Building a winning deposit strategy
Credit unions are facing unprecedented challenges in the battle for deposits. Neobanks, fintechs, and digital-first services have dramatically shifted the competitive landscape, forcing credit unions to rethink their deposit strategies. As consumers increasingly turn to these innovative alternatives, credit unions must evolve and adopt a forward-looking approach to avoid being left behind.
A successful deposit strategy today requires an understanding of the complex, evolving behaviors of consumers and a firm grasp of macroeconomic trends. From the generational transfer of wealth to the rising demand for personalized digital experiences, credit unions need to respond strategically.
The key to success lies in understanding these factors and leveraging data analytics to create personalized, proactive strategies that address the unique needs of both existing and future members.
Factors to consider when creating a deposit strategy
1. Changing consumer behavior: One of the most pressing concerns for credit unions is the increasing willingness of consumers to switch their financial service providers. Recent studies show that 40% of consumers may switch financial institutions in 2024, double the average rate over the past decade. This surge in mobility presents both a challenge and an opportunity for credit unions. While this trend reflects growing dissatisfaction with traditional financial services, it also indicates a prime opportunity for credit unions that can deliver a superior value proposition.
Much of this willingness to switch is driven by consumers’ attraction to digital-first experiences offered by neobanks, fintechs, and other online financial platforms. Institutions such as Chime and Ally have captured the imagination of younger, tech-savvy consumers by providing seamless, mobile-friendly services that are both convenient and personalized. These disruptors offer streamlined onboarding, user-friendly apps, and often higher interest rates, appealing to those who prioritize convenience and competitive pricing.
Traditional credit unions can no longer rely solely on loyalty or legacy relationships to retain members. To remain competitive, credit unions must invest in digital transformation and member experience enhancements that meet the growing expectations of their increasingly mobile and digitally native clientele.
2. Spending trends and the YOLO effect: The economic environment is another critical factor shaping consumer behavior. Inflation, although slightly tamed, continues to drive the cost of living higher, creating financial stress for many households. At the same time, personal savings rates have dropped sharply, from a 20-year average of 9% to just 4% at the end of 2023. As disposable income shrinks, consumers have had to adjust their financial habits. However, this financial pressure has not entirely quelled consumer spending.
Despite these economic challenges, many consumers have embraced a YOLO (You Only Live Once) mentality, especially in the aftermath of the pandemic. The desire to make up for lost time has driven a surge in spending on experiences such as travel, entertainment, and dining out. For example, live event spending increased by 27%, and travel saw a 9% rise in 2024. While this suggests that consumers are still willing to spend, it also points to the increasing use of credit and a rise in debt.
For credit unions, this shift also represents a challenge and an opportunity. Credit unions must be prepared to offer products that address members’ evolving financial needs, such as credit card services and personal loans. On the other hand, it highlights the importance of developing products that can attract and retain depositors even in a low-savings environment.
3. Generational wealth shift: Another critical factor to consider is the generational transfer of wealth. While consumers over 50 hold 80% of U.S. personal wealth today, younger generations—particularly millennials—are poised to inherit a staggering $90 trillion over the coming years. This wealth transfer will create new opportunities for credit unions that can successfully engage younger consumers.
Currently, younger generations hold just 9% of the country’s wealth, but they will become the most powerful financial demographic as inheritance changes hands. For credit unions, this generational wealth shift underscores the importance of capturing the attention of millennials and Gen Z now, before they inherit vast sums of money. Credit unions that ignore this group run the risk of becoming irrelevant as these younger consumers turn to more digitally focused and innovative alternatives.
How to create an effective deposit strategy
1. Strategic roadmap for growth: To create a successful deposit strategy, credit unions must shift from reactive, short-term pricing tactics to proactive, long-term growth strategies. Many credit unions have entered a “rate war,” increasing deposit rates to unsustainable levels. While this might temporarily attract new deposits, it often does little to differentiate an institution’s brand or build lasting loyalty.
Instead, a strategic roadmap should be built on a deep understanding of the credit union’s target member segments and their financial needs. This means identifying not only the most valuable members—those with the highest balances—but also those with the potential for future growth. Credit unions must invest in understanding the behaviors, preferences, and goals of their ideal members, and then design products, services, and experiences that meet those needs.
2. Leveraging data analytics: Data analytics is a cornerstone of any modern deposit strategy. While 80% of marketing leaders recognize the importance of data insights, many institutions struggle with inadequate systems and fragmented data sources. To create an effective strategy, credit unions must improve their ability to gather, analyze, and act on first- and third-party data.
First-party data, such as transaction history, account activity, and behavioral patterns, provides institutions with valuable insights into their members’ financial lives. When combined with third-party data on demographics, lifestyle, and spending habits, credit unions can create a 360-degree view of each member. This allows them to develop highly targeted marketing campaigns, personalized product offerings, and tailored financial solutions.
3. Importance of personalization: Personalization is no longer optional—it is a necessity in today’s financial services industry. Members now expect the same level of personalized service from their credit unions that they receive from companies like Amazon and Netflix. A recent survey found that 72% of consumers view personalization as highly important to their financial services experience, and 76% expect personalized service across all channels.
Credit unions must leverage data to create personalized offers that resonate with their members’ unique needs. This means using insights from both digital and in-person interactions to deliver relevant products, services, and advice at the right time. Personalization can take many forms, from tailored savings plans to customized credit offers, but it is essential that every touchpoint reflects a deep understanding of the member’s financial journey.
In a financial environment where consumers are increasingly willing to switch providers, having a well-defined, forward-thinking deposit strategy has never been more critical. Credit unions must understand and respond to changing consumer behavior, including the growing demand for digital-first experiences and the shifting generational dynamics of wealth. By investing in data analytics and personalization, credit unions can build deeper relationships with their members and position themselves for long-term growth.
Ultimately, the success of a deposit strategy will depend on the credit union’s ability to move from reactive tactics, such as rate hikes, to proactive strategies that focus on customer experience, retention, and acquisition. By leveraging the power of data and designing personalized, relevant financial solutions, credit unions can stay competitive in an increasingly dynamic market.
