- With the relentless rise of digital providers, branch banks are capturing only about half of all new customers, and their average core customer growth is now less than 1% per year.
- To maintain and grow their share, these FIs are well advised to adopt a relationship activation engine to ensure more core customers choose them and stay with them.
- Acquisition is only the beginning. Achieving acceptable customer lifetime value requires an equal emphasis on effective onboarding and deepening of the relationship.
Today, adding primary customers is at the top of virtually every bank’s agenda, but it’s becoming increasingly difficult and even unsustainable. The share of new customers available to branch banks has shrunk considerably because of the rise of direct banks, and it now stands at only about half of all new relationships. At the same time, the cost of acquisition has spiraled upward—by 49% since 2019—and it’s contributed to what’s become a marketing arms race (Figure 1). The antidote? Banks will increasingly need to evolve how they go to market into an “engine” with smart targeting and relationship capabilities.
Figure 1: Average Checking CPA 2019-2024
Source(s): Curinos Analysis | 1Curinos Marketing Analyzer | 2Curinos Digital Benchmarking | 3Curinos Deposit Analyzer
The Demands of Churning Consumers are Bifurcating
Based on Curinos’ Primary Churn Model, the churning population of the U.S. remains at 6-7% of all adults annually, or about 20 million consumers, and their composition is skewing toward lower liquidity and mass market. Almost 60% are considered paycheck-to-paycheck and 26% stable mass market. The remaining 14% are more affluent (Figure 2).
Figure 2: Segments of Churning Bank Customers
Note(s): Paycheck to Paycheck: Consumers with less than 1 month of income in liquidity; Stable Mass: Consumers with less than $100K income who are not within the Vulnerable Mass segment; Emerging Affluent: Younger than 35 years old, have $100K+ income, and are not part of the Vulnerable Mass segment; Affluent: Consumers 35 or over, have $100K+ income, and have $100K+ in investments | Sample sizes greater than n=50 for each segment
As such, banking preferences and demands of churning customers are shifting, particularly with respect to what they consider a primary relationship, or primacy. Consumers with low liquidity find a provider’s differentiation through payments vehicles increasingly important and are aligning their primacy with FIs that provide easy access to their money. Affluent consumers, on the other hand, increasingly define primacy with FIs as those that align with their credit card relationships and their wealth. This bifurcation of primacy means that the composition of providers that are winning is shifting. The heightened importance of payments is opening up the aperture for digital players, which now capture 58% of the switching population—leaving well less than half of switchers to the branch-based institutions.
Challenging Economics
This comes at a time when wallets continue to fragment. Today, 50% of switching consumers have more than four checking relationships on average—a huge increase from 2019, when only 7% had more than four. Adding to the headwinds is growing attrition, and the value of every attriting customer is typically two times the value of every customer acquired. Despite a typical bank’s net customer growth goals of 2-3% per year, core customer growth is muted, and even negative, at most institutions, with average new checking account growth standing at only .5% (Figure 3).
Figure 3: Net Checking Account Growth (Regional & Super Regional) Apr. ’24 – Mar. ’25
Source(s): Curinos Deposit Analyzer, Curinos Analysis
To help counter these dynamics, average cash-offer incentives for a new-to-bank affluent checking relationship is now ~$1,700, reflecting the unprecedented level of interest banks have taken in these customers. In addition, a provider’s distinctiveness continues to be a critical driver of funnel performance, and, increasingly, digital players are taking leading positions across the dimensions of distinctiveness, notably whether they represent a good value and are easy to do business with. This places an additional burden on traditional players to reshape their distinctiveness agenda across product and customer experience to break through, and it underscores the importance of them to do so.
Ready, Set…
Want to grow? To get started, here four key questions to consider:
- Who’s being targeted, and does the bank have the right value proposition in place to drive outsized acquisition with the target segment(s)?
- Does the bank have the capabilities to target the right customers in the right markets?
- What is the performance of acquisition today by channel, e.g., branch vs. digital? Through which can the bank drive the most acquisition?
- What’s the activation journey today for early month on book, and does the bank have the capabilities to drive personalized journeys from the early going to primacy?
The Relationship Activation Engine
Acquisition is just the beginning, which is why evaluating success as simply achieving an acceptably low cost of acquisition is flawed. A better metric, although longer to assess, is customer lifetime value, most of which, by definition, accrues over time. Effective onboarding and deepening of the relationship are tantamount to that customer ever clearing profitability hurdles (Figure 4). And that requires putting in place an activation engine that shepherds and nurtures the relationship for many months, even years, after day one.
Figure 4: Relationship Activation Journey | Building Meaningfully Valuable Relationships
Activating acquisition. Job 1 is to get a potentially profitable customer on the books. A provider’s activities in this first phase of the customer journey begin before the customer even begins the journey. (Figure 5)
- Identify target segments, and rank order intentional and well-defined design target(s).
- Activate the upper funnel by identifying segments in the wild and reaching them with relevant marketing.
- Establish a right to win by meeting pricing and perceived convenience requirements for the segment.
- Drive conversion to purchase by building attributes that are truly distinctive.
Figure 5: Activation Activities Across the Customer Journey – Acquisition
Activating onboarding. An acquired customer is an empty vessel until they’re engaged in behaviors that will keep them engaged in the relationship over time. (Figure 6)
- Provide best-in-class experience. Adopt best practices in onboarding experience that is omni-channel.
- Facilitate funding and cross-selling. Enable key actions such as direct deposit, bill pay and a debit card early in the journey
- Deliver on the engagement model by defining and implementing cross-channel engagement across use cases.
- Optimize client messaging by personalizing at the micro-segment level to boost outcomes.
Figure 6: Activation Activities Across the Customer Journey – Onboarding
Activating deepening. In today’s high-cost environment, acceptable lifetime customer value is difficult to achieve, if not impossible, by relying on the initial product sale. The relationship needs to go deeper. (Figure 7)
- Sustain long-term retention by taking the long view in managing pricing and the customer experience.
- Pave the path to graduation by laddering the product suite to enable deepening and by optimizing the value exchange.
- Incentivize consolidation. One way is to provide carrots for customers to maintain a high share of wallet.
- Communicate continuously through leveraging a personalized marketing engine to drive desired messages and outcomes.
Figure 7: Activation Activities Across the Customer Journey – Deepening
Activate or Perish?
Think of it: the percentage of banking customers who have more than four relationships in their wallet has burgeoned seven-fold in only five years. Amid this kind of fierce competition, customers whose loyalty might have been assumed a few years ago are now at risk of flight. Meanwhile, because of the spiraling cost of acquisition, replacing them requires finding new customers that represent twice their value. No wonder the use of generous incentives to reach well-heeled prospects has become the norm.
To grow the ranks of high-value customers, and to keep them, banks increasingly will need to activate an activation engine, one that extends well beyond acquisition. Only through an integrated approach that also embraces effective onboarding and deepening will today’s providers be able to realize the per-customer profitability they demand.
