Credit unions, this one’s for you:
On the heels of a wearisome liquidity crisis, comes a positive outlook on deposit growth: overall assets are up 4.4% since 2023.1 But will it be enough to sustain growth in 2025 and beyond?
Unfortunately, delinquency rates have crept up 25 bps during the same time frame. Plus, loan-to-share ratios are still an area of concern as we’ve freshly come off of some unsettling economic times (and are likely to face more upheaval in the wake of the 2024 election.)
We know that deposits are the answer - yet credit unions continue to struggle with the threat of shrinking deposits. How? And more importantly - why?
Your Greatest Threat to Deposits
(And it’s not who or what you may think)
Digital-only FIs and neobanks are the greatest competition to deposits, sweeping up enormous market share, right?
Wrong.
The greatest threat to growing organic deposits is the friction of opening and funding an account. Put another way, if a member wants to open and sustain an account with your credit union but can’t do it easily, seamlessly and with as little friction as ordering lunch from DoorDash, they just won’t.
On average, it takes 10 or more minutes to open a new account. Did you know that the average adult attention span resides at 12 seconds? (And that’s on the generous end.) The length of time it takes to deposit funds is the root of the friction. The ideal time frame for opening/funding an account is 3 minutes or less. That means the average time needs to be cut down nearly 4x’s!
(Pro tip: Try to open a new account with your CU. Don’t forget to set a timer and make mental note of the roadblocks along the way.)
To increase deposits is going to mean increasing account openings. This is done by slashing the amount of time it takes to open and fund an account.
If you want to ramp up deposits, you need to remove the friction of account opening and funding.
Account Opening Friction isn’t Fiction. Here’s how to remove the (very real) friction of organic deposits
When it comes to deposit friction, there are two breakdowns:
- Opening a new account and,
- Funding an account (new or existing)
These breakdowns aren’t restricted to digital experiences either. In-branch account openings and funding processes are - and historically have been - cumbersome. The experience (albeit a poor one) carries across from branch to digital banking. In an experience-first world, good service is a good experience. If you offer a positive, continuous experience, you will be perceived as safe, relevant, and trustworthy.
These breakdowns in experience are costing FIs more conversions and higher submissions, and in many cases, new accounts in general. But these costly breakdowns also provide valuable opportunities. More ease leads to greater trust that may equate to higher submissions down the line.
It is possible to remove the friction of deposit by leveraging an intuitive technology that synthesizes the deposit experience- both in-branch and online. With technology that boasts of 100% of accounts being funded upon opening, your credit union can remove the friction that hinders deposits. Imagine this: how would it change your deposit growth strategy to convert every opened account?
Quick Fix or Long-Game Strategy?
How about both! A safe, frictionless solution serves as both a deposit-growth-quick-fix as well as a long-term growth strategy.
Deposits are a challenge, but technology that removes friction knocks this challenge down from a crisis to a strategic business initiative.
For more insights and strategies, keep an eye out Allied Insights for part 2 of this series.
1https://ncua.gov/newsroom/press-release/2024/credit-union-assets-lending-insured-shares-delinquencies-grow