Deposit Growth Strategies for Today, Tomorrow, and Forever

As we wrote in the article How Community Financial Institutions Compete in a Digital Age, deposit growth is not what it used to be. Along with shifts in U.S. population growth and demographics, excess liquidity in deposits created by COVID stimulus plans has quickly eroded. The “higher for longer” rate environment is stressing cost of funds (COF) and earnings. Loan growth outpaces deposit growth at most financial institutions, and the need for deposits continues to increase with repricing pressures coming soon as CDs come due in an enduring high interest rate environment.  

In fact, according to Curinos Consumer Deposit Analyzer, only the top quartile of branch banks experienced deposit growth in 2023.   

Tom McGill, PRI Director of Customer Experience, said since financial institutions can no longer count on historical population trends to grow their customer bases, the focus has shifted to taking more market share from their competitors. However, the acquisition of market share is also facing tough challenges, with only 3 percent of people over the age of 55 who are willing to make a change in their bank, whereas 15 to 18 percent was once the norm. In addition, younger customers are twice as likely to make a direct bank their primary bank.    

“If you think your institution is going to grow by inertia, the headwinds are decidedly against you,” McGill said. 

One of the ways financial institutions will grow their customer bases in the next decade is to focus on deposit growth strategies. As financial institutions face the current environment’s headwinds, there are five key responses McGill says will help them grow deposits. 

Get them, keep them: Onboarding matters.

Onboarding new customers requires as much effort as acquiring them and can reap even greater benefits in the long-term. An excellent onboarding program builds and cements the institution’s relationships with their customers. 

  • Coaching and development of staff in sound onboarding practices is critical.
  •  Synchrony with digital activities is an imperative. This is where customers interact with the institution and form their lasting impressions.
  • Don’t let perfect be the enemy of good. Get started on the process you want to implement and polish and improve as you go.  

Invest in meaningful analytics.

It’s important to have your finger on the pulse of what’s happening in your deposit growth program, McGill said. You can’t grow what you don’t know. Measure the basics and be sure you know your balance flows, product velocity, account waivers, rate exceptions and marketing efforts and results.

  •  Measure retention – think static pools.
  • Validate that incentive schemes align with business objectives.
  • Socialize everything in an easily consumed fashion. 

The digital experience is your front door.

The digital experience is your organization’s “front door,” according to McGill. It’s how your customers find you, engage with you and interact with you for the life of the relationship. Don’t accept a solution that is only “good enough.”   

  • Understand the critical customer journeys as they navigate the digital experience. Reduce friction at every touchpoint.
  •  Leverage the data to make strategic decisions.
  • Be immersed in the digital space. It’s changing rapidly.
  • Partner selection is critical.
  • DAO (Digital Account Opening) and Digital Onboarding are their own products.
  • Focus on optimizing existing branches rather than adding new ones. 

Growing deposits everywhere.

Traditional models of Commercial Lenders making loans and Retail Bankers generating deposits no longer suffice. Deposit growth is everyone’s business, and every segment—including consumer, small business, commercial and Treasury Management—must be mined for increased deposits. 

  • A Treasury Management strategy is important for institutions of all sizes and requires emphasizing product, distribution, and support efforts.
  • Not all institutions and not all distribution channels at an institution have the same opportunity. Align goals with opportunities. 

Growing deposits all the time.  

Every day, every week, every month, and every year are the times when the FI must focus on growing deposits. Deposit spigots cannot be turned on and off, absent expensive rate plays. Core deposit gathering requires a consistent commitment to the task. Even if bank leadership determines the institution has enough deposits, that is a good time to focus on shifting the deposit mix to increase overall profitability. 

Growing a bank’s deposits takes a sustained effort over time. Even in the current challenging environment, there are key, effective strategies to grow deposits and reap the benefits of increased profitability. 

“As the saying goes, the best time to plant a tree is 30 years ago,” McGill said. “The second-best time is today. The same can be said for deposit growth strategies.”   


How Community Financial Institutions Compete in a Digital Age – PRI 

PRI specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to propel growth and improve profitability.

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