Many bankers are shooting themselves in the foot when it comes to deposit gathering.
Outdated policies and marketing strategies are impeding banks' ability to bring in low-cost funding, panelists said at the American Bankers Association's annual conference held earlier this week in Seattle.
Bankers need to take a closer look at their account opening procedures, said Sean Payant, chief consulting officer at Haberfeld Associates in Lincoln, Neb.
"You're going to die when you read some of the things in there — things that aren't necessary," Payant said.
Payant pointed to an unnamed bank's policy that limited new account openings to applicants with a driver's license issued in one of four states.
"For 11 years, that one choice has been limiting their opportunity for growth," he said.
Think Mutual Bank in Rochester, Minn., recently completed a review of its procedures. Management found several restrictive policies that applied to less than 1% of account openings.
"We were punishing 99% of our really good customers," said Jenny Hosfeld, the $1.7 billion-asset mutual's chief banking officer. "We had to change our mindset."
Think Mutual, for instance, used to place nine-day holds on all deposits made within 30 days of a new account opening. Now the mutual handles holds on a case-by-case basis.
"This change in practice made it easier for customers to use their new account immediately and not have their funds tied up," Hosfeld said in an interview after her panel discussion.
Banks also need to rethink their marketing and delivery channels.
Timing is important, Payant said, suggesting that banks should step up marketing on Fridays. He noted that studies have shown that most consumers still get paid on Friday and, as a result, banking is most top of mind at that time.
Think Mutual has found success by narrowing its marketing focus to direct mail and digital, Hosfeld said. Since the shift, the pace of new account openings has risen from 0.5% annual to 3%. Transaction deposits, like those in checking accounts, increased by 13% last year, to $96.4 million, according to data from the Federal Deposit Insurance Corp.
While banks need to reconsider the size of their branch network, it can be tricky to develop a successful digital strategy.
There is more attrition from accounts opened digitally because those customers are often looking for something specific, such a the lowest rate, and are willing to leave if they find a better offer elsewhere, said Frank Sorrentino, chairman and CEO of the $6.1 billion-asset ConnectOne Bancorp in Englewood Cliffs, N.J.
While consumers who use digital channels are more likely to switch banks, Stephen Schroth, head of digital consumer banking and global experience design at the $143 billion-asset KeyCorp, noted that fewer than 1% are actively looking to leave their bank in any given month.
“Even though it’s easier to switch than ever before, people are not doing it,” Schroth said.
Increased community engagement is another way to bring in new business, said Phillip Baldwin, CEO of the $915 million-asset Citizens Bank in Batesville, Ark. He called his bank a "jack of all trades" that tries to serve a diverse set of retail and commercial clients. It has doubled the size of its customer base in the past five years without an acquisition.
"We're doing something right," Baldwin said, crediting the bank's community involvement.
Citizens participated in the Impact Independence County program, which brought together county residents and area leaders to identify ways to re-energize the economy and improve the overall quality of life. Since its development, two dozen commercial loans have funded more than $4 million in projects tied to the program.
Customers "see us as different from the average bank," Baldwin said.
