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Banks Need Personalisation to Win the Battle for Deposits

By Dorel Blitz, VP Strategy & Business Development at Personetics.

Since last October, European banks have been challenged by deposit outflows. According to European Central Bank data, during that time span consumers took out €214 billion from eurozone banks. As consumer confidence has wavered and interest rates have increased, banks’ efforts to retain deposits have intensified. But in this competitive market, just increasing interest rates on deposits is no longer enough for banks to retain their customers.

For banks to win the battle for deposits they must focus their business strategies and tech deployment on hyper-personalisation.

Here are the four steps that will help banks to stand out from the competition to retain and grow their current deposits, as well as attract new funds.

1. UNDERSTAND CUSTOMER BEHAVIOR: Operationalise customers’ financial to identify deposit vulnerabilities and opportunities.  

Banks must take a more tailored approach to customer interactions, based on each customer’s unique needs and behaviours, instead of implementing a one-size-fits-all strategy. They need to understand the customers’ financial situation, depth of relationship, and how dynamic (or static) their funds are.

This can be done by leveraging advanced data and analytics capabilities to create a “customer money map.” The customer money map utilizes data from the customers’ transaction account to show the movements of funds – what’s coming in and what’s going out – and whether the customer has the capacity to save (which they may not realize). It can also incorporate open banking data to provide a more holistic view of the customer, enabling banks to identify deposit vulnerabilities and opportunities and devise their strategy accordingly.

2. ENGAGE CUSTOMERS: Build loyalty by turning data into insights.

Most customers are not attracted to a bank merely by the rates offered there. They want to put their money in institutions they feel are “looking out for them” and will help improve their financial well-being.

European banks should leverage customers’ financial data to deliver timely, contextual, and hyper-personalised insights and advice through their digital channels (and subsequently through their bankers). These insights generate meaningful engagement with customers that builds loyalty and helps with retention.

Customers value these interactions, like when a bank alerts them that they’re likely to have an overdraft issue, or when they have a subscription service that’s about to be renewed at a fee. These insights also inform customers when they have excess cash that could be moved into a savings account, effectively capturing funds before they can leave the bank.

3. SEGMENT SMARTER: Build tailored campaigns to improve conversion rates 

Hyper-personalisation should also be applied to marketing campaigns, in which customer financial data and behaviour are leveraged to provide timely personalised recommendations, offers, and messages about saving in marketing. When banks can determine exactly which customers should receive those messages about saving, then they can tailor them accordingly to increase the likelihood of conversion.

4. MAKE IT EFORTLESS: Do the hard savings work so your customers don’t have to

Many customers want to increase their savings but don’t put in the time to understand all the details. Banks can use advanced money management tools to analyse each customer’s cash flows and let them know when it’s safe to set aside money, as well as how much they can afford to save. They can then offer to automatically move that money into a savings account for the customer.

Banks also need to deliver practical savings journey plans that empower customers to reach their saving goals – like a down payment on a new home, a dream vacation, or a child’s education. Giving a helping hand in a savings journey is more valuable to most customers than the extra percentage point on interest rates that another bank is offering on their deposits account.

Banks cannot afford to ignore competition for deposits

The status quo in banking is changing fast. Customers are expecting more from their banks. Retaining deposits requires more than simply offering promotions or incentives to save.

Customers want to put money into financial institutions they see as trusted advisors that will improve their financial well-being. Banks have a key role in identifying the right factors to grow and retain deposits.

This is a huge opportunity for institutions that can foster engagement to build loyalty and trust. To do that, banks must start with understanding the customer, then engage effectively and make proactive recommendations to reach specific goals by making it effortless.

The next wave of innovation is here and is being driven by artificially intelligent powered solutions, which enable banks to provide personalisation on an unimaginable scale. This should be part of any bank’s comprehensive, differentiated deposit strategy.

First published on Financial IT, on 2 May 2023: https://financialit.net/blog/banking/banks-need-personalisation-win-battle-deposits

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