This Month In Retail Banking
Balance runoff is picking up speed in 2023. With interest rates from some direct banks topping the tantalizing 4% mark on a savings accounts – a level not seen since 2007 – depositors are waking up and moving their non-operating cash to higher-yielding alternatives. The pressure to replace those deposits puts many banks in a classic prisoner’s dilemma: attract more deposits with headline offers, but if all the banks do this, deposit runoff will accelerate, and the industry’s profitability will take a big hit.
Against this backdrop, personalized customer marketing programs – from win-back offers to balance augmentation – help banks to protect and defend their existing book without heating up the whole thing. For example, a bank with an always-on marketing effort that discretely targets lost balances – focusing only on those depositors with stickier money – and leverages personalization engines to optimize the message and offer will reduce its dependency on rate campaigns that broadly reprice their deposit book. Similarly, by targeting just those customers who are more likely to respond to rate and cash offers, that same bank can grow depositor balances meaningfully without repricing the whole book or going out to the deposit market.
Banks that have invested in marketing personalization are finding that in the eight or ten weeks it normally takes to develop a single marketing campaign, they can launch always-on, targeted win-back and balance augmentation programs that economically and efficiently address balance decay.