Making the most of the deposit growth boom

How community banks can shift from attracting deposit-only customers to lifetime customers with better UX and personalization.
Feb 8, 2022
Jackie Lam
Contributing Writer

The deposit growth in the community banking space during the pandemic has seen a record surge from the pandemic. However, aggregate loan-to-deposit ratios at U.S. banks have been dropping since the second quarter of 2019. By the second quarter of 2021, this ratio had dipped to 58%, which, according to SPG Global's database, which goes back to 2003, is the lowest recorded level

While there has been a boom of deposit accounts growth among community banks, the challenge remains: how to encourage existing customers with deposit accounts to explore other products and services. It's an important avenue to explore. That's because the more products and services customers are signed up for with their community banks, the deeper the engagement and involvement the community bank has with their customers. In turn, this leads to long-lasting relationships with the customers, who come back again and again to work with the community bank for different needs and at different milestone events in their lives. 

Now that the pandemic has accelerated the pace of transformation and fueled digital adaptation and transformation of digital account openings, financial institutions can explore the greater digital services landscape, and make digital decisions to facilitate turning existing customers with deposit accounts on to high-value products, such as loans. Let's a look at how: 

Focus on improving UX to reduce stress and anxiety around loan origination

Unlike opening a savings or checking account, where there's little risk or investment, opening a loan requires a financial commitment, and typically interest fees. In turn, potential customers may feel stress and anxiety, and tend to feel a haze of uncertainty around the type of loan and amount that might be a good fit for their needs. 

The key is to reduce barriers to loan origination with better product design and user experience. Better UX means a user-friendly site navigation that can reduce friction, and in turn, boost loan application completion rates and mobile loan origination. A user-friendly site means creating an environment that reduces any stress one might have about applying for a loan product. It can also prevent a potential customer from getting frustrated in the digital application process and abandon ship entirely. Plus, automating as much as possible, such as loan approval can help speed up the application process and help customers have access to funding quicker. 

Plus, centralized finance, where all accounts and financial data are in one place, can make for a more informed loan aggregation. This can also speed up the approval process for loans, especially for customers who would like to receive quicker approval and deposit of funds.

Better UX design also makes it easier for potential customers to access the materials and resources to improve their financial literacy and confidence. Information can be more easily found and structured in a way that's scannable. Think: educational materials, content such as articles, video tutorials, and loan repayment calculators.

Leverage insights from segmentation and analytics to understand a customers' growing needs 

The bottom line:  learn who your customers are, what they need, then deliver it. Analytics can help achieve that. As users' growing needs are the heart of developing new products and services, leverage analytics to help gain insights. The better analytics you have, the stronger solutions you can provide to your customers. In turn, it can allay any anxiety in creating the right product fit to best serve them. 

For instance, segmentation and analytics can unlock better solutions to challenges your specific audience is facing, and lead to greater personalization and inclusive access to loan products. If you're a community bank that offers both CRE lending, small business lending, and agricultural loans, tap into your business intelligence to figure out what pain points customers' are experiencing.

That, coupled with segmentation, can lead to solutions for different audiences. For instance, potential customers who skew younger will have different needs than an organization that wants to purchase an office space than a small business owner starting their second location. 

According to the FDIC's 2020 Community Banking Study, data reveals that between 2011 and 2019, as a whole community banks based in counties with lower median ages and the highest levels of net migration inflows (typically metropolitan areas) had a larger chunk of business loans, faster loan and asset growth rates, and were overall more profitable. 

Analytics and big data can help figure out where there might be friction in their journey to opening a deposit loan and help create a customized loan offer to the customer. Plus, it can enhance the overall customer experience and provide financial tools to help the user. 

Improve the support experience

Enhancing and improving the support experience and resources your customer service team has for loan products leads to greater trust and adoption. 

No surprise that a positive customer experience is crucial to a long-time relationship with an FI. But it's not just about having a customer service team that's trained and up to date with protocols and processes but having digital tools that make it easy for them to interact and develop relationships with the customers. Invest in new systems and technology.

One way to achieve this is by looking for ways to improve your FI's digital interface. On the backend, make it easy for your CS team to pull existing customer information. Otherwise, you might experience lag times between customer queries and customer service response time.  

As customers typically have more questions and anxiety around applying for a loan, have questions answered beforehand. Perhaps via a chatbot, or make it easy to find information on your financial institution's website or app. This can help ease anxiety around a financial commitment such as taking out a loan, and help them make informed choices based on their needs. This, coupled with segmentation from Narmi Analytics, can make for a more personalized loan process. Further, it can help determine which services and products are most useful for a customer.

Serve your community and offer loan products to underserved segments of the population

Tap into outreach and data to help underserved groups secure funding. As the pandemic has further revealed, small business funding needs to be available to these segments sooner. Per data from the Kauffman Foundation, over 81% of entrepreneurs don't have access to venture capital or a bank loan. Further, 1% of venture capital dollars went to Latino and African-American entrepreneurs, and only 2% went toward female entrepreneurs.

As the need for small business lending will only increase – it's predicted that 17 million new small businesses will be launched in 2022 – focus on outreach and resources to help them secure funding. For instance, the Genesis Bank in Newport Beach, Calif., created a Small Business Accelerator to help budding entrepreneurs in the community. Consider creating webinars, virtual Q&A sessions, and pointing toward small business resources.

Turning deposit account customers to ones who turn to your FI for lending services and products is a long game. It starts with tapping into user data and looking for digital solutions to make for a faster, more efficient application process, and serving your community.

Narmi Inc.
P.O. Box 231517
New York, NY 10023

Making the most of the deposit growth boom