How to Get More Deposits at Lower Costs? Give Marketing Room to Run
By Neil Stanley, Founder and CEO of The CorePoint
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Finance, sales, and marketing have been arguing over deposits for years.
Finance wants to protect margin. Sales wants a rate it believes it can sell. Marketing wants to generate growth but must stay within the pricing decisions already made.
That tension is becoming more consequential now as industry indicators point to future increases in deposit competition. The good news is that marketing departments can help ease that tension, usually from within institutions’ current pricing and product framework. Sales can follow a similar framework. Together, these departments can gather double the deposit volumes while also finding significant savings in deposit costs, a very uncommon pairing.
Need to Know:
- Deposit pressure could intensify rather than ease. Higher long-term yields and additional lending capacity from lower capital requirements could increase competition for deposits, complicating institutions’ efforts to contain funding costs.
- Institutions need a deposit competition strategy alongside their pricing strategy. Waiting for funding-cost relief is a growing risk as depositors become more sophisticated and deposit markets become more efficient.
- Not every depositor is a rate shopper. Distinguishing sleepers, curious depositors, and true rate shoppers helps institutions avoid raising the cost of money that could have been attracted or retained at a lower price point.
- Marketing needs more leeway, not pricing control. Product pairings, customized non-pricing offers, and the right handoffs to a trained frontline give marketing more ways to gather deposits within the institution’s existing pricing framework.
What Future Increases in Deposit Competition?
A bank’s funding cost — what it pays depositors — tends to follow the Federal Reserve’s target rate. A bank’s longer-term assets, and the alternatives its depositors can chase, follow the whole curve. So for a year, many bankers waited on “when rates come down” to ease the pressure. The overnight rate did come down. But the term money everyone competes for got more expensive, not less.
The curve isn’t inverted anymore — it’s upward-sloping again, recently sitting at 4.03% at 3 months to 5.37% at 30 years. The Fed sets the short end. The rest is the market pricing in what it thinks of the debt.
Now, lower capital requirements for banks will pump more lending capacity into the marketplace, adding fuel to the fire of deposit competition.
Key insight: The uncomfortable question for banks and credit unions already struggling with deposit costs: If finance does not want to raise rates offered to depositors, then sales cannot negotiate on pricing, and marketing is stuck with cookie-cutter offers.
What exactly will motivate depositors to choose the institution aside from pricing?
Why the Fight Is Always About Rate
For decades, executives have had an “accept that banking is commoditized” approach to deposits. And banking is about as commoditized as any business can get, but there are two reasons that fact can become an excuse for inaction when it ought not to be:
First, banking felt even more commoditized than it was after 2008 because pricing had almost no bearing on where depositors parked their cash. It even became so common for depositors to act ambivalently towards their discretionary savings that bankers actually cited “having too much cash” as a challenge to one another.
Second, on the surface, it makes sense that the highest pricing will attract the most volume in a commoditized industry, but data proves otherwise. One reason: Product pairings and customizations are not necessarily commoditized in depositors’ eyes.
Institutions can hardly be blamed for accepting commoditization because, in a price-driven market, they largely compete with each other. The silent backdrop, however, was that the deposit market was traditionally about as inefficient as a market could be. Significant friction (by today’s standards) and a lack of sophistication among depositors did the heavy lifting in creating the funding book’s contribution to bank profitability.
What I have described thus far is the backdrop for institutions’ wait-and-see approach to their deposit business in recent years. That approach was a strategy. Now it’s a bet. Industry conditions are unlikely to offer relief to institutions; deposits are more commoditized; depositors are more sophisticated than ever; and deposit markets are much more efficient.
Key insight: Yes, participation in a deposit market will always have pricing decisions tied to the balance sheet. Institutions, however, must begin to run a deposit competition strategy alongside the pricing function. Institutions can take small steps to get started, beginning in the sales and marketing departments.
Respecting Pricing While Competing
Bankers will sometimes say loyalty is dead. But loyalty did not keep most discretionary savings where it was. Inertia did. Depositors left money in place, rolled maturities without shopping, and quietly funded the institution at below-market rates. That behavior was the load-bearing wall of deposit margins.
Depositors can be “sleepers,” like the ones described above. But a useful way to segment the deposit base is into three groups: sleepers, who don’t move; the curious, who may move; and rate shoppers, who move on price. The costly default at most institutions is to build campaigns, frontline scripts, and pricing as though everyone belongs to the third group. New depositors then tend to receive a price before anyone has established whether price is even driving their decision.
That default is expensive. Lead with rate, and you raise your funding cost on money you may have attracted or retained at a lower price point. Leading with rate invites depositors to shop, introduces price to the curious, and wakes up sleepers. And it drags the existing book toward a new, higher, more painful number. The institution ends up paying up by more than many institutions realize.
Marketing is a natural fit for solving a one-size-fits-all approach, even without major changes to its authority.
Upping Marketing’s Game Without Changing its Seat
Marketing operates across numerous channels, from the institution’s website and email campaigns to digital account opening, direct mail, paid media and existing-customer communications. How the strategy works will vary by channel, but three core practices can give marketing a larger role in gathering deposits without giving it authority over pricing.
The first may also be the simplest: present a relevant companion offer alongside the deposit product a customer is already considering or opening. Many institutions call these “companion savings accounts,” and they can double the volume of deposits originated through marketing conversion.
Key insight: Companion savings accounts require little marketing explanation and little additional complexity for the frontline banker to deliver. The depositor buys a CD, and that eligibility event allows them to open a high-yield savings account paying a rate comparable to a CD. The more important question is how the offer is targeted. Marketing would need to avoid unnecessarily waking up existing low-cost “sleeping” deposits by broadly promoting the higher-yield savings option to customers who are already content.
Used selectively, however, the pairing can materially change the economics of account origination. A customer who came to the institution intending to open one CD can be given a second place to move funds at the same moment. That creates a path to doubling the deposit volume gathered at origination while also converting a single-product CD customer into a two-product deposit relationship in one fell swoop.
None of that requires marketing to alter the CD rate or make a pricing exception. It simply gives marketing another approved product to position around the same depositor decision.
Customize the Deposit, Not the Price
A second opportunity is to let marketing customize non-pricing elements of the deposit offer and the shopping experience.
Most institutions still present deposit products in rigid packages: a promotional term, a handful of standard maturities and a static rate table. But the customer experience doesn’t need to stay that limited.
Consider maturity dates. Rather than forcing every depositor into a 6-, 12-, or 24-month box, an institution could let the customer choose the deposit maturity date. That is not especially radical by the standards of the broader retail economy. Consumers routinely choose their seat on an airplane, configure a vehicle, select delivery timing or modify other elements of a purchase. With today’s computing capabilities, banks can give depositors more control over the product structure without changing the institution’s pricing authority.
Marketing can also apply standard e-commerce practices to the way deposit offers are presented online.
Key insight: Deposit rates are inherently time-sensitive offers, yet bank websites rarely present them with the same urgency consumers encounter elsewhere. If an offer is available only for a limited period, marketing can make that visible with tools such as a countdown timer that encourages the depositor to complete the transaction rather than leave the page and continue shopping.
If the first offer does not result in an account opening, the interaction doesn’t have to end there. Marketing can use follow-up communications to re-engage the depositor, present another approved configuration, or slightly alter non-pricing elements of the offer to learn what is preventing the customer from moving forward.
The objective is not to turn deposit pricing into a negotiation. It is to give marketing more ways to improve conversion around the pricing decisions finance has already made.
Build a Breakpoint Between Marketing and the Frontline
A defined breakpoint between marketing and the frontline gives the institution a practical way to treat sleepers, curious depositors and rate shoppers differently.
Marketing channels do not need to contain every possible rate-shopper offer. In fact, keeping those offers out of the standard marketing journey can help the institution avoid introducing price unnecessarily to depositors who may have accepted the public offer, a companion product, or a customized non-pricing feature.
Instead, marketing can use the depositor’s behavior to determine when a handoff is appropriate. A customer who accepts the offer stays within the marketing journey. A customer who explores, hesitates or continues shopping can be given additional approved options. When the depositor makes clear that price is the deciding factor, marketing can facilitate a direct handoff to a banker or frontline employee trained to work with rate-sensitive customers.
That breakpoint does more than improve execution. It gives the institution a clearer map of how depositors are behaving across its channels — where sleepers convert without intervention, where curious depositors can be moved with product structure or messaging, and where true rate shoppers require a sales conversation.
The result is a cleaner division between marketing and sales. Marketing can focus on gathering deposits at the institution’s established spread without filling every channel with its most aggressive pricing. The frontline can concentrate on the smaller group of depositors whose behavior shows that price actually needs to be addressed.
