How Banks Are Driving Deposits Now

//How Banks Are Driving Deposits Now

Mid-tier regional banks, community banks and credit unions are under increasing pressure from larger, national banks intent on luring away their customers. Seeing their deposits pulled away by these competitors is one of the most ominous trends in the industry right now.

To put the problem in perspective, whereas average annual deposit growth industry wide is 4.6 percent, JP Morgan Chase, one of the nation’s largest banks, has seen its deposits grow 9.5 percent since 2014. Other large national banks, as a class, have seen growth on the order of 5.3 percent. That leaves smaller institutions in a precarious position.

Unlike their larger competitors, who often go to the capital markets in search of liquidity, smaller institutions are dependent upon their deposits. With less money to lend, their ability to profit on the spread is hampered. Over time, they can become even less capable of competing.

But these institutions are fighting back, and they are leveraging technology to do it.

A focus on the customer experience

Ultimately, it’s the consumer who decides where to put their money. While only 11 percent of consumers switched banks in the past year, according to the Accenture North America Consumer Digital Banking Survey, 80 percent said they wouldn’t have a problem doing so. These consumers indicated that they view their banking relationship as transactional and not advice-based, leaving them free to switch to anyone who offers a better experience.

Thus far, according to the study, the winners have been the virtual banks and payment providers. These online natives are in touch with what consumers expect today and have grown by 15% in the past year by giving it to them.

If traditional banks and credit unions want to hold on to their depositors, they must offer better experiences. In fact, that’s what we’re seeing in the market today.

Going digital to get more depositors

In the case of fast-growing Chase, the bank spends billions of dollars every year to be at the forefront of the digital banking revolution, according to an article in Bank Director. According to the publication’s executive director:

“Thanks to these investments, [Chase] has the single largest, and fastest growing, active mobile banking base among U.S. banks. As of the end of 2018, Chase had 49 million active digital customers, 33 million of which actively use its mobile app. Eighty percent of transactions at the bank are now completed through self-service channels, yielding a 15-percent decline in the cost to serve each consumer household.”

Even so, Chase attributes 70 percent of the increase in deposits to customers who use its branches. Which makes this an incredible opportunity for local institutions that have built their reputations on relationships that originated in their branches…if they can keep pace on the digital front.

Making the shift to digital

As community-based depositories plan to make the shift to digital banking, they are finding that they lack the internal expertise to execute on a strategy while minimizing risk. They know they need to make the move, but they also need to minimize risk.

We’ve been helping businesses navigate their digital channels for years now, acting as guides for executive teams as they implement changes. Often this involves developing software, but it may also involve choosing among existing technologies to meet the institution’s particular needs. In many cases, cloud-based technology is proving to be an excellent component both for efficacy and risk mitigation.

To find out more or to visit with our experts about your own strategic choices, reach out to us today.

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