Increasing core deposits has become a key priority for community financial institutions. While you could, metaphorically, fish with a net or throw darts blindfolded, using advanced analytics is an ideal way to grow your FIs deposits. In this post, we discuss three practical methods for using advanced analytics to efficiently grow deposits.
1. Segmentation is everything: mathematically it may even be more
We’ve all heard about the 80/20 rule. But in many applications, the segment concentrations are even more extreme. Don't be surprised in looking at data from your core if critical deposit segments fit a 90/10 or 95/5 concentration!
There are two keys to consider when embarking on a member or customer segmentation path. First, consider how you should identify the segments in which the extreme-minority produces the extreme majority. In other words, where should you look to find the 90/10 or 95/5 concentrations?
The second key is in finding the best way to drive action within the groups you identify from the previous paragraph. It's one thing to identify groups to target and another to act on the information you uncover.
The solution is to have a quantifiable metric to identify and measure change. Specifically, a metric to measure engagement is strongly suggested. Consider asking the following questions to help understand your members' engagement with your organization:
- Identify which members clearly have a primary checking relationship with your FI. (In other words, which of your members treat your organization as their primary financial institution?)
- Which members have a checking account, and make a loan payment from that checking account, but have very few other transactions?
- For members who account for the vast majority of deposits, what products, transactions, and services do they most frequently utilize?
- Answers to these questions (and a dozen more!) will reveal many intuitive actions
- Developing an engagement metric helps to track these segments and measure changes in engagement for the critical segments identified
2. What’s more important than onboarding success?
Repeated statistical analysis reveals that habits are formed in the first several weeks of a relationship with a new FI. That is, the product relationships formed during the onboarding process represent a significant percentage of the entire products and service relationship an individual will have with a FI.
Consider questions such as:
- How good is our onboarding and cross-selling process? Do we have well-defined goals? Do we achieve success?
- Do we succeed in deepening the member/customer relationship to include multiple deposit products and loan products, strong utilization of digital services, etc.?
- How do we measure success? Do we know which branch does the best job? Do we know which branch employee does the best job? What are the methods that lead to their success?
Measuring engagement at the two-day, two-week, and two-month mark should reveal the success of your onboarding process by region, branch, and employee. Generating more deposits is made drastically easier by achieving strong relationships during the onboarding process. Sharing information across the FI with other lines-of-business, coordinating follow-up, and measured actions are key.
Remember: what gets measured gets done!
3. Characteristics of our best deposit generating members
Once we have an operational engagement metric, measured action results, measured onboarding success, and a completed segmentation analysis of our best deposit-generating members, several analytical methods can be applied:
- Consider a simple geographic cluster analysis to identify where the ideal depositors live. Through purchased or internally-mined lists, reach out through their preferred marketing channels.
- What are the most frequent product mixes (typically 2-3 different products in a cluster) that occur within your strongest depositors?
- How quickly can you recognize new members that could be “the best” and take action to help quickly deepen the relationship?
The key to success with growing your deposits lies within your data. Analytics should be empowering your journey and providing insights and key metrics. Consider the various bullet points discussed in this article and don't discount the power of measuring engagement!