Gathering deposits has been a priority for banks in recent years, but bankers say that’s not enough to stay ahead of the competition. iStock illustration
Last year’s hope for lower cost of deposits may have given way to uncertainty, but banks are still looking for ways to compete beyond the interest rate they offer.
After historic lows during the COVID-19 pandemic, interest rates shot up and the Federal Reserve’s target range currently sits between 4.25 and 4.5 percent.
With competition for deposits fierce and net interest margins still tight across the industry, Chris Letourneau, assistant vice president and marketing officer for The Village Bank noted how marketing budgets can usually be one of the first line items to be slashed.
“It’s a harder environment in which to be profitable for a bank so sometimes the first thing to be cut is your marketing budget,” he said.
But marketing can be an effective tool to acquire deposits, even if individuals might not live close to a physical branch location. Research from Simon-Kucher & Partners, cited by banking consultancy BAI in a recent report, found that consumers are willing to travel if they receive top-notch banking services. The research states that consumers are willing to travel 26 minutes by car in suburban areas to do their banking if they are receiving high-quality service.
From Print Ads to Perks
Banks have plenty of options to choose from when it comes to the avenue they choose to market. Print media and physical advertisements remain valuable options, but digital and social media advertising also add another way for financial institutions to gain new customers.
Salem Five has seen its timed deposits grow 18 percent from 2022 to 2024 according to FDIC data. Joe Bartolotta, senior vice president for the North Shore-based bank, noted how newspaper ads continue to be a reliable way of attracting customers.
“One of the things we’ve done, and one of the things that you see a lot of banks still doing is advertising in local newspapers,” he said. “For as long as I’ve been in banking, we’ve been able to generate deposits by running ads in local newspapers. Local newspapers demographics skew older and those are the people who have the money, who want a secured investment, like a CD.”
Certificates of deposit can add a lot of value to a bank’s balance sheet while checking and savings accounts would require greater growth, Bartolotta said.
“You always want to be attracting new customers,” he said. “Ideally, it is through less expensive core deposits, checking and savings accounts. The problem with that strategy is you need a lot of checking accounts to match what you would get from a single CD.”
For Berkshire Bank, innovation is the name of the game. Sumant Pustake, executive vice president and chief strategy and marketing officer at Berkshire, said that if banks simply advertise their deposit interest rates then it becomes a “race to the bottom.”
“But if you just continue to compete on price, you are further accelerating that trend,” he said. “The only way you can stay in front of this is via innovation. So, when we talk about innovation, it’s product innovation. You have to offer a differentiating product set to the client, so the client starts viewing your product more than just interest rate. You still have to have interest rates that are sort of competitive, but you don’t have to beat every competitor.”
Berkshire’s current marketing tagline is “Banking with Perks” and the value proposition of being a Berkshire accountholder has been one of the bank’s main strategies to acquire deposits. Depositors at Berkshire can gain access to cellphone insurance as well as streaming credits. Additionally, with direct deposit set-up, account holders can get paid two days early.
But Berkshire has also innovated in its product selection. The bank added a product called a “shared direct account” that provides an interest rate that Pustake said was competitive with a certificate of deposit but still providing a checking account associated with it that also pays interest.
Pustake noted that when he first started controlling the bank’s marketing that the Berkshire utilized focus groups to see how banks market themselves. The findings from the focus groups showed that banks tend to market themselves a similar way with only colors, logos, and names being differentiating factors.
Berkshire utilizes Hubspot marketing software to track its customers journeys, but through utilizing Snowflake, a cloud-based data platform, the bank is able to learn even more about its customers and maximize the benefits they can offer.
Additionally Berkshire utilizes radio ads and traditional billboards along with digital ads on various social media platforms such as Google and Instagram but the bank has also recently started advertising on Pinterest and TikTok.
Sam Minton
Uncertainty Raises Bar
The Village Bank has also taking a similar approach as they launched a banking rewards program. Part of the program allows for accounts that utilize a debit card to receive a small share of a purchase back when they use their card. Also customers can receive $5 just for signing up for electronic statements.
Letourneau, the bank’s marketing officer, said that given shaky consumer confidence in the economy and a widespread feeling of chaos around the world, it’s important banks offer potential customers a reason to switch.
“In times of uncertainty, it is very difficult to get somebody to change their entire banking profile from one to the next,” he said. “So there has to be some sort of carrot to dangle in front of customers.”
Like Berkshire, The Village Bank recently launched a new high-yield savings account to reach into new markets.
“Once we get them here, the goal is to then show them the rest of what we have, show them our checking products show them why we’re so trusted inside Newton and Wayland and Waltham, and then sort of play on our history and our reputation and get them in the door that way,” Letourneau added.
The Village Bank utilizes social media advertisements on platforms such as Instagram, Facebook and Google but also utilizes radio and television advertisements.
“As the belt has tightened, you can’t give up completely on that line,” he said. “You have to pick the channels and the spots where you get the most reaction.”
Letourneau also highlighted that marketing needs to strike a balance of utilizing regular channels while also finding the ability to reach new markets.
“It’s not an easy balance to find, but it’s been important for us to do it for the past couple of years so, and I think we’ll continue to this year,” he said.
