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Whom to Target for Deposit Retention?

August 1, 2019
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We recently wrote about how to grow deposits.  Just as important as deposit growth is deposit retention. You can grow at a rapid pace, but if all of your deposits are walking out the door, you obviously won’t be growing.

Most consumers (78 percent) have not switched financial institutions for a better rate. However, those with higher balances are more likely to move funds for a better rate. Of those households with over $50,000 in deposits, 16.5 percent said they are actively tracking rates and would move, compared to only 8.6 percent of all households.

Of all households, 28 percent said they have liquid money waiting to be invested. When we look at those with over $50,000 in balances, 54 percent say they are waiting to move liquid money. It is important to understand your high balance deposit households to retain deposit dollars.  On average, a credit union has 15 percent of households who have balances over $20,000, and those households hold 86 percent of the credit union’s entire deposit portfolio. Institutions should develop a retention strategy for these households and determine who may be the biggest risks to take their dollars elsewhere.

Above are the characteristics of less and more rate-sensitive consumer households. Below we rank these characteristics by most sensitive to least sensitive.

On average, a typical credit union has 10 percent traditionalist and 34 percent of baby boomer members who hold 76 percent of the credit union’s deposit portfolio. Institutions also need to develop strategies around generational transfers. Do you know your deposit account beneficiaries, and have you quantified your risk in this area?

Deposit growth is definitely top of mind for most institutions in this current rate environment. In order to attain this growth, institutions need to be very specific in who you target, but you also need to do the research and understand who your members or customers are and what your current share of wallet is, and don’t forget  about retention in developing your institution’s plan for growth.