As the offer wars kick-off in 2024, is any bank positioned to win?
Banks rival top brands like Coke and P&G as the highest spending advertisers in the world. And bank marketing teams - channeling their best Cardi B energy - literally "make money move" with hundreds of millions of dollars at their disposal to hit annual growth goals. While the accounts keep rolling in, there’s a frantic scramble as institutions fumble in their attempts to convert active customers and meaningful engagement through aggressive, unsustainable offers.
Welcome to the offer wars—a race to the bottom, where profitability is sacrificed at the altar of acquisition.
Big promotions fail to activate customers
You’ve all seen the promotions: fund a new account and get $500. Desperate for deposits, banks resort to outlandish tactics and unsustainable offers promising $400 to $1,000 for setting up a checking and/or savings account. Chase, Citi, PNC, Wells Fargo, Discover—they're all vying for a slice of the market share.
More recently, we've noticed offers that encourage signing up for both checking and savings accounts, creating a combination that results in surprisingly high, almost irrational, levels of benefits. Banks seem to be making bold moves, attempting to secure a s multiple-product sale in order to attain the elusive and coveted customer primacy.
Yet, these generous offers have yielded meager results at best. Activation rates are stagnate at a dismal 60% industry-wide, which means a staggering 40% of new accounts at major banks remain unfunded—a costly misstep with dormant accounts adding a financial burden of $120-400 per annum.
Consider the colossal operational infrastructure that banks are managing: thousands of branches, hundreds of thousands employed, marketing budgets in the hundreds of millions, and significant fraud and customer support expenses. Despite all of that, this bank makes nothing if the customers they are attracting do not become heavy users of their new checking account.
Primacy is more elusive than ever
Previously, changing banks wasn’t common, with 40% of consumers sticking for life to wherever they established their first account relationship. Now, the opposite can be true thanks to these offer wars. These promotions have inadvertently incentivized annual bank hopping to seek ever better deals, bleeding banks dry without fostering lasting loyalty.
Neobanks and fintechs have capitalized on this chaos, snagging a staggering 47% of new checking accounts without making these outlandish offers. The allure of digital banking, bundled with comprehensive financial tools, is pulling in younger demographics, where 72% of new account holders are Gen Zers or millennials.
Traditional banks are failing to speak the language of these tech-savvy generations who view loyalty differently and are instead always searching for the best deal and best use of their money. It’s not just about the best technology, it’s about the best savings rates, financial management, tracking credit scores and offers, as well as investing tools and tailored financial insights.
Look at Citizens for example. We partnered with the large bank and have been working to not just retain customers, but to entice new ones by offering flexibility and ease, addressing the growing need for streamlined services.
As competition surges, banks must pivot, offering better rates, superior product experiences, and embracing ease of switching, a sentiment echoed by industry leaders in a recent American Banker article profiling Pinwheel’s work to transform the new account flow at Citizens.
“We’re all chasing the same thing, which is wanting to make it as easy as possible to capture the direct deposit” said Don Weinstein, Former Chief Product & Technology Officer at ADP.
To win true customer primacy, banks will need to fulfill deeper customer needs - not just provide the richest acquisition offer. As marketing teams evaluate their 2023 results and understand what their offer bonanza drove in addition to new account growth - intensified gaming, one and done funding, and higher than ever first year attrition rates - marketing performance will get redefined to drive activation and engagement. There is a burning need for banks to eliminate all barriers to direct deposit enrollment, accelerating primacy in new customer relationships and driving lifetime value.