Ally Financial customers who take advantage of one of the bank's signature savings features are putting aside twice as much money as customers who don't set savings goals the same way.
An increase in consumer savings could help boost bank deposits during the current period of
"It gives banks the opportunity to compete on functionality rather than just the rate," said Sabine Hermann, senior analyst at Curinos.
Customers who used Ally's savings "buckets" saved twice as much over a 12-month period as customers who didn't use them, said Emily Shallal, Ally's director of consumer insights and innovation. The buckets allow customers to divide up their savings funds into customizable categories, such as a vacation or home repair fund.
Ally customers who don't tie the funds in their savings accounts to specific goals are more likely to pull that money out because it's not connected to their personal ambitions and desires, Shallal said.
"If you log in and see a bucket designated for taking the kids to Japan or being able to fix your car if it breaks down, you're a whole lot less likely to pull money from it and a whole lot more likely to contribute dollars to those goals even when times are tough," Shallal said in an interview.
Less than 20% of banks allow customers to set savings goals in their mobile banking app as of November 2023, according to the financial services consulting firm Curinos. And about 13% of the retail banks tracked by Curinos offer progress meters that help customers track their savings.
Many financial institutions allow customers to set up automatic, recurring transfers to their savings accounts. But banks that allow customers to track their progress visually with a meter remain in the minority, according to Curinos research.
"Every time you log in, you can see that you're slowly inching toward your goal," Hermann said. "It's a positive experience, kind of like a game you play."
For banks, the benefits of investing in mobile features that make savings fun include growing primary banking relationships. Customers who return to a banking app again and again to add funds to their savings accounts or to withdraw funds needed to cover an emergency are more likely to develop loyalty to that primary bank, said Tim Flacke, executive director at Commonwealth, a nonprofit with the mission of financial security for Americans with lower incomes.
"It's an attractive place to be as a financial services provider," Flacke said. "It may not be profitable on a product basis, but from a customer-relationship perspective, it plays this incredibly critical role."
At Ally, more than 35% of customers with savings accounts make use of at least one in-app feature designed to promote saving. The bank also offers several savings "boosters," one of which grows savings accounts by automatically rounding up to the nearest dollar on purchases and earmarking the change for savings. Another so-called booster analyzes account balances to find funds customers could be saving and scheduling automatic transfers of $100 at a time.
Financial institutions that prioritize adding new savings customers and making it easy for current customers to save may also be able to help offset the industrywide decline in deposits that began earlier this year. Deposits at U.S. commercial banks totaled $17.29 trillion at the end of November, according to the Federal Reserve. That is a 2% decline from a year earlier and a 5% drop from April 2022, when deposit levels reached the highest level on record.
Still, there are ways for banks to remind customers to save without new mobile and online banking features.
Financial institutions of all stripes can encourage savings by reaching out to customers at key times in their financial lives, Flacke said. Those crucial times often come during tax-refund season or after a salary increase, events that banks can track via direct deposits into customer accounts.
Another prime time to engage customers about their savings habits is in early January, when many consumers are setting fresh financial goals and reassessing their spending and saving habits, Shallal said.
"We're always trying to engage in this ongoing conversation, constantly reminding them about the value of saving and why it's important to start today," she said.
