Winning the Race for Deposits: How Personalized Offers Drive Profitability

Deposit growth has become a top priority for many banks in today’s fiercely competitive environment. But as financial institutions ramp up their efforts to attract customers, they often face a common challenge: the race to the bottom on incentives. Outspending competitors to offer higher incentives might boost account openings, but it comes at the cost of razor-thin margins and dwindling profitability.

The key question: Was the cost to acquire these customers worth it? Without a personalized approach, this question becomes nearly impossible to answer. 

Instead of relying on generalized strategies, banks must turn to personalized offers based on behavioral targeting that strike the right balance between acquisition costs and customer value. A McKinsey study found “companies that grow faster drive 40 percent more of their revenue from personalization than their slower-growing counterparts”.

The Downside of Generalized Deposit Offers

The traditional approach to deposit offer communications is straightforward but often ineffective. It typically follows this pattern:

1. The bank decides on a blanket deposit offer it can afford to run for a fixed period.
2. Ads are crafted to promote this offer.
3. Campaigns are launched with broad targeting in the hope of driving deposit account openings.

While this method may generate results, it often wastes valuable resources on customers who will not be swayed by the offer – or who may have been motivated by something else. Many expenses that come with generalized campaigns tend to be overlooked. For example, customers that are attracted by sign-up bonuses may switch banks frequently, leading to higher churn rates. Alongside that cost, managing a surge of new accounts from bonus seekers can place a strain on internal resources. Essentially this increases administrative expenses while not necessarily guaranteeing lasting customer relationships and long-term profitability. Additionally, competitors may flood the market with competing offers, causing banks to have to increase their costs of acquisition to meet their goals. 

These generalized offers can also erode brand perception, causing an institution to appear less customer-centric. A one-size-fits-all offer risks signaling commoditization, or its irrelevance to the consumer can erode their attention to your brand over time, subtly diminishing brand value. Prioritizing short-term gains over long-term brand equity, banks often overlook the lasting damage caused by offers that fail to resonate with their audience.

As a result, banks not only miss out on customers who might have switched for less and waste valuable resources—they also undermine their own brand strength.

5 Strategies to Successfully Execute Personalized Deposit Offers

To stay competitive in an offer-rich environment, banks must shift to personalized strategies that align with their acquisition goals. This approach requires data-driven segmentation, dynamic creative optimization, and targeted messaging to deliver the right offer to the right customer. 
Often this approach can feel overwhelming as banks face higher challenges to personalization than other consumer brands due to regulations such as UDAP, TILA, FFIEC Guidance. However there are ways to adhere to regulations while still delivering on personalization for consumers. 

Here’s how it works:

1. Define Acquisition Goals:

Start by identifying measurable, time-based business objectives, such as increasing deposits from a particular area or region or for a particular product by a certain date. What specific customer segment or market do you want to target, and how does this align with our broader business growth objectives? 

2. Segment Your Audience:

Analyze existing customer data to segment audience groups based on behavioral characteristics and patterns, such as financial behavior, current product mix, and life stage. Use these insights to build lookalike profiles of high-value prospects. AI can play a role here in collecting first-party data and segmenting it based on core priority behaviors to focus your team’s efforts on analysis rather than data gathering. It is critical to ensure audience segmentation is based solely on behavioral or transactional data—not on protected personal characteristics—in order to comply with fair lending and anti-discrimination laws. 

3. Tailor Offers to Profiles:

Determine the optimal offer for each audience segment based on behavioral insights and customer value—ensuring no use of protected personal characteristics in the decision-making process. For example, instead of offering $500 across the board, banks can identify customers who may be motivated by a $200 incentive and reserve higher-value offers for those with greater switching barriers.

4. Leverage Dynamic Creative Optimization:

Avoid the burden of creating unique ads for every offer and contingency by using Dynamic Creative Optimization (DCO). This technology allows you to automatically tailor ad creative to match different audience segments and offers. Use internal review protocols to ensure dynamically generated ads remain consistent with marketing compliance standards. 

5. Measure, Refine, and Follow Up:

Track performance metrics to refine your copy, creative, and offers in real time. Build a communications strategy that uses owned channels, such as email and app notifications, alongside ad retargeting to nurture relationships with prospects and existing customers.

Why Personalization Matters

By identifying the optimal offer for each customer, banks can minimize acquisition costs while maximizing profitability. This level of precision ensures a better ROI while building trust with customers by delivering value that feels tailored to their unique needs.

Personalization to Drive Retention

Deposit offers are typically viewed through the lens of acquisition, but what’s often overlooked is their potential to strengthen existing relationships and reduce churn through personalization. Profitability isn’t just about acquiring new customers—retention is equally critical, as both are two sides of the same coin. In fact, retaining customers is often more cost-effective than acquiring new ones. By applying the same personalization strategies used for acquisition to retention efforts, banks can deepen relationships, foster loyalty, and create opportunities for cross-selling products like mortgages and credit cards.

Using First-Party Data & Compliance Considerations for Personalization

Banks often overlook the insights available from their existing customers through first-party data. By analyzing customers’ spending patterns, banks can identify opportunities to offer relevant financial products. If a customer consistently shops at travel agencies or books international flights, the bank could personalize promotions for travel rewards credit cards or foreign currency accounts.

In an industry as highly regulated as financial services, privacy concerns are always top of mind. However, first-party data should be viewed as a strategic asset—one that can help banks reduce reliance on third-party sources while still delivering personalized experiences.

Regulations like GDPR and CCPA have significantly impacted how banks collect, store, and use customer data for personalized campaigns. Yet, discussions around personalization often fail to address compliance, despite it being a critical concern for bank CMOs. To maintain compliance, the following should be considered:

• Focus on gathering data directly from your customers through methods like website interactions, email subscriptions, and loyalty programs.
• Utilize encryption, secure storage systems, two-factor authentication, and safe data transfer methods to safeguard customer information against breaches.
• Perform internal audits to ensure all data handling practices align with current privacy laws and regulations, covering aspects from collection and storage to processing and disposal.

Personalization should not be viewed as yet another tactic in a long list of ideas. It’s a strategic shift that requires a balance of data-driven insights, compliance, and customer-centricity. For CMOs focused on sustainable growth, the key is building a personalization strategy that both drives immediate engagement and strengthens brand loyalty and adaptability in an evolving market.