Reaching Deposit-Rich Consumers

CU360
September 3, 2009 | COMMENTS

The migration of consumers to online banking from more traditional delivery channels has been well documented. But for consumers with significant deposits, face-to-face branch interactions still are essential, even among consumers who manage their accounts online.

What does that mean for the role of the Internet, the branch, and other channels for account origination and servicing?

To answer that question, the First Manhattan Consulting Group (FMCG) recently reported on research specific to deposit products. Their study of more than 11,000 consumers found that although there has been a shift to online banking, person-to-person channels and traditional marketing methods still matter a lot, especially to the most deposit-rich consumer segments.

True, the percentage of consumers who prefer to do most of their financial transactions online has increased substantially—from 38% in 2005 to 57% in 2009. But this finding doesn't tell the whole story. Other findings from FMCG research:

• Active online banking/bill-pay users, in the aggregate, remain frequent branch users. The online channel appears to complement, rather than replace, the branch.
• Branch volumes have been stagnant or declining. The complexity of the remaining branch transactions is increasing, however, indicating that consumers have been moving the simpler transactions online.
• Often overlooked is the importance of the branch for servicing commercial customers—including small businesses. Most small businesses use their branch on average more than 100 times per year.

There are several ways for institutions to segment members or customers. One approach that yields powerful insights is to group those needs and attitudes that influence consumers' choice of where to bank and their level of loyalty. CUNA research shows that loyal members are more likely than less loyal members to use more services and have higher account balances.

When grouping consumers by their deposit preferences, one fact emerges: online banking is only part of the solution—even for your most technologically savvy members. Two segments are of particular interest—what FMCG calls the “self-directed diversifiers” and “conservative branch bankers.” If you're in the hunt for deposit balances, these two segments are the prize:

Self-directed diversifiers represent nearly a quarter of the population and account for nearly 39% of deposit balances. They're confident and knowledgeable about finances, and they prefer to do most transactions online. If you're targeting this group, robust Internet and other self-service capabilities are essential. Nearly 50% of this group considers a personal relationship at the institution to be very important.

Conservative branch bankers represent 14% of the population and account for nearly 35% of deposits. They're less financially confident and strongly prefer face-to-face interaction. Two out of three branch bankers consider a personal relationship at the institution to be very important.

Before opening an account, about 80% of both segments highly value a face-to-face meeting with an employee who can explain account features and answer their questions. In other words, deposit-rich customers—even those who prefer to do their transactions online—still like to open accounts at branches.

Personal relationships also build loyalty. Two-thirds of satisfied customers in both segments are loyal to their primary financial institutions (PFIs), and relationships stand out as the key factor behind this satisfaction:

• Three out of four satisfied customers in both segments say their PFI has really tried to help whenever they had a problem.
• Both segments find branch employees competent and knowledgeable.

Fees also matter. Consumers who are very satisfied with their PFI don't feel “nickel and dimed.” For the branch of the future, knowledgeable employees who make a sincere effort to serve their members well will make the difference in winning deposits—so long as they avoid over-using the “fee stick.”

FMCG also found that about 40% of self-directed diversifiers and conservative branch bankers open and read direct mail from institutions they don't do business with. Thus, credit unions have a prime opportunity to use targeted direct mail to reach deposit-rich consumers—even those who bank online.

The Branch of the Future is one in a series of white papers available from FMCG.com. Registration is required.