Although the amount of data available to understand consumers has exploded, cloud-based technologies now make it possible to knit together many distinct types of information into a usable “data fabric” in near real time.
By Kristopher Lazzaretti
Diminishing consumer pandemic reserves and draining commercial deposits, coupled with hyper-competitive rates on government securities, has made growing deposits challenging. Banks have been turning to some of the most expensive sources of dollars, including brokered deposits and loans from the Federal Home Loan Bank system. Between Q1 2022 and Q1 2023, brokered deposits and FHLB borrowings more than doubled at the 84 largest banks in the U.S., while interest expense increased 12 times, reports Bloomberg.
However, a more sustainable and considerably less expensive lever exists to grow core retail deposits: precision direct response marketing.
How can banks leverage data and technology to power core deposit growth?
Personalized marketing at scale can sound challenging–even daunting—but the great news is technology-powered, data-driven marketing has made tremendous advances over the last 15 years. Although the amount of data available to understand consumers has exploded, cloud-based technologies now make it possible to knit together many distinct types of information into a usable “data fabric” in near real time.
The best platforms responsibly collect and analyze data from many different sources to offer insights into the “triple crown” of deposit-focused marketing:
Capacity to fund an account: How much does the household have available to put into a new deposit account?
Savings behavior: How much does the household prefer to maintain in checking, savings, CD and money market accounts (versus money market mutual funds or other instruments)?
Provider selection preferences: Would this household use a direct bank or community bank, or would it only consider larger banks?
In our experience, understanding these three factors is critical to any marketing plan—or frankly, any broader growth strategy—to increase core deposits.
Why is direct response marketing important for core deposit gathering?
With technology as the enabler, direct response marketing is particularly effective for core deposit gathering, because it allows banks to utilize massive amounts of data to precisely select and then address high-potential audiences.
It is now possible to quickly and easily serve relevant offers and content to consumers and small businesses across multiple coordinated channels, including social media, programmatic display, email and direct mail.
The one-to-one nature of these channels allows bank marketers to target households with the most interest and opportunity, while also reducing the risk of repricing existing “on us” deposits—a feature just not available in other marketing channels, such as mass print or radio. The dynamics of direct response marketing also allow rate offers to be changed frequently and presented consistently across exposures.
On its surface, direct response marketing can appear to be slower, more complicated or less material than other methods. Perhaps that’s why brokered deposits and FHLB borrowing has increased so dramatically. But that’s not true and banks don’t have to “go it alone.” There are sophisticated marketing partners with experience using data and technology to quickly create programs to drive material growth in core retail deposits at costs that are considerably less expensive than other options. And with deposit dollars no longer “on sale,” management teams that remember the value and power of well-executed marketing have the most to gain.
Kristopher Lazzaretti is president of data solutions at Deluxe, a full-service data, analytics and marketing solutions provider with deep expertise in financial services.
