Are your financial institution’s core deposits a source of competitive advantage?
They can be, as they’re crucial to support loan growth and profitability, and will be even more important as interest rates rise.
Core deposits provide banks and credit unions with a stable source of funds for their lending base and can affect long-term profit potential. They also offer predictable costs and a measurement of customer loyalty.
Their importance is further underscored as the historically low interest rate environment recedes. Rates paid on core deposits are slower to adjust, thus muting the impact on the net interest margin from an interest rate increase.
All the more reason for financial institutions to actively pursue attracting, retaining and growing core deposits via acquisition campaigns, with a focus on increasing the deposit base and enhancing profitability by offering the right products and services to prospects and existing account holders.
One option is to emphasize building up the base of low-cost deposit accounts, which can be both profitable and often the gateway product that’s most likely to bind a consumer to the financial institution. This can include new or current account holders in the right geographies.
Keep in mind that over 50 percent of households have multiple checking accounts. An account holder with only one checking account at your institution may be in the market for a second or third account. This is especially true of younger consumers.
Financial institutions can also target existing account holders through segmentation and cross selling of appropriate products and services to build deposits. Multi-product households build customer loyalty and greater account profitability over time.
Use the right tools. Robust data-driven analysis from a variety of sources, in addition to your own account holder profiles, identifies high-value prospects, allowing you to extend personalized offers with attractive features and incentives.
Whether your strategy is to attract new account holders or deepen the relationship with current ones, or both, the right acquisition campaign can give your financial institution a marketplace advantage.
The timing couldn’t be better to build core deposits, ensuring a stable and sufficient source of funds for lending activity.
The key to beating the competition in a fluctuating banking is to create a new core account holder base, while still maintaining strong relationships with traditional account holders.