Growing deposits with a personalized approach

Liquidity challenges have been a top concern for credit unions and members for some time now, especially following the large bank collapses of 2023. Even though interest rates have begun to stabilize, the continued threat of recession has led to a more conservative approach by credit unions and members alike. In a time where there is fierce competition for attracting and retaining deposits, how can your credit union stand out?

Challenges in deposits

Economists have been predicting a recession for years; thanks to government stimulus checks and a strong labor market, there was increased spending, which, combined with other factors, eventually led to the inflationary market we are currently experiencing.

But the threat of recession hasn’t abated—the increased interest rates and high levels of inflation have set up an environment for it to be more likely. What’s different about this recession, however, is we’ve had more time to prepare for it, with the experience of recent recessionary cycles. Once it manifests—not if but when—we’ll “find out who’s been swimming naked.” Smart planners know that preparing now will pay dividends in the future.

Members are aware that a recession may occur, which is why we’re seeing changes in their spending habits. Member deposits are shrinking, largely due to prioritization of paying down credit card debt cyclically post-holidays and preparing for financial depression. Members have become more conservative in their spending overall, while savings and deposits have shrunk year-over-year.

Increasing deposits with personalized marketing

We know that a central bank like the Fed has raised the cost of borrowing 16 times since 1950 to fight inflation. In each case, a recession resulted. Thus, credit unions are looking at their liquidity ratios closely.

There are several ways to go about increasing liquidity—an option is to ease off on lending, but that can create more problems down the road. Your credit union could also sell some existing loans to quickly gain capital, but that might not be every credit union’s preferred approach.

I believe that one of the best ways in the long term is growth—increasing membership and strengthening relationships with existing members; and to do that, your credit union needs to be prepared to invest in marketing.

The personal relationships credit unions can build with members are the greatest resources in your marketing arsenal. Even as we move to enhanced digital relationships, your credit union can capitalize on personal messaging to acquire new members while still maintaining relationships with existing members.

To build and strengthen those member relationships, we must rely on data. Credit unions must know their members intimately in order to serve them; this means understanding not only who they are, but what they are going through financially, what they care about emotionally, and the intersection of both. Credit unions already collect data on members to serve their financial needs, and to drive growth they build databases of member demographics to drive decision-making. It can be overwhelming, however, to try and capture everything your credit union knows or can intuit about members, and then apply that to marketing strategies.

Crafting messaging based on certain characteristics is one way to start planning out marketing. Your credit union could choose to focus on just specific segments, allowing you to create messaging based on spending habits or goals; focusing on generational differences, however, may be a better choice if you’re looking to bring on newer, younger members.

Of the four active generations—baby boomers, gen x, Millennials, and gen z—your credit union likely already has a significant population of the older two, and a smaller but growing population of the younger two. It’s important to understand the differences in how these generations prefer to be communicated with and what their financial goals are when creating your marketing messaging.

Baby Boomers: b.1946-1964 (60- to 78-year-olds)

Baby boomers are either in or approaching retirement and are typically going to be more focused on wealth management than more risky endeavors. These members typically prefer face-to-face interactions to digital, and they value in-person conversations. Messaging to this population of members should focus on options such as trusts or high yield savings accounts and highlight local brick and mortar branches. They also provide a bridge to the younger generations in terms of kick-starting their savings.

Gen X: b.1965-1979 (44- to 59-year-olds)

Gen X members are still part of the active workforce but are generally more established in their careers and lives. They may be more likely to take on home loans or look for refinancing options, and retirement accounts will likely be a priority for them. Gen X are interesting, as they are sandwiched between the more analog generation of baby boomers and digital generation of Millennials. While they are tech savvy and comfortable with digital banking, many Gen Xers will have complex financial situations that require an in-person experience and will likely frequent your physical branches. As Gen Xers are responsible for caring for both their millennial and Gen Z children, in addition to aging baby boomer parents, they are more likely to carry credit card debt than other generations. Marketing to this population should focus on balance transfer credit cards and large loans, such as mortgages or car loans, as well as boosting loyalty by offering financial and estate planning services.

Millennials: 1980-1996 (28- to 43-year-olds)

Millennials are the largest of the active generations and are characterized by a more technology-focused existence. Raised in the era of social media, this generation prefers to do their banking online and are more likely to choose a digitally savvy financial institution to partner with. If your credit union does not have an easy-to-use app or website, a Millennial is less likely to choose you as their primary financial institution. The biggest competitor credit unions have for Millennial business are non-brick-and-mortar fin-techs, many of which do not even offer in-person services and instead prioritize a seamless online experience. Millennials typically do not (yet) have the brand loyalty other generations have exhibited and will instead choose whatever offers the best experience. They will also not hesitate to jump to a different institution if they think it will better meet their needs. When it comes to Millennials, your credit union would be best served by ensuring the digital experience is well crafted and easy to navigate—but always with a path to personal service when it is needed. Create personalized messaging within the app to promote first time home buyer programs or personalized loan options.

Gen Z: 1997-2012 (12- to 27-year-olds)

Gen Z is the youngest of the financially active generations, with some of them not yet in adulthood. Gen Z is the first generation to be raised in the era of technology and many have begun to eschew it in favor of more in person interactions. This generation will likely still make use of the online experience, but they are just as likely to visit in-person locations. Gen Z is very active in the political and environmental spaces and will give their business to those who align with those values. When messaging to Gen Z, highlight any eco or diversity initiatives to demonstrate that alignment. Gen Z was also there to watch how debt affected their older millennial siblings and tend to prioritize any options that allow them to avoid taking on such debt. Promote debit cards and savings options to these potential members. As many enter adulthood and the workforce, Gen Z provides a great opportunity for credit unions to bring on new members. Many will need their first checking accounts and may need additional financial guidance as they begin to build their wealth. To close the loop, Gen Z may also have strong financial connections (and backing) from Baby Boomers and Gen X, which means that an inter-generational approach will support fostering a long-term relationship with Gen X until they get into their 70’s.

Activating your credit union’s marketing strategies

Building and maintaining liquidity is an important step in ensuring your credit union can weather inevitable cycles of economic challenges; a focus on growing membership will aid in that endeavor.

Start by identifying where and how your credit union wants to engage with each generation: the established Baby Boomers and Gen Xers, and up-and-coming Millennials and Gen Zs. Understanding them and fostering a good mix will allow your credit union to serve a diverse membership that will have interest in a wide range of products and services, while also contributing to your deposit needs.

Once your credit union comes up with that strategy, it is time to execute! Bring the data together into a “single source of truth” for member intelligence (hint: you might already be doing this for risk management). Next, augment that member data with third-party data to include prospective members. You can then use data enrichment to round out your database with insights. At this stage, you should have robust data to run predictive analytics, AI-driven modeling for things such as segmentation and next-best product or action.

• Next-best product: predicts which product should be offered to a member next (product propensity) with a goal of increasing product growth, usage and overall revenue
• Next-best action: like next-best product, but extends to things like “offer financial education,” and “wish happy birthday,” with a goal of increasing engagement and retention

At this point, your credit union will be able to add these components to its evergreen digital platform to drive personalized experiences, to its marketing platform to drive campaign calendars, and to ultimately drive growth, usage and member loyalty to support long-term liquidity.

Consider partnering with a data and analytics-driven marketing solutions provider to accomplish your credit union’s growth goals. These providers can help you identify, understand and effectively market to the population segments of your choice, allowing your credit union to focus on continuing to meet new and existing member needs to bring capability and capacity to your team.

At the end of the day, remember that credit unions as an industry tend to be very resilient. Whatever economic ups and downs come our way—we’ll continue to survive and grow.