Uncovering Hidden Deposits in Your Market
Co-produced by Traci Mottweiler, Director of Growth Strategies at Allied Solutions and Greg Wempe, Chief Client Officer of Kasasa | July 25, 2019
At one point in time, the smallest town in the U.S. was Buford, Wyoming. Population: 1. The only resident also ran the only gas station and post office in the town. It’d be a real kicker if he also ran the only bank, right? Suffice to say, America is home to many small communities with locally owned financial institutions that serve the needs of those communities.
One of the hidden difficulties for institutions operating in these small towns is growth. When you know everyone in a 50-mile radius by name, it can feel as though you’ve exhausted all the opportunities at your fingertips.
It’s time to sharpen the edge of your retail banking strategy.
The realities of deposit share markets are complex. You may think that you’ve captured all the deposits, or at least your fair share of what’s available to you. However, relying on a single data source such as the FDIC’s Deposit Market Share Report can underrepresent the real potential in your market. Take a look at the NCUA data for your area (or vice versa, if you’re a credit union) — your nearby competitors may be holding more market share than you realize. Additionally, privately insured institutions are completely missing from the data set.
Click here to listen to our two-part podcast series: "A Financial Tune-Up for Your CU: Deposit Growth and Loan Diversification."
What’s also completely missing from any analysis are deposits available to you via online channels, as well as deposits in your market that have been lost online. Meaning if someone in your market opened an account online with a financial institution that doesn’t have a physical branch in your market, no available data source will provide that information to you. Marcus, the new online lending and savings option from Goldman Sachs, gathered $35B in deposits in its first year, but never appeared on a single deposit market share report. And that is just one example.
In the end, these types of analyses provide marginally useful information, at best, but should not be a major point of consideration for strategic decisions. If you need more deposits and you’d like to avoid purchasing expensive ones there is hope, but conventional strategies aren’t going to cut it. If you’re serious about getting out of your deposit rut, you’ll need a more innovative approach.
Adopt a progressive approach to turn interest rate risk into your ally.
One of the first steps you can take is to begin offering high-rate, differentiated products with no monthly maintenance fees (such as reward checking). Although offering 3-4% on a checking account may sound like an insane amount of interest rate risk, the reality is that reward checking is one of the most flexible and low-cost core deposit products in existence. Once you understand the mechanics of how reward checking works, you can use it against your competition.
Offering rewards like high-interest rates or cash back on debit purchases is a great way to draw in account holders who would have overlooked your institution otherwise. These types of accounts can also help you achieve PFI (primary financial institution) status with current account holders who have low or negligible activity. Rewards give consumers a reason to shift their deposits and daily activity to your institution. This lays the foundation for cross-selling into other products or services that you offer.
Click here to learn about enlisting Kasasa's reward checking solutions to fuel deposit growth.
Enhance your advertising toolkit to build better customer relationships.
Once you’ve established a retail product suite that is appealing to consumers, you can begin retooling your marketing strategy. In fact, there’s a reason that we don’t recommend this as a first step: you can spend every spare penny on advertising, but if the product isn’t attractive, your marketing dollars won’t matter.
With great products in hand, you should turn your attention to precise targeting. Look for an advertising partner that can help you bring in exactly the type of account holders you want and need: You’ll want to find a partner that can help you with: 1) new account holder acquisition, and 2) existing account holder cross-sell. Both initiatives are important and require very different automation sequences and campaign assets.
If you’re an institution that is struggling with a constrained deposit market, we’d advise against trying to spin up highly advanced marketing programs and platforms on your own. There are partners out there who can help you share access to these large platforms and leverage proven assets, so you can achieve the kind of growth you crave while managing costs. Going this path alone can easily end in wasted time and investment with lackluster results to show for it.
To Recap: Here are three ways you can grow deposit accounts, even in a tough market -
1. Search some alternate data sources before you make a final judgment on the potential for growth. Deposits in small markets can often go unnoticed due to a range of factors. Looking at multiple data sources can help you gain a clearer picture of the growth opportunities that are out there.
2. Offer products that consumers actively seek (such as reward-based checking accounts). You won’t win over new consumers or re-invigorate existing account holders with the same old vanilla deposit products you’ve used for decades. For example, the new Apple credit card offers cash back rewards — that’s a pretty solid indicator of what people want.
3. Adopt a highly targeted advertising program. Once you have attractive products, you need to bring in local consumers who will make you their PFI.
Three simple steps, right?
The truth is that these steps are simple to understand, but can be hard to carry out properly. And there’s no reason for you to attempt a strategic shift of this caliber on your own. The good news is there are partners out there that can help. Check with your bank or credit union association and ask for a list of recommended vendors. Finding the right partner can take time, and if you’re already hungry for deposits, you need to start the process sooner rather than later.
Click here to visit our contact page or reach out to your Allied Solutions sales representative to learn about our deposit and loan growth solutions.
About Allied Solutions
Allied Solutions, LLC is one of the largest providers of insurance, lending, and marketing products to financial institutions in the US. Allied Solutions uses technology based products and services customized to meet the needs of 4,000 clients along with a portfolio of innovative products and services from a wide variety of providers. Allied Solutions maintains over 15 regional offices and service centers around the country and is a subsidiary of Securian Financial Group, Inc. Allied Solutions has tools and resources that can help you keep an eye on the potential areas of impact, protect against collateral losses, and stay on top of any new events, bulletins, and regulations as they happen.
Kasasa® is an award-winning financial technology and marketing provider. Based in Austin, Texas, Kasasa® helps more than 800 community financial institutions establish long lasting relationships with consumers residing in their local markets through its branded retail products, world class marketing capabilities, and expert consulting. The company reinvented checking and is now reinventing lending through its latest patent-pending offering, Kasasa Loans®. For more information, please visit www.Kasasa.com, follow our blog at Kasasa.com/blog, or share with us on Twitter @Kasasa, Facebook, or LinkedIn.
Content in the blog posts are the opinion and views of the writer, and don't necessarily reflect the opinions or views of Allied Solutions.