Community banks have been looking for the perfect recipe to attract deposits in a market in which consumers and commercial customers continue to switch institutions in search of better rates. Over the past few years, high interest rates combined with bank failures and accompanying wariness have driven customers to seek better returns on their investments. Despite many financial institutions raising the rates on their deposits to attract and retain customers, deposit rates have been slow to catch up with yields on alternative investments, such as certificates of deposit (CDs) and money market funds. In April of 2023, $1.1 trillion in deposits left U.S. financial institutions. Since then, deposits have started to climb slowly and are set to grow in the second half of 2024. In this climate, growing healthy deposits has become the number one business challenge for bankers, according to BAI’s 2024 Banking Outlook. The strategies to do so vary depending on the type of deposit growth you are seeking. While rates and fees associated with deposits matter greatly, other strategies become key to driving growth once rates are within an acceptable range. We explore three key strategies for both consumer and business deposit growth that have proven successful. STRATEGIES TO ATTRACT CONSUMER DEPOSITS 1. Maximize the use of technology. A good online and mobile offering allows banks to increase their reach to audiences across the country. Moreover, coupled with a personal touch, it is a critical part of a slick customer service offering. Veritex, a Texas-based bank with $12.1 billion in assets, invested in technology to streamline its account opening process. They credit the new technology — and the extensive employee training program that went with it — for the $135 million spike in deposits in the first 90 days after launch. 2. Offer reward checking accounts. For many institutions, reward checking accounts have proven effective in boosting long-term deposits by 4%. Essentially, reward checking offers a high return, around 6%, on a portion of the deposit — perhaps the first $20,000 — in exchange for a minimum level of engagement, such as card usage, online banking usage and so on. Lower engagement leads to a lower rate, with the interest rate dropping on deposits over the initial $20,000. Overall, the 6% peak rate is appealing to customers. What’s more, due 6 STRATEGIES TO BOOST DEPOSITS By Matt Helsing, SVP & Northwest Regional Manager PCBB, ICBC Associate Member 18 | INDEPENDENT REPORT
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