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Generating Deposits while Protecting Margins

The number one concern of banking executives I spoke with at a recent industry conference was deposit growth. Specifically, bankers want to grow core deposits without pricing themselves into less profitable situations. This sentiment extends well beyond the hallways of conference sidebar conversations.

A recent American Banker headline observed that: 

[the] “Deposit race among banks kicks into higher gear”

And an S&P blog from early in 2023 had this somewhat dire outlook:

“Financial conditions will remain tight, favoring banks with good liquidity management. And domestic deposit growth is likely to slow as household and corporate deposits are hurt by pressure on living standards and slower economic activity.”

Forward-thinking bankers are not sitting back waiting for deposits to erode while playing an interest rate matching game with larger institutions. Rather, they enable proactive strategies to help their banks maintain resilient liquidity levels and healthy profit margins.

These strategies include:

Fully leveraging CRM capabilities

Financial institutions can try and buy new customers with higher deposit rates, but that tactic does not necessarily lead to increased customer loyalty.

With the appropriate use of Customer Relationship Management (CRM) tools, customer loyalty and wallet share can increase – leading to additional core deposits.

Four straightforward CRM tactics to apply include:

  1. Review and scrutinize onboarding practices. Your organization gains new retail customers through a campaign. Do these customers understand how all their deposit products work? Have they gone online, are they paying bills electronically? Have they used a debit card yet? A CRM system can be set up to monitor new customer activity and then align appropriate banker responses if certain actions are not happening. This can be as simple as a reminder email on how to set up online banking or a trigger to branch staff to engage in a conversation. These types of service activities often lead to additional product sales by following a simple set of talking points.
  2. Flag product gaps. Your CRM tool should recognize product shortfalls in customer situations and provide notification to front-line staff to make recommendations for products such as bill pay and debit cards for young adults assigned to a household account.
  3. Assess how active a customer has been. Deposit accounts with low transaction thresholds indicate potential situations for customer defection. Triggers to bank staff based on criteria such as no (or limited) debit card transactions can lead to important conversations about your bank’s suite of deposit products that can help cement or expand a relationship.
  4. Analyze customers and leverage external data. A critical application of CRM tools is the segmentation and analysis of your best (most profitable) existing customers – which can lead you to seek similar characteristics in prospective customers. External data content can align with these profiles to improve the return of email or direct mail campaigns.

Evaluating an online bank

Online or direct banks leverage digital channels – not branches. They aren’t a new concept in financial services, but they are realizing a recent resurgence. Direct banks offer speed-to-market, reduced overhead, lower customer acquisition costs, and expedited onboarding. These enable banks to fast-track deposit acquisition, expand markets, and broaden a customer base.

The potential to rapidly drive deposit growth and support improved deposit/loan ratios for the parent organization is a primary driver behind the recent surge in direct banks.

Any direct bank offering should be well-planned and align with an institution’s existing strategies and risk tolerance. Community and regional banks should look for ways to extend an online bank offering to a particular market or a region where the bank’s brand is already recognized.

Providing effective training

A hallmark of banks with high deposit growth is a strong sales culture that harnesses the skills of the entire organization. The bank’s deposit goals and objectives must be understood throughout the financial services organization.

Each business unit and individual contributor understands how his/her job can impact sales. And every employee with direct customer contact has a basic understanding of the bank’s deposit products and their respective value propositions.

High-performing banks value training as an investment and leverage training programs that creates empowered, skilled, and knowledgeable employees. Effective sales training directly impacts an organization’s sales culture.  In turn, a bank’s ability to achieve deposit growth can be related to the efficacy of employee training.

Extend Banking as a Service offerings

Banking as a Service (BaaS) enables business functions that give banks, fintechs, and corporations – across any industry – the ability to rapidly configure new financial services offerings.

By delivering banking and deposit products in an “as-a-service” fashion, institutions can pressure-test rapid innovation with a low-risk “pay-as-you-grow” model.

These new products can include new deposit account offerings delivered with new partners that can provide entry into entirely consumer markets. Potential bank partners include firms in areas such as e-commerce, travel, retailing, health, and telecom.

Banking as a Service, CRM capabilities, online bank offerings, and sales training combine to form a unique combination of technology, people, and processes that can help organizations grow deposits profitably.





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Maria Schuld

Maria Schuld

Division Executive, Americas Banking Solutions


Member since

11 Feb 2021



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This post is from a series of posts in the group:

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