Acquiring new customers and growing quality deposits are the top business challenges in 2025

A version of this article first appeared in the December BAI Executive Report: The 2025 banking landscape. Within, industry peers share the strategies and potential solutions for meeting customer needs, preparing for market uncertainty and streamlining operations to preserve margins.

Feeling bullish, consumers anticipate having excess cash in the next six months, according to the 2025 ProSight Banking Outlook. That sentiment should play well with bankers who, in a companion banking outlook survey of financial services organizations leaders, identified quality deposit growth as their top business challenge for 2025.

Conveniently for bankers, the consumer segments that said they will have excess cash are Gen Z and Millennials, the younger generations that are highly coveted by financial services organizations. In the consumer survey, 45% of Gen Z and 47% of Millennials anticipate having more excess cash in the months ahead—notably, both percentages are higher than the previous year’s survey.

But there’s no guarantee consumers’ excess dollars in the months ahead will land in bank accounts. The stock market, the bond market or other financial instruments may appear more attractive.

A competitive landscape

To gauge the banking industry’s temperature, BAI surveyed about 150 banking leaders from across the market spectrum and 1,000 consumers to produce the ProSight Banking Outlook.

Banks and credit unions, many of whom forecast positive deposit growth in the year ahead, will strive to meet their top business challenge by deploying several tactics to attract and grow deposits. Expect to see more promotional rates on savings accounts, CDs and money-market deposit accounts. A promo is a higher-than-normal rate or cash incentive for a deposit product.

According to the ProSight Banking Outlook consumer survey, 16% of Gen Z and 18% of Millennials opened savings and money market accounts featuring promotional incentives in the last six months. CD promotions were most popular with the Boomer+ generation with 12% of them reporting they had opened one in the past six months.

More than half of Millennials (51%) and Gen X (59%) learned of promotional offers online, while 38% of Gen Z and 43% of Boomers+ did the same. The next most likely channel for promotional offers for all generations was the branch.

Amid the recent higher-interest rate environment, financial services organizations saw substantial deposit outflows of so-called hot money into money market mutual funds, bonds or stocks for potentially higher rates of return. We define hot money as an amount of $10,000 or more that is moved to a new deposit or investment for a higher rate or cash incentive.

But based on ProSight’s survey, the outflow of hot money has cooled somewhat, which is good news for banks that are trying to retain those large deposits. In the 2024 ProSight survey, 9% of consumers indicated they had moved $10,000 or more from a checking account and into a CD or an insured money market account for a higher rate.

In our most recent survey, only 7% of consumers said they had moved hot money to a CD or an insured money market account.

Similarly, in 2023, 9% of consumers indicated they had moved $10,000 or more from an insured account – such as checking or savings – into stocks, bonds or money market mutual funds to chase a better return. In the 2024 survey, that percentage slipped to 7%.

When asked what they plan to do with any excess deposits in the next six months, the most popular response of all generations was “nothing much will change.” Paying down loans or lines of credit was the second most popular response of all generations.

Primacy still matters

As was the case in the 2024 ProSight Banking Outlook survey, bankers looking ahead at 2025 said new customer acquisition was their second-biggest business challenge in the year ahead.

It will be a daunting test in 2025 amid the increasingly competitive banking landscape. Direct or alternative banks, community banks, credit unions, regional/super-regional banks and large national banks are all vying for consumer deposits.

According to our consumer survey, a larger percentage of every generation cite a direct/alternative bank as their primary financial services organization. However, large national banks remain the leading primary institution for all generations.

Primacy, of course, is critical because it’s where customers keep the majority of their total deposits. Primacy is usually determined by where customers maintain their checking account, receive their paycheck deposits, and pay their bills.

Gen X and Millennial consumers are much more apt than their older counterparts to change their primary bank. 20% of Gen Z and 21% of Millennials said they will “definitely or probably” switch their primary institution in the next six months. Only 3% on Boomers+ and 12% of Gen X said they’re likely to switch.

To attract more checking account customers, a larger percentage of banks and credit unions said they are offering cash incentives to new customers. The percentage rose from 28% in the 2023 survey to 33% in the 2024 survey.  The average cash incentive is $277.

But most (57%) financial services organizations said they are not offering cash incentives on checking for new customers.

The younger generations are attracted to cash incentives to open a new checking account. The 2025 ProSight Banking Outlook survey found that 19% of Gen Z and 16% of Millennials opened a new checking account with cash incentives in the last six months.

Fees, incentives and other differentiators

It’s no secret that younger consumers looking to switch banks want one featuring a great mobile app and other strong digital capabilities.

But the top reason why consumers select a new primary institution is for the lowest fees. That’s true across every generation, according to the ProSight survey.

Next is best rates, again cited across the generations. Cash incentives/rewards weighed in at No. 3 for all consumers.

Financial services leaders should pay close attention to fees in the year ahead. Not only must they be competitive, but they must also be perceived by consumers as fair and reasonable.

Fees are a vital revenue stream, but they can also be a major source of irritation for consumers and prompt a change in banks. Fortunately for bankers, a growing percentage of all consumer segments said they considered the fees charged by their primary institution as “fair and reasonable.”

A simple and transparent fee schedule combined with competitive rates, cash incentives on checking, as well as best-in-class digital capabilities will be a winning formula in 2025 for deposit growth and new customer acquisition.

The days of deposit gathering for banks being a boring and predictable business are gone. Changing rate cycles, increased competition, regulatory pressures, digital and technology improvements, and overall consumer economic shifts across various generations have made the deposits business a top focus for most banks.

Cycles that used to last for years are now changing by the quarter and even within months. Banks need to ensure they have their ear to the ground and can act with flexibility to keep up in order to balance their liquidity needs and consumer demands. Other critical factors, including mitigating fraud, providing positive multi-channel experiences and deepening customer relationships beyond deposit products only add to the complexity.

Deposit-focused professionals need to consider these factors because the speed at which change will occur is likely to accelerate and won’t be slowing down anytime soon.

Isio Nelson is Managing Director, Research, Fraud and Thought Leadership with BAI.