Community banks can reclaim the customers and deposits they have ceded to digital savings applications.
It can be difficult for community banks to find the right tool to help them gain low-cost deposits in today’s low-rate environment. Although rate specials on certificates of deposits can be an obvious quick win, they do not provide the right “stickiness” needed to create a long-term relationship that generates future deposit gathering. Personal finance apps like Digit, Qapital and Acorn bring even more competition to community banks, taking away deposits in small amounts that can really add up.
Consumers want more digital products and automated mobile banking options in today’s smartphone-centric world, but many of the popular savings and investing apps charge fees that may not be in their best interest. Qapital charges up to $12 a month in fees, while Digit charges anywhere from $2.99 to $5. If a consumer saves $1,000 over 12 months but pays $2.99 per month for an app, that consumer is getting an interest rate of -3.59%. If the consumer saves $2,000, their interest rate is -1.79%. Unless these platforms are offering consumers interest in excess of those rates, the consumer ends up underwater on their own money.
Micro-investment applications like Acorns invests a consumer’s spare change. If a consumer purchases a coffee for $4.50, the purchase is rounded to $5 so the 50 cents can be automatically invested. Acorns charges between $1 and $3 a month in fees on accounts with less than $1 million, depending on the selected features. But when consumers are investing just a few dollars each month, even that $1 fee can seem pretty steep.
These apps are beautifully designed and have gained user traction promising big results under the guise of saving and investing, but consumers aren’t seeing the big results they promise. This gives community banks an opportunity to win.
Community banks can take a leaf out of these app’s playbook by leveraging an attractive, digital interface that meets consumers’ needs but doesn’t charge them fees. An auto-savings tool can help banks provide additional value to existing customers by providing them with the digital banking tools they desire. Most importantly, they offer a low-cost acquisition method of a new net saver bringing in low-cost deposits.
Some accounts, like Plinqit accounts, can be opened in under three minutes so users can start saving immediately. These accounts carry the same or lower administration costs than a traditional savings account and can outsource the customer service.
Educating customers on how to save is another key to increasing deposits and developing long-term customer relationships. Customers desire personal finance education: 41% of Americans say their lack of financial knowledge keeps them from progressing financially. One area ripe for education is why customer funds should be stored at a bank.
Many customers habitually leaving money in Starbucks Corp., PayPal Holdings and Venmo apps. Helping them realize their money is not working for them in these noninterest bearing accounts can show them the value of earning reward or interest on these funds at your bank. It is important to craft marketing messages that help consumers how they could be making money on the funds saved at your institution.
Some automated savings interfaces offer ways for banks to deepen relationships with customers. For example, Plinqit incentivizes customers increasing their financial knowledge by rewarding with money added toward their savings goal. This increases engagement with the app, and costs a fraction of the typical-pay-per click engagement. Ultimately, an automated savings tool like Plinqit can be a cost-efficient way to attract consumers for community banks. Building a relationship that provides consumers with valuable education and savings without fees fosters a long-term connection with the bank. In a crowded market, having the customers’ financial wellness as a top priority will help your institution stand out and grow deposits.