In an environment characterized by increasing interest rates and economic uncertainty, banks must address the interconnected threats of deposit runoff and uncertain loan portfolio returns to meet performance expectations. The recent run on deposits at both Silicon Valley Bank and Signature Bank only crystallized the urgency for banks to attract and retain deposits by demonstrating the ease and pace of a bank-run in the digital age.
Given the outflow of deposits to both the largest banks and fintechs, the question now becomes how to ensure you’re keeping your existing deposit base?
Treasury management is often looked to as a viable option for institutions to take on added deposits by creating “stickiness” with existing customers. The embedded question that lies therein becomes: How can banks create deeper relationships with their depositors via treasury services to protect their longevity and durability?
Now more than ever, optimizing treasury management services should be a primary way to stabilize and grow a bank’s deposit base.
By focusing on enhancing customer experience, fostering relationship longevity, and leveraging data analytics, banks can create a compelling value proposition that empowers the treasury management function to drive deposit growth—meaning a focus on the following areas:
Unlocking deposit growth and retention requires financial institutions to harness the power of data analytics and adopt an execution strategy that encompasses a comprehensive change management framework. Banks possess significant—often untapped—portfolio and customer data that can be leveraged to target available segments and customer bases ripe for deposit acquisition. By targeting the right long-lasting relationships and directing efforts toward targeted client needs, banks can optimize their efforts and success rates in increasing customer wallet share—rather than overinvesting in low-opportunities and under-investing in key opportunity areas.
This data-driven segmentation approach—which considers factors such as retention profile, usage patterns, profitability, and propensity to use other bank products—enables banks to deliver an experience for its customers that minimizes attrition and run-off. It also empowers banks to tailor targeted marketing efforts, personalized fit-for-purpose solutions, and value-added services to specific customer segments.
To transform these opportunities into tangible results, financial institutions must adopt an execution strategy that aligns value propositions and offerings with evolving customer expectations and market dynamics.
By leveraging technology, optimizing onboarding, maintenance, servicing, and customer engagement processes to create an “ease of doing business” experience—while simultaneously fostering an internal culture of innovation—banks can drive organizational transformation and facilitate the adoption of solutions that increase deposit growth.
Establishing clear key performance indicators, building internal relationship manager (RM) sales effectiveness competencies, monitoring progress, and implementing feedback loops enable banks to measure success, make necessary adjustments, and realize the full potential of their initiatives in deposit growth.
Examining operating accounts within your portfolio reveals a significant number of low-margin deposits that are often overlooked. Operating accounts, with their tie to treasury services and various financial flows, possess a high level of stickiness. But it’s important to note that a customer’s payables, receivables, and merchant services are often distributed across multiple banks. This makes targeting operating accounts critical as they’re the most entrenched in a bank’s ecosystem and are very challenging to move.
Banks can identify opportunities to consolidate funds and improve deposit stickiness by proactively engaging these account types—and can be done by investing efforts to deepen relationships identified from data-driven segmentation, supported by a clear and focused sales enablement function, and supported by an execution change management strategy. This strategy aims to increase the stickiness of operating accounts and organically improve the overall deposit mix and volume.
Banks can strengthen and expand their deposit base by focusing on targeted customer relationship building, addressing potential product imbalances, encouraging customers to allocate deposits that align with their treasury and credit needs.
To effectively target the identified segments, financial institutions must ensure that their onboarding and account opening are streamlined and customer-centric. Simplifying account opening procedures, reducing paperwork (thus eliminating redundant requests for customer information), and leveraging digital technology can create a frictionless onboarding experience that encourages customers to initiate and maintain banking relationships. This should be streamlined for existing customers where KYC and other data attributes are already available within the bank—while focusing on ease and simplicity for the broader, net-new customer experience.
This pillar of success lies in creating a frictionless and easy customer experience, facilitated by using digital tools and associated processes. With data-driven segmentation, strategic focus and investment in key relationships, and the enabling power of technology, financial institutions can drive deposit growth and build lasting customer relationships.
For example, implementing digital account opening technologies allows customers to easily submit required documentation digitally, leading to reduced time and effort needed for onboarding on the bank’s side. By leveraging this sort of technology, optimizing processes, and fostering a culture of innovation, banks can drive organizational transformation and facilitate the adoption of TM solutions that increase deposit growth.
The power of data-driven strategies in treasury management cannot be understated when it comes to driving deposit growth. By utilizing data segmentation, targeting operating accounts, and strategically sizing opportunities, financial institutions can unlock substantial deposit growth and retention potential.
An effective execution strategy—backed by robust technology tools and change management practices—ensures the realization of value and the achievement of KPIs. By bridging the white space in TM and deposits, banks can position themselves as leaders in the commercial banking space and foster long-term customer relationships while expanding their deposit base.