Consumer Bankers Association hosted its 16th annual CBA LIVE, in Orlando March 16-19, where it encouraged participants to “Level Up”—learn more, achieve greater things and explore new horizons. The intent of the conference was to help retail bankers meet customers where they are and help them get to where they want to go. Curinos advanced the cause by sponsoring or co-sponsoring five in-depth sessions, from the importance of securing primary retail checking to reimagining the banker of the future. Here are several takeaways from those sessions.
1. In securing primary checking, headwinds remain for branch banks as demand holds but evolves.
Of the 262 million banking customers and members in the US, only ~20 million of them, about 7%, switch primary checking providers each year. That’s according to data compiled over the last decade by the annual Curinos US Shopper Survey. The latest survey reveals consumer behavior continues to evolve—in large measure to the detriment of branch banks—manifesting in wallet fragmentation, less reliance on branches and digital adoption. Fully half of checking switches now report having at least four checking relationships, and how they rank the importance of convenience factors attributed to branches has dropped 29% in five years. By contrast, almost six in ten say that the checking account they switched to was with a digital provider.
Source: Curinos Churn Model; Curinos Annual U.S. Shopper Research 2024
2. Account activation and relationship deepening are increasingly dependent on marketing and digital journeys, but customer quality is still digital’s Achilles heel.
Checking acquisition continues to move away from branches and toward marketing and digital, but the value of those digital relationships remains of poorer quality. At origination, branch-initiated checking balances are more than seven times greater than those derived through digital means, and even after 12 months of seasoning, those from branches are 2.5x greater. And that’s compared to the digitally originated balances that have stuck around—only 45% of all digital relationships are still on the books after the 12 months. In contrast, more than three out of four of branch-originated relationships remain. The quantity of branched-based checking may be on the wane, but the quality is holding.
Source: Curinos Digital Benchmarking 4Q2023 based on 4Q2022 Vintages.
3. Succeeding with small businesses means cultivating the entire relationship, which in turn means making data actionable.
Small business banking is no longer just about lending and payments. Business owners are one of the best sources for dependable low-cost deposits, and they’re wealthy, or they will be. And how they interact with the bank is changing—branches are giving way to digital and they’re increasingly looking for sound advice, including quick access to specialists. This is against a backdrop of intensifying competition from fintechs, which move fast and price aggressively. The response from banks has to be more than interactions with a relationship managers. Increasingly, their activities need to be interwoven with marketing that’s backed by data-driven intel. Underpinned by the RM’s knowledge of the customers, this combination is the best of both worlds. Just be sure the right incentives are in place, then practice, practice, practice and coach, coach, coach.
4. The branch is very much alive, but what the staff does within it needs to be reimagined.
The decline of branches has slowed and in some cases reversed, and branches drive unaided awareness, which leads to more digital sales as well as in-branch sales. So how to make the most of this important asset? One way is to migrate a customer’s transactional needs to digital while having sufficient branch staff to deliver advice and guidance. That in turn might call for physical layouts with greater privacy that enable safe discussions. Another issue is age discrepancy. Branch customers skew older, many of whom are approaching retirement, but branch economics generally result in younger recruits who may not be able to connect with them. That demands rigorous training and continuous learning, which is often most effective when gamified to appeal to the younger cohort and leave the intended impressions. Presented below are implications that need to be considered for both the branch bankers of the future and their management.
5. HELOC: There appears to be a correlation between speed and need, and there’s definitely one between no draw at closing and no draw at all.
Non-traditional lenders close faster than depositories, by a lot, and their draws at closing are much higher, even when depository closings that result in no draw are thrown out of the mix. Yes, many non-traditionals require utilization at close, but it’s also possible that borrowers with a greater need are also more motivated to get their hands on their funds more quickly. If that’s the case, depositories would be well advised to speed things up, which may result in higher draws and fewer closings resulting in no draws at all. The fact is that two-thirds of depository applicants that don’t take a draw at closing never will. Increasing the speed to closing may attract more of those potential borrowers with an urgent need. The possible result? More lines in use with higher line utilization.
The Evident Correlation Between Speed and Need
Source: Curinos HE LendersBenchmark Originations; Traditional lenders data includes only borrowers that take a positive draw at loan closing
Source: Curinos Lendersbenchmark HE Portfolio
6. Four challenges to securing new checking customers—and three responses.
Landing the checking account and getting it funded and activated with direct deposit and bill pay is an important first step in gaining customer primacy. But that first step is becoming increasingly difficult, and because only 20% of all checking accounts cover their acquisition expense over the first four years, getting it wrong can be expensive. Cash incentives and reducing signup friction help lead to profitability, but they can go only so far. A winning value proposition and an onboarding journey in the first 60-90 days that can blossom into to a fuller cross-sold relationship are also critical. Below are four challenges to putting profitable checking customers on the books and three responses retail bankers should consider in helping to overcome them.
7. With more M&A on the horizon, truly understanding the value of the deposit book is essential to any successful deal.
The value of core deposits is one of the key drivers of the long-term success of any bank M&A, so determining their correct value is critical. But valuing deposits is highly complex and requires more than cursory due diligence on high-level data in the deal room. It calls for in-depth data-fueled analytics, and the extra effort up front can pay for itself many times over. According to the Curinos M&A benchmark, average branch-based deposit attrition from Legal Day 1 to three-months post conversion is 11.1%. Even more striking, the spread between good performance and poor performance is more than 12 percentage points in that same timeframe. That’s a huge range. On a deposit book of $10 billion, it would translate to more than $1.2 billion in lost balances. The importance of understanding and retaining the core customer deposit franchise cannot be overstated. It can literally make or break the economics of the deal.
Source: Curinos Analysis, Curinos Customer Impact of Bank M&A Study, Curinos Analyzers
