize results.
Read more: Marketing in a World of ‘Infinite Data’
3. Personalize Communication to Reach Priority Segments
We are all very busy. We are constantly being bombarded with communications.
What we pay attention to and choose to interact with depends on what is going on in our lives. If my last child is off to college, if I’ve recently purchased a larger house, if interest rates have jumped 300 basis points, you can likely predict what my spouse and I are talking about at the dinner table.
Your goal is to get people to consume a communication and engage with you about it.
Read more: How Major Banks Are Personalizing Their Mobile Apps
4. Enhance Engagement with Timely Advice
With knowledge about a specific persona and an idea about what communication channels and content will draw their attention, you can now set the table for meaningful value-added engagement.
Your employees are already providing excellent advice in your branches, call centers and digital channels. You need to use the data you already have to funnel this advice to the places it will add the most value and where it is most desired.
Customized communications that lead to a response can produce value-added discussion that will delight people.
Some examples:
- Low-balance alerts can lead to a discussion about fees for insufficient funds and the option to set up an automated savings program: 30% of all account holders at ING Direct had an automated monthly savings program in place.
- Fraud prevention alerts can lead to a discussion about dual factor authentication, which protects both the consumer and the financial institution.
- Educational information sent to borrowers with adjustable-rate mortgages when rate changes are in the local news can lead to your institution being the “expert” in that family’s financial life. That can later lead to a mortgage renewal, wealth management, consolidation loans or discussions about insurance.
Read more: Customers Expect Financial Advice: Banks Are Falling Short
5. Consider the Risks Your Customers Face
Growth and financial success are also about managing risk, not only for financial institutions but also for consumers.
Data allows us to identify fraud and other types of risk, enabling us to take proactive measures to protect customer accounts and information.
Read more: Fighting Fraud Is a Customer Experience Opportunity
The Path from Personalization to Profit
This all may sound like an impossibility, or you may jump to the conclusion that executing this strategy will require a massive transformation project. This is simply not true.
You can start with one segment, with one persona. Engage your staff throughout the organization to understand that persona — what they think, what they need, what your institution has that can help them. You can even invite the people who fit this persona into your office for coffee or lunch and get to know them.
Consider establishing a client advisory board. This will allow you to stay close to the people who bank with you and their changing needs. You can also test ideas, tools and products.
Start there. Choose a few communication tools, engagement points and the types of advice and products you can offer them in the next six months. Gather data and test the results — and don’t give up.
Keep inching along and day by day your culture will begin to evolve. You will have more engaged communications with more and more of your customers. Their trust will grow. They will become loyal to you. They will come to you for help and tell their friends and family to do so too. Your net promoter score will rise and so will your customer base, deposit base and bottom line.
About the author:
Peter Aceto has several decades of banking experience that includes serving as the president and chief executive officer of ING Direct Canada/Tangerine Bank from 2008 to 2017. He most recently served as president of Mortgage Alliance, a Canadian mortgage brokerage firm.