Rising interest rates and inflation have created a perfect storm for intensified deposit competition. Financial institutions of every size are looking for ways to attract and retain depositors while depositors search for the best return on their dollars. Research from Cornerstone Advisors shows that the interest rate environment and cost of funds are community bank and credit union executives’ greatest concerns for 2023.
Until recently, interest rates hovered at historic lows, which meant many financial institutions’ current marketing teams have never had to prioritize deposit growth strategies. However, all of this has changed. Even for marketers that have managed deposit growth campaigns in the past, tactics that worked well decades ago may not be the best path forward today.
For instance, promoting higher rates on CDs is a common tactic, but this approach often primarily attracts rate shoppers, who will invest their dollars and leave once the deposit has matured. Aggressively raising rates across an institution’s entire deposit base also does little to improve customer retention or attract new depositors long-term. Meanwhile, these tactics are typically costly and customer acquisition costs are already high enough. According to some experts, for a large bank, it could cost between $1,500 and $2,000 to acquire a new retail banking customer.
Check out Kathleen’s full article published on bankbusiness.us