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3 Competitive Strategies to Grow Commercial Deposits in 2024

3 Competitive Strategies to Grow Commercial Deposits in 2024

Last year, bankers worldwide saw a shift in how they did business.

Gone were the days of low interest rates and the luxury of putting a majority of their focus on lending. Instead, high interest rates cost banks more to retain deposits (often via brokered deposits), while at the same time, their customers were taking deposits to higher-yielding money market funds. 

Despite the expectations that the Federal Reserve will lower rates this year, 48% of banks cite deposit gathering as a top concern for 2024 to ensure their growth and liquidity.(What’s going on in Banking 2024, Cornerstone). In fact, within community banks, “the median short-term liquid assets to total assets ratio decreased from 14.5 percent in 2021 to 8.0 percent in 2022 before improving slightly to 8.6 percent in the first quarter 2023” (FDIC). Unsurprisingly, half of banks will look to grow their large commercial deposits this year to ease that concern.

As banks shift their focus, it will be important to build distinct strategies to capture key segments in the market to achieve competitive differentiation. We recommend breaking out the segments based on the level of familiarity with your bank, such as the following:   

  • Existing deposit customers
  • Existing non-deposit customers 
  • Net new customers

These market segments have different needs and deserve their own strategies and approach. Below, we outline competitive strategies for growing commercial deposits with each of them.

1. Strategy for Existing Deposit Customers: Relationship-Based Pricing

To help retain and grow within existing deposit customers, banks could consider relationship-based pricing. This model enables customers to pay for services and products and receive benefits based on their relationship with their bank. Through this strategy, banks can dynamically price their product portfolio, and provide hyper-personalized offerings directly in line with their customer’s needs. This way, your relationship and service become the foundation of every product offering, making it extremely difficult for other banks to compete. 

The key to understanding your customers, how they leverage your products, and how you could best benefit them with relationship pricing is one thing: analytics! You must have a full picture of how your customers interact with your bank. This also requires some customer discovery of their goals and how they are looking to grow.

Once you have the data and the information, it’s much easier to determine specific pricing based on that information to benefit both your goals for increased deposits, as well as your relationship with your customer. Relationship-based pricing can not only increase your deposits, it can strengthen your overall customer journey and better ensure they stay with you over the long term.

2. Strategy for Existing Non-Deposit Customers: Converting Lending to Deposits

Another great option for commercial deposit growth is looking to your other existing customers who don’t currently hold deposits at your bank, but may utilize other products such as loans. Because you already have an existing relationship with these customers, do a bit of customer discovery and determine how you can better serve and attract their deposits. Leverage your LOS system to understand what loan products they’re leveraging, their growth goals, and what deposit products could potentially benefit them.

Based on your research, shortlist some existing customers you think will benefit most from your deposit offerings. A good way to prioritize customers is by who you have the strongest relationship with, or by a certain segment or industry where you already have a large set of customers.

From there, you can also incorporate relationship-based pricing (see strategy #1) to attract and land commercial deposits from these customers. 

3. Strategy for Net New Customers: Intuitive & High-Touch Customer Experiences

To attract new customers where your bank doesn’t currently have a footprint, the first step is to adopt the mindset of the customers within these new markets. Many of them expect consistent modern banking experiences. This starts with customer service, which is often at the core of a bank’s growth and how they initially attract customers. 

But banks can’t cling to their old ways in this area. With competition in the market higher than ever before, banks need to keep iterating and reinventing how they support customers. 

Just like all the other businesses they interact with daily, customers expect their experience with banks to be seamless and intuitive. In modern banking, when every customer has a digital-based retail experience with their personal and consumer banks, they expect their business and commercial experience to be the same. 

But it’s not that easy – while many customers value digital banking experiences, they don’t want the process to be completely automated. In fact, they want to be able to work and speak to the banker when it matters. A blend of both experiences will be key to winning new customers. A digital banking process will reduce manual work for the banker, allowing them instead to focus on strengthening their relationships with their customers.

With 40% of banks focusing on new customer growth as a top concern in 2024(What’s going on in Banking 2024, Cornerstone), one of the best ways to achieve that is to digitize your banking process. And the best way to do that? Work with DocFox. DocFox makes a modern commercial account opening experience not just possible, but easy to implement, with a digital customer experience that makes opening new business a seamless and smooth process for customers and bankers alike.

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