When you’re desperate for something, it can feel further out of reach than when your need was not so great. It can also feel like everyone is clamoring for what you need. For some time now, the refrain we hear from bank leaders is “We need deposits!”
Most bankers with whom we’ve spoken know whether they need low-cost deposits or high-yield deposits. We’ll cover low-cost deposit strategies in an upcoming article, but here, let’s assume you need high-growth deposits. Here’s why you might go that route, ways to not let desperation undermine your strategy, and tips to stand out to future customers.
Why launch a high-yield deposits initiative?
1. You’ll attract more valuable customers.
Earning the business of rate shoppers only provides a temporary, partial win. You’ll gain some of their deposits for a set period of time, but that’s probably all you’ll get.
But the customers you win by offering high yield savings with a great overall experience? They’re much more likely to keep their business with you across financial products and for a longer time. A customer that uses your institution for checking and savings, along with any high-interest accounts they choose to open (if they go that route), is worth much more to you than one that just opens a CD. Even better, once they know and trust you, they’re more likely to come to you first when they need a loan as well.
In addition, high-yield savings accounts tend to draw high net worth individuals. The key is in how you design and market the product. With the right fintech partner, you have the opportunity to add benefits that make new depositors stickier customers, integrating features into the product build that make them feel understood and valued. Likewise, you can target very specific customer types and use your marketing to make them feel seen for who they are, rather than treating them like rate shoppers.
2. You’ll drive deposits that don’t cannibalize your other deposits.
In trying to attract new customers with high interest rates, your marketing will likely reach current customers as well. The people who have already chosen your institution for their checking and savings accounts may well be persuaded to move some of those funds into your higher-interest products instead. That’s not entirely a negative, but….
If you are in the business of attracting new customers, expand your marketing efforts outside of your footprint. In this digital world, that could even represent communities and states that are not adjacent to your footprint at all. Instead, you could target lookalike audiences elsewhere.
3. You can create an easy-in to new markets by testing an affinity brand.
For many consumers, considering a brand’s values now plays a key role in deciding where to put their business. For banks, one way to attract these consumers is by establishing an affinity banking brand – a move the right fintech partner can help with.
Why would you set up an affinity brand? An affinity brand with a singular deposit product, such as high-yield savings, can test your brand in a low-risk and low-cost way. Partnering with a fintech company that can do this without the overhead of a full online banking and core system setup serves as a barometer for future brand expansion. An affinity-branded product can also ensure you do not cannibalize current deposits with a higher rate offer.
Offering a specialized banking brand that emphasizes the needs of a particular segment of your audience demonstrates that you understand and care about them. Deloitte research found that 57% of customers feel more loyalty to brands that commit to addressing social inequity. For younger consumers, the appeal is even more heightened, as 94% of Gen Z expects businesses to take a stand on social issues.
Dipping your toe into the affinity brand market lets you try out your offerings with different customers and communities. From a business perspective, you get to shore up market share, strengthen your brand, align your activities to your mission, and – most importantly – explore new markets in a cost-effective way.
If you do decide to branch out (haha) into an affinity market, the right fintech partner can smooth the process for you. By bringing their technical know-how to the table, they can substantially reduce setup costs. In addition, they can enable you to test the waters without having to create a charter.
Whether setting up an affinity brand or adding a digital offering, working with the infrastructure that’s already been built, tested, and proven by a reliable vendor makes your job easier. You can reap the benefits of offering a full-deposit suite, with less investment required on your part.
4. You’ll drive deposits that don’t impact your COF.
If your cost of funds (COF) to borrow stays high and the interest rates you’re paying to consumers are high as well, you take a hit on both ends. However, it may be worth the influx to offer a competitive interest rate. Compared to alternative, more traditional methods of deposit acquisition, the COF of a well-marketed high-yield savings account is negligible.
Saving benefits both you and the customers you serve.
In Plinqit’s State of Savings Report, 91% of all recipients said they were saving. Even in the midst of inflation, consumers understand the importance of setting money aside. Customers care about improving their financial habits and working toward their savings goals. Helping them accomplish that isn’t just good for them, though; it has tangible benefits for you as well. Your bank has a strong opportunity to drive deposits that increase your reserves and enable you to make more loans. Consider launching a savings account alternative that drives the right deposits and relationships for your objectives.
If you appreciate these 4 reasons you might elect to launch a high-yield deposits strategy, you’ll want to download the full white paper.
