3 Ways Credit Unions Need to Talk to Their Depositors

People today make a huge number of decisions every day. They are busy. Credit unions can safely assume that every depositor is looking for more value and convenience, but when and how do they communicate with depositors? Does the media noise around interest rate hikes prompt new conversations? What have credit unions done to prepare? How should they prepare to navigate and win the deposit pricing wars?

Very few credit union professionals believe they have created the ultimate in cost efficiency regarding deposits, which would enable them to simply outbid every other federally-insured depository. If credit unions cannot win the pricing wars with price, how can they expect to win?

In the days of ultra-low interest rates, the differential between the rates of the highest and average rate payers did not turn many heads, so stalemates were frequently achievable, where depositors left funds with the incumbent financial institution. Many credit union professionals have watched this and now appear determined to test the power of incumbency. This is a valid approach. However, this cannot be their only pitch for the looming dynamic environment. Credit unions must have some other talking points prepared to address the specifics of each situation. The static rate sheet and a nice cup of coffee is not likely to yield the combination of volume and cost of funds that optimizes the financial institution’s results. Credit unions must equip and empower the frontline to be the professionals they can be with better processes, products, sales platforms and training.

1. Talk Dollars

Every depositor knows that higher interest rates are better for their deposit accounts, but few can easily and confidently run the numbers to understand the consequences of their options in dollars. Frontline employees need to be equipped to talk dollars with these depositors. Every offer can be dollarized to explain how earnings from the account will add up over time. This provides a much more professional approach than the order-taker posture that is prevalent any time the static rate sheet becomes the center of attention.

Credit union professionals know that every depositor today has a phone with them that they can use to search their options in terms of annual percentage yield (APY). Why not match their computing power with the credit union’s? Why not show members what the account that is under consideration will mean in dollars earned each month and over the life of the account? Beyond that, credit unions can show how its offers stack up against the competition. When credit unions acknowledge the options that the depositor has and quantify the consequences of the alternatives, they are often rewarded with the deposit without matching or besting the competition. The frontline loves leveraging these analytics because they are common sense to them and the people they are presenting these results to, yet so few competitors are prepared to talk dollars.

2. Talk Specials

Usually, deposit specials are easy to spot. They often have a high yield certificate rate for an odd maturity term. At a basic level that is correct. However, in 2022 there is so much more to promotional specials than throwing out a high yield for an odd term. For one thing, promotional certificate specials need to be timed and defined in order to minimize the unnecessary repricing of maturing accounts that are not actively looking for higher rate offers.

“Companion deposit accounts” are specials that accelerate growth while moderating the problematic repricing of deposit accounts that would have stayed with the organization for less than the special pricing. Broadcast advertising and availability of companion accounts that carry what is typically the highest yielding overnight savings rate of the credit union is not only acceptable but recommended. The reason that this does not result in an overly large marginal cost of new funds is that opening and depositing to these accounts requires a simultaneous new term deposit account to be opened. This qualifier restricts the migration of funds to the highest yielding accounts and leads depositors to broaden the deposit relationship and extend its duration in order to qualify for this profitable account that is less profitable on face value than other overnight interest-bearing offerings.

3. Talk Personalized Options

While the dollarizing process presents the standard deposit options in terms of dollars, there are times when even our promoted specials will not be enough on their own to secure the accounts. Yes, sometimes the differences in dollars are material enough that the depositor says they are headed over to the higher rate payer to take advantage of the options available there.

This situation creates the opportunity for credit union professionals to make an upgrade in the offers. Credit unions frequently have the potential to introduce valuable options that the depositor did not know existed. Having options to customize solutions is what truly sets professionals apart from the herd. There are numerous options that can be extended in a sequential offering process. Continuing to talk dollars, credit unions can now explore with the depositor options for customizing the maturity of accounts, retaining deposits in overnight interest-bearing accounts with rates that compete with the most aggressive options available, offering to refinance deposits that are not yet maturing at the competition and offering a daily redemption choice that creates optionality for term depositors without giving away any additional value from the financial institution.

Moving Forward as a Prepared Professional

Professionals will talk dollars, specials and options with a posture of curiosity, competency and confidence that wins business from those who assume the order-taker, product-pusher posture of someone with a rate sheet and a cup of coffee. This has always been true, but few have developed and refined their conversation skills during the ultra-low interest rate environment that favored the incumbent.

As credit unions leave behind the rate environment that was associated with a surge of deposits across the industry, the new environment will clearly favor the prepared professionals who have been equipped and empowered. The industry will undoubtedly find that fortune favors those financial institution leaders who have prepared wisely and acted boldly to prepare their people to talk to depositors as interest rates rise.

Neil Stanley is founder and CEO at The CorePoint, an Omaha, Neb.-based deposit solutions provider serving financial institutions.