By Jody Bhagat, President of Americas | Personetics

For the first time in years, the economic environment is forcing credit unions to aggressively compete to attract deposits. Add to this economic backdrop the recent bank failures triggering a “flight to quality,” and you have an all-out battle for deposits underway.

Let’s consider what credit unions can do to both retain and attract deposits in this hyper-competitive environment.

The Old Tactics for Attracting Deposits Don’t Drive Impact

While not a completely unfamiliar situation for the industry, current times do call for very different tactics to be successful. The traditional tactics of promotional rates and bonuses don’t deliver sustainable gains. They can deliver a bump in new member acquisition, but don’t attract the kinds of relationships that credit unions desire. Also, members expect more from their credit union than simply incentives to open new accounts. 

These tactics are not going to strengthen member loyalty and are not going to look very innovative when compared to some of the aggressive tactics used by fintechs.

A 3-Step Approach for Defending and Acquiring Deposits

Consider instead, complementing your incentive programs with a comprehensive program that will help your credit union retain and grow your current deposits, as well as attract new funds.

Step 1: Use Your Members’ Financial Data to Identify Deposit Vulnerabilities and Opportunities

Rather than a universal approach across members, consider a more tailored approach based on  member needs and behaviors. This recognition starts with an understanding of the members’ financial situation, depth of relationship, and how dynamic (or static) their funds are.

This can be done by leveraging advanced data and analytics capabilities and creating a “Member Money Map.” The member money map is derived primarily from the transaction account and shows what moneys are being retained or leaving the institution and the capacity the member has to save. The Member Money Map can also incorporate Open Banking data to offer a more holistic view of the member.

Step 2: Use Member Financial Data to Foster Engagement and Build Loyalty

Most members don’t just shop rates. They want to put money with institutions they feel are “looking out for them” and will help improve their financial well-being. 

To move this from slogans to actions, credit unions need to leverage members’ financial data to deliver timely, contextual, and hyper-personalized insights and advice via the digital channels (and subsequently through their bankers). This isn’t the stale, steering with the rearview mirror approach of traditional PFM (Personal Financial Management), which only shows you what you did in the past and offers up one-size fits all suggestions across the entire member base. These interactions are personal, forward-looking and proactive, alerting members ahead of time when they’re likely to have an overdraft issue or when they have a subscription service that’s about to renew at a fee. More specifically, to cash flow, personalized and proactive insights should inform members when they have excess cash, they can move into the credit union’s savings account, capturing funds before they are likely to leave the institution, as identified in the Member Money Map.

These are the interactions that build member engagement, which then quickly builds loyalty and member satisfaction. A loyal member is far more likely to keep their deposits with you and to act on your suggestions and advice when they see those actions are in their best interest.

Step 3: Do the Hard Savings Work for Your Members

Many members want to increase their savings. They just don’t want to figure out all the details. They have lives to lead, kids to raise, and businesses to run. Managing their money and figuring out how much to set aside every month is stressful and burdensome.

Again, showing them a chart of their previous income and expenses is not enough. Credit unions need tools to analyze each member’s cash flows and then let them know when it’s safe to set aside money into savings, how much they can safely move out of checking and into savings, and even - if the member feels comfortable – automatically move the money into a deposit account for them. Deliver a practical savings journey that helps members set up saving goals – a new home, a vacation, a child’s education, etc. - and helps them track their progress toward them.

To put it succinctly, giving your members a helping hand in the savings journey is more valuable to most members than the extra quarter point the bank down the street is offering on their deposits account.

You Can’t Sit Out the Battle for Deposits

Identifying the right situations to defend or win back deposits, fostering engagement to build loyalty and trust, and delivering savings journeys should be part of a comprehensive deposit strategy.

It’s more challenging than simply raising rates or offering incentives but will deliver rewards in the form of a strong member deposit franchise. You’ll need the right tools and the right strategic alignment with your leadership to make it happen. But perhaps the greatest incentive will be the knowledge that no one can sit on the sidelines during this battle. If you don’t do anything to protect your members’ deposits and to attract new funding, rest assured, your competitors most certainly will.