Abstract
Boston, MA. - December 23, 2009 -- While tough news has battered the
banking industry as 133 banks have failed already in 2009, another 400 are in
the I.C.U. and industry executive compensation is growing profoundly rich,
again, not all news has been grim. Even within a challenging economic climate,
core deposits have continued to grow, increasing from $4.1 trillion in 2002 to
$6.5 trillion, Q3 2009. Despite buffeting news and a tough economy, banks
continue to intermediate core deposits.
The newest report from Mercator Advisory Group's Customer-Centric Delivery
Channels Practice, Revitalizing Core Deposits: Deploying New Strategies to
Rebuild the Heart of Banking, profiles some of banks' impressive successes
harnessing and leveraging specific delivery channels and products to attract
and nurture long-term core deposit relationships.
By switching core deposit marketing and messaging away from interest rates to
account features and how those features can help an individual or household
achieve a specific goal, banks can dramatically erode the underpinnings of
rate shopping and account churn.
Many of the most exciting core deposit products entering the market are
long-term plays that lock-in deposits for years yet through monthly automatic
transfers of funds into the account, keep the customer engaged with the
institution, and receptive to additional marketing messages.
“By introducing merchant discounts, rewards and loyalty schemes and even
long-term investing bonuses into the mix of features offered in the design and
marketing of banking deposits, the days when the banking industry offers a
safe yet above-inflation return on deposited funds may well lie ahead of
us,” comments Elizabeth Rowe, Director of Mercator Advisory
Group's Banking Advisory Service and author of the report. “Seeing banks
designing core deposit products that create a long-term savings structure for
their customers while they hone the cross-sell strategies for those
relationships makes us think this may finally be the time for banks to move
aggressively into products for rainy-day and retirement savings. After 40
years of losing customer deposits to brokerage accounts, that tide may finally
be turning.”
Report Highlights Include:
- The future of core deposit growth is in the migration of new rewards and
loyalty schemes from the retail and payments industries into traditional DDA
and savings products.
- The critical issue for retail banks is that even if an institution can
gain consumer mindshare and access to his/her deposits, how then does it
capture the greatest possible share of wallet while managing those deposits
through channels that are both lowest-cost to itself and of greatest value to
the customer?
- By affixing cash-back rewards and merchant funded discounts to new
products, banks can rein in their CD marketing campaigns while, in the case of
529 plans, capturing growing deposits for almost two decades.
- Long-term core deposits can be gathered by inserting savings products into
the retirement product offerings of customers' institutional 410(k) platforms.
- Core deposit growth strategies are additive. These initiatives exist on a
service/technology continuum that pulls rote transactions out of the branch
which both lowers the channel fulfillment costs for an institution and raises
the levels customer convenience and satisfaction.
One of the 6 Exhibits included in this report:
Companies Mentioned in This Report: Bank of America, Bank of Texas,
Bank of the Wichitas, Capital One, Citibank, Citizens Financial Group,
Diebold, Futuretrust, JPMorgan Chase, McCombs Enterprises, NCR, SmartyPig,
SunTrust, U.S. Bank, uPromise, USAA, Wachovia, Waterfiled Financial Services,
Wells Fargo and WestBank.
This report contains 25 pages and 6 exhibits.
