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How to Manage Customer Churn

Marissa is a loyal primary customer with checking, savings and a mortgage at your financial institution. She hasn’t cared about receiving pennies of interest on her savings because she knows that rates are at rock-bottom levels.

But now she has read that the Fed is raising rates and she will soon start wondering if she can get a better offer elsewhere – maybe even at one of those “new” online banks that keep running commercials on TV.

Do you want to keep Marissa as a customer or should you let her go?

Rising rates will impact the industry in many different ways compared with prior cycles, including customer churn. While consumers typically switch to higher-yielding accounts when rates rise, Curinos believes that customers are more elastic this time around because the sophistication of digital channels make it easy to move. As a result, switching will occur at a faster pace, especially as rates above 1% become available.

Fortunately, there have been significant advances in customer-level analytics since the last time rates increased. Deposit holders have new tools to track customer behavior and determine which are the right customers to retain and acquire – and which should be let go.


There’s little doubt that customer behavior will shift as the Fed continues raising rates. Some economists predict seven increases or even more this year.

When the Fed last raised rates, churn from savings and money market deposits into higher-rate accounts doubled over the course of the 2015-2018 cycle. This churn was seen both internally (with customers switching from standard rates into promotional rates or higher-rate CDs) and externally (with direct banks being some of the biggest beneficiaries of new customers).

There was a lag at the start of the last rising-rate cycle before churn picked up. In fact, it wasn’t until the Fed passed 1.00% and top-of-market rates passed 1.50% that churn increased. This indicates that some amount of time may pass before churn starts building this time too.

Many factors suggest that overall levels of churn may be higher in this cycle:

  • Aggressive Pace of Increases – In the last cycle, the Fed increased rates around 0.25% per quarter, a slower pace than the previous rising-rate cycle of 2004-06 when the Fed increased by 0.25% at 17 consecutive FOMC meetings (representing nearly 0.50% per quarter). The most aggressive end of today’s expectations could result in an even faster pace of increases than 2004-2006 – some 0.50% moves may be possible. With larger moves making a bigger splash, customers may look for higher rates more quickly than in the past.
  • Lower Starting Point – At the start of the last rising-rate cycle, standard MMDA rates were in the 0.10%-0.25% range and many banks were running periodic promotions as high as 1.00%. Today, most rates are under 0.05%, with almost no banks running promotions. Combined with more aggressive Fed increases, customers may perceive their rate as below market earlier than they did last time.
  • Digital Competitors – There are many new direct banks and fintech players today that will be competing for deposits. The pandemic helped them because more people are now comfortable opening accounts online. More competition, ease of moving money and better availability of rate information may increase external churn to these alternative providers.


The flood of deposits that entered the system during the pandemic will also impact churn. Most institutions can likely maintain necessary funding levels even while ignoring increased churn and delaying pricing actions for the first few Fed increases.

Those delays, however, may result in losing valuable deposit relationships that will have to be re-acquired at much higher costs later in the cycle. Instead, winning institutions will use customer-level deposit analytics that capture both churn and deposit value. This will enable banks to keep betas down while retaining their most profitable relationships.


Though overall churn is expected to increase, there will be notable differences in response by customer segment. Many institutions are already deploying analytics that capture customer-level drivers of balance movement. These banks will avoid costly portfolio repricing by
identifying customers who are most likely to switch institutions or products. These customers can then be targeted with either proactive or reactive offers, depending on the customer’s expected long term value and the bank’s funding needs. Targeted strategies will enable banks to retain the right balances without significant increases to posted rates.

Effective analytics capture the following drivers of deposit balances to determine the right treatment for each customer.

  • Discretionary Liquid Balance – how much of a customer’s balances are for day-to-day cash flow versus excess savings that are more likely to be shopped
  • Price Sensitivity – how will a customer respond at a given offer rate
  • Balance Persistence – how much of a customer’s balance will remain
  • Shopping Behavior – how likely is a customer to augment balances


Ultimately, the response of each bank will depend on both the need for deposits and the characteristics of the customer base. Every bank will need to think about both broad-based actions using standard rates and how to target the specific segments of customers with different behaviors. (See Figure 1.)

Figure 1: Deposit Strategies in Rising-Rate Environment

Source: Curinos Analysis

Importantly, these strategies will need to be dynamic as conditions shift. Banks may begin in one quadrant and find both deposit needs and customer behaviors shifting over time, necessitating strategic changes. Banks will need to carefully track the customer behaviors to understand when targeting and changes in offers will be required to maintain progress against objectives.

Financial institutions will certainly face significant challenges as rates begin to rise because they won’t be able to rely on previous cycles of behavior. Still, providers that closely track customer behavior and respond rapidly will be ahead of the game.

  • Authors
    • Zachary Kaplan
    • Adam Stockton

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      Managing Director
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