For the first time in more than 10 years, financial institutions have faced rising interest rates which threaten to compress net-interest margins and drive off low-interest deposits as account holders move money from safer insured deposits to higher-yielding long-term deposits. Additionally, depositors have more options than ever for placing deposits, and digital banking makes it easy to quickly switch money from institution to institution. Financial institutions (FIs) have done well, so far, to avoid paying higher interest on short-term deposits, but they won’t be able to resist indefinitely. It’s only a matter of time before consumer-demand for higher interest-bearing short-term deposits forces FIs to get creative with their deposit acquisition strategies in order to control deposit costs as long as possible.

Retailers are Shaping Consumer Expectations

Meanwhile, consumer expectations around sales and service are being shaped by large data-driven organizations like Amazon and Netflix. Today’s consumer decides what, when, where, why, how and from whom they buy. They expect instant gratification, receiving what they want, when they want it, via their preferred channel(s) and they expect you to offer it to them proactively. Because of the use of data to analyze behaviors in order to predict needs and suggest relevant products and services, today’s brands no longer sell to consumers.

Combine this new consumer reality with the new (to most) interest rate reality and it makes profitability more difficult, putting more pressure on core deposits to provide a stable source of funds for lending activities and long-term profits.

However, FIs that embrace this new reality, recognizing they’re competing not just against other banks and credit unions but also against large, experience-driven retailers, will not only survive but also thrive against increasing competition for deposits.

Using Data Analytics for Competitive Differentiation

Meeting and exceeding consumer expectations around improved engagement is no longer a nice-to-have, but essential for survival. When asked, consumers rated FIs as delivering personalized experiences “somewhat well” 59 percent of the time versus 81 percent for online retailers. The good news is FIs have access to the same—and even more—data and analytics large retailers use to elevate the consumer experience by predicting needs, making relevant offers and delivering personalization.

FIs have the lead on retailers when it comes to the depth, quality and timeliness of information available from account holders, including access to transaction-level insights. This treasure trove of transactional and behavioral information, when combined with third-party demographic, geographic and psychographic information and the ability to aggregate it to gain a holistic view of current and potential account holders, gives FIs properly leveraging it a distinct competitive advantage.

The rub, however, is for busy marketers to find the staffing resources and time to invest in data analytics in addition to creating the resulting strategy and executing tactics.

Here’s What You Need to Do

Connect with consumers when and where it matters. Taking a personalized, omnichannel approach to acquisition (like retailers do) is key to effectively and efficiently acquiring loyal and profitable customers.

Improve targeting and cost-effectiveness. Identify prospects matching the profile of your best customers, and send personalized offers based on consumer, demographic, lifestyle, purchase potential and other relevant data.

Leverage new and innovative marketing technologies. Gain a true competitive edge by proactively engaging consumers anytime, anywhere, and on their terms. The flexibility to quickly refine and adjust strategies is a key differentiator and driver for steady, consistent portfolio growth.

Align with a customer engagement company that shares your values. Whether your financial institution takes the analytics journey alone or teams with an experienced customer engagement partner, one thing is clear: traditional spray-and-pray marketing tactics are no longer sufficient to survive in this increasingly complex competitive landscape.

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