After a series of rate hikes (with more likely on the way), banks' deposit growth strategies are top of mind this year. Banks are under tremendous pressure to find ways to attract and keep deposits on the balance sheet. Still, as competition intensifies among non-banks and digital disrupters, deposits will be tough to wrangle.
One way to effectively do so is to strengthen existing digital banking platforms. Digital banking by itself is nothing new or innovative. It's table stakes. Consumers expect a digital experience but also something that delivers actual value.
Meanwhile, consumers increasingly value self-wellness, but financial wellness has historically been a neglected part of self-wellness. This is starting to change. As inflation soars and impacts the average American's wallet, financial wellness is already becoming a bigger priority. According to new data from Lincoln Financial Group's Consumer Sentiment Tracker, 9 in 10 Americans acknowledge room for improvement in their overall financial wellness, and 71% say they are likely to set financial goals in 2023.
How can banks tap into their customers' interest for improved financial wellness to create a winning deposit strategy? Fortunately, it doesn't require a cowboy strategy. Instead, it needs to replace traditional PFMs with PFG – Personalized Financial Guidance.
PFMs Can Negatively Impact Banks' Deposit Strategies
Basic digital banking features like mobile check deposit, viewing account balances, and transferring funds do not help consumers on their financial wellness journey or create deeper engagement. To increase engagement, banks have therefore relied heavily on tools like PFMs. The problem is that PFMs lead to disengagement, hurting a bank's ability to attract and retain deposits.
Here's why: Traditional PFMs focus on consumers' past spending behavior and don't tell them what they can do to improve their financial situation. For instance, it may tell a customer how many times they made purchases at Target that month that could have gone to their savings account instead – taking a negative rather than a positive approach that encourages a customer to make changes and explains why it will benefit them. Imagine a football coach reviewing every foul play from their last game and nothing more. Users will not feel motivated to continue using the app without positive encouragement.
PFMs also offer banks little ROI. Integrating into their digital banking platform costs thousands, but low engagement means little return. It also means a competitive risk. Consumers already believe non-banks do a better job helping them manage their finances.
Unlike PFM, PFGs offer guidance on what customers can or should do with their money to meet their specific goals, such as paying off debt, starting an emergency fund, building wealth, etc. The bank can then pinpoint precisely where a customer is on that journey and coach them on improving their financial fitness by providing products and services that meet their specific needs at exactly the right moment. It's like giving the customers their dedicated financial coach in their pocket.
First United Bank Increases Engagement, Uncovers New Deposit Strategy
With $14.5 billion in assets and just over 330,000 customers, the bank strongly supports its customers' financial fitness.
To maintain that commitment, the bank sought a new way to help clients improve their financial health through its digital banking channel, which would also allow the bank to pursue revenue generation for the first time through this avenue.
Without the ability to build a new solution from scratch, partnering with Finotta made sense. First United partnered with Finotta in early 2022 to embed its Personified Platform, which utilizes Personalized Financial Guidance (PFG) technology, into its existing digital banking system.
First United's Personified Platform prominently features recommendations in the app to improve the customer's financial health, like opening an emergency savings account. These recommendations are personalized based on each customer's unique financial situation by factoring in details like a customer's cash flow, expenses and debt-to-income ratio.
With Personified, the bank has gamified financial wellness, just like a fitness app. By demonstrating positive behaviors like saving money in a new emergency account or paying down a loan, customers can accrue points and badges that work towards personal financial wellness goals and awards through its Financial Health Leveling System. As a result, customers have a fun and interactive way to improve their financial health while at the same time generating new revenue for the bank.
Launching in November 2022, the results were substantially more dramatic than expected. Almost doubling the industry average, First United saw a 40% adoption rate of its PFG technology among mobile users in the first 120 days.
Within 30 days, the bank digitally increased savings account opportunities by 20X compared to an average physical banking location. In the first 24 hours, the bank saw 120 new savings account opportunities, and by the end of the first week, a total of 257 were discovered. That number rose to 400 after 30 days and 1,299 after 90 days. In the first 120 days, First United saw an 11% conversion rate of users who were prompted to open accounts, and 86% of those accounts were funded.
"A typical First United location normally sees 20 savings account openings per month. Ninety-one percent of all new accounts at First United are still opened at a location. So getting 120 in the online channel (on the first day) is a monster improvement in the numbers," said Dan White, First United's Director of Customer and Employee Experience Program Office.
Creating these new accounts affects the bottom and top lines of the bank. By driving savings account openings through its digital channel, the bank's new PFG platform helped increase its share of wallet with customers and decrease the acquisition costs for those accounts by 86% within the first week.
PFGs also produce a more rewarding experience, meaning customers are likelier to spend time with their banking app. First United has boasted a sustained 13% user engagement rate since its launch, more than triple compared to industry competitors.
PFGs Are The Smoking Gun in Today's Fight for Deposits
First United's partnership with Finotta has delivered customers a genuinely personalized financial wellness experience while identifying an extremely successful deposit strategy.
Since the platform was embedded directly into First United's digital banking channel, customers were granted direct access to the tool with the same look and feel they know and trust – leading to fast adoption. In just a few months, the bank increased revenue and facilitated additional customer loyalty – all while helping the bank better serve its community.