In today’s competitive market, deposit generation is a hot topic. According to the 2023 Strategic Priorities Benchmark Study from Jack Henry™, financial institution CEOs identified growing deposits as a top strategic priority for the next two years.
While it’s true that your pricing strategy can always impact incoming deposits and retention, here are five ways you can boost your balance sheet without paying up for deposits:
1. Build your business portfolio. On average, the median balance in business accounts is more than twice that of a retail account ($12,100 vs. $5,300), making business account acquisition especially attractive when you’re seeking to build low-cost deposits.
While many things factor into the selection of a new primary financial institution, a bank or credit union’s digital banking capabilities can make or break the decision. In fact, a study of newer business owners revealed that online and mobile banking capabilities are more important than an institution’s location, fees, or product lineup.
That means that having a comprehensive digital strategy is essential to serving your business accountholders. Seek scalable solutions that make it easy for you to update an account’s digital capabilities to include more robust functionality as the business grows. From enabling payments to ACH, wires, and more, ensuring you can provide today’s digitally savvy business owners with the access and user experience they desire is essential to gathering business accounts and business deposits.
2. Counter “silent churn.” According to new research from Javelin, 2022 marked the first time that more than half of small businesses engaged with publicly held “big fintech” non-banks. These four providers – PayPal, QuickBooks, Shopify, and Square – are creating “silent churn” by quietly capturing the foundational transaction accounts of your business accountholders and siphoning your low-cost business deposits.
Because these providers primarily target smaller employers and sole proprietors that may not be on the radar of your business development team, deposits disappear before they ever hit your books. To counter this challenge, take a look at your business banking strategy and ensure your small business solutions are both visible and comprehensive – especially those that provide digital payments and invoicing since cash flow is key to the survival of younger and smaller businesses.
When you position your institution as a financial hub where businesses of all sizes can start, grow, and thrive using a full suite of deposit, lending, digital, payment, and security solutions, you’ll discover (and retain) previously untapped deposits.
3. Attract youth and families. If you aren’t actively considering Gen Z or Gen Alpha in your deposit-gathering strategy, now is the time to start. Children in the United States amassed a staggering $26 billion in wealth in 2021 ‒ $3.1 billion from chores alone. Coming from gifts, allowances, chores, jobs, and other sources, these deposits sometimes land in traditional banks and credit unions, while others are disintermediated by financial apps targeting kids.
These kids, who will happily use fintech apps for savings, investments, and crypto, are financially motivated: 78% of U.S. respondents in the 2022 Youth Economy Report believe it’s important to earn their own money, and over 25% planned to start their own business or already have.
As a result, this digitally native audience is a promising source of low-cost deposits and long-term relationships. To capture these young accountholders, ensure your digital account opening process is flexible enough to easily add minors to an account after an over-18 parent or guardian handles the legal disclosures. Then make sure you’re offering the tools that meet their needs.
Embed P2P functionality into your digital banking app to make it easy for youths to collect earnings from babysitting or lawn-mowing jobs, rather than pushing them to Venmo or PayPal. Then consider whether third-party fintech providers that provide gamified savings, fractional investing, or financial education would be good candidates to embed directly into your digital banking experience.
4. Enable in-app payments. Only $1 out of every $8 collected by an accountholder through a third-party payment tool like PayPal, Square, or Venmo ever makes its way back to the primary financial institution. Beyond the issue of those deposit dollars sitting in uninsured accounts, that means your accountholders are disintermediating nearly 88% of their payments receipts to a third party.
While embedding P2P payment solutions into your digital offerings is a great start, also consider enabling digital invoicing and payments – the way Autobooks is embedded into the Banno Digital Platform™ – for your retail and business accountholders.
This additional functionality not only makes it easier for the people you serve to use digital invoicing for small business payments and receipts, but also for individuals to manage payments among friends and family, club sports, or other small organizations.
Beyond the additional deposits that’ll hit your balance sheet rather than sitting with a third party, you’ll also gain additional visibility into the money moving in and out of your institution, helping you identify individuals operating businesses and additional opportunities for deeper relationships through cross-sell or upsell.
5. Open your digital front door … wider. Account opening through the digital channel has become table stakes for anyone looking to capture new business. And it’s easier than ever to offer secure and flexible digital account opening solutions. But beyond serving your current geography and local communities, it’s a great time to consider whether a digital-only brand or pursuing a niche strategy is right for you.
In the past, this meant purchasing a “side core” and running duplicative systems. But with today’s modern technology, you can execute a multi-brand or digital-only brand strategy using a single core. This lets you reach targeted segments or niche audiences more quickly and with less expense than ever before.
Dialing into a new audience and attracting a particular niche has proven to be an effective strategy time and again – despite the recent challenges some big banks have faced in their own attempts to start a digital-only brand. Consider Simmons Bank and their quest to attract the Gen Z and millennial audience. Using account opening technology with flexible workflows that cater to the mobile-first experience this niche desires, Simmons has attracted new checking accounts and deposits.
Pro tip: If you’re considering a multi-branding or digital-only strategy, take five minutes to check out these niche strategy tips and considerations from Jack Henry’s Sr. Director of Corporate Strategy, Lee Wetherington. With only 4% of respondents in the 2023 Strategic Priorities Benchmark Study planning to pursue a niche strategy in the next two years, this under-represented tactic could really help you stand out from the competition when it comes to deposit-gathering.
Low-Cost, Stable Deposits Are Within Reach
Growing deposits organically can feel frustratingly slow when you’re seeking low-cost, stable deposits from long-term relationships. But by employing the right strategies and the right digital banking tools and technology, both are within your reach.
Let Jack Henry help support your deposit-gathering strategy with digital tools that help you stand out from the competition. Contact our digital experience team today.
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