In recent months, the financial sector has been experiencing a significant shift known as deposit flight. Several banks (Silicon Valley Bank, Signature, and First Republic Bank) collapsed due to this phenomenon, where customers withdraw their deposits and move them to the perceived safety of larger institutions. Credit unions now find themselves in a unique position to capitalize on this trend and attract new members.
Diving into Deposit Flight
Deposit flight is typically triggered by factors such as economic instability, or dissatisfaction with a bank’s services. In our current context, after a prolonged period of historically low interest rates, where borrowing at household, corporate, and government levels reached unprecedented levels, the subsequent significant rate hikes are expected to have a profound and lasting effect.
A report from Reuters indicates that total deposits in major U.S. banks declined by 3%, equating to billions of dollars exiting the banking system. Customers have pulled around US$800 billion in deposits from US commercial banks in the past year since interest rates began their rise. According to other reports, depositors are leaving smaller regional banks en masse and turning to larger banks and alternative financial institutions.
How Credit Unions Can Capitalize on Deposit Flight
As funds flow out of banks, credit unions have an opportunity to attract these wandering deposits. Credit unions, with their member-owned structure, often offer higher interest rates on savings accounts and certificates of deposit (CDs). They also frequently provide more personalized customer service, which can be a significant draw for individuals disillusioned with impersonal banking giants.
To effectively capture these migrating deposits, credit unions need to take proactive steps:
Emphasize a Member-Centric Approach
Credit unions have long been known for their focus on serving their members, compared to banks that are profit-driven. This ethos can be appealing to those seeking a more ethical or locally-focused alternative to big banks.
By highlighting member-centric philosophy and commitment to meeting individual needs, credit unions can position themselves as attractive alternatives to traditional banks. Clear communication of the importance of superior customer service, building strong member relationships, and delivering exceptional customer experiences can be compelling factors for those seeking a more personalized banking experience.
Highlight Competitive Rates and Fees
Credit unions often offer competitive interest rates on savings accounts and loans, as well as lower fees compared to traditional banks. By highlighting these advantages, credit unions can attract customers dissatisfied with high fees or low returns on their deposits.
Enhance Your Digital Services
As the demand for digital banking solutions continues to rise, credit unions can invest in user-friendly online and mobile banking platforms. By providing seamless digital experiences, including features such as mobile check deposits, real-time payments, and intuitive account management, credit unions can attract tech-savvy customers who expect convenient and efficient digital banking options.
Leverage Fintech Partnerships
Partnering with fintech companies can help credit unions offer innovative services that meet the needs of modern consumers. For instance, IMS Integration offers a range of software solutions, such as web loan applications, Skip-a-Pay, online self-service forms, designed to optimize and streamline credit union operations and member experiences.
Foster Community Relationships
Credit unions have deep roots in their local communities and are known for their involvement in community development. By showcasing commitment to supporting local businesses, organizations, and initiatives, credit unions can resonate with customers who prioritize community engagement and want their financial institution to contribute positively to their local area.
Providing financial education and empowering members to make informed financial decisions is another key approach to consider. By offering resources, workshops, and personalized guidance, credit unions can attract customers who value ongoing learning and want to improve their financial well-being. Positioning themselves as trusted advisors and educators can be a significant draw for those seeking a financial institution that prioritizes member empowerment.
Seize the Opportunity: Drive New Members to Your Credit Union
While the deposit flight from banks presents challenges for the banking industry, it opens up opportunities for credit unions. By understanding this trend and strategically positioning themselves, credit unions can attract new members and strengthen their financial position. As the financial landscape continues to evolve, those who adapt swiftly and effectively are poised to thrive.
Welcome new members with an onboarding process that is easy and hassle-free. With IMSI’s Online Account Opening solution, they can sign up quickly and easily, benefiting from a streamlined user experience and comprehensive workflow.
