How AI helps bankers create “stickier” deposits with stronger customer relationships

Low-cost deposits are the underpinning of retail banking. Every bank wants to secure more of these stable, “sticky” deposits, as they are far more valuable than short-term, high-yield deposits that quickly come and go.

This year has been particularly challenging for bankers in their efforts to grow and keep deposits, particularly in the wake of highly publicized bank failures, increased competition from fintechs, digital banks and larger competitors and the market consolidation that continues to impact the industry.

The key to success lies in banks’ ability to measure customer loyalty and engagement—crucial indicators of a bank’s ability to retain these coveted deposits.

Short-term gains vs. the importance of relationship banking

Commercial interest rates can help attract customers, but they often fail to foster lasting relationships. In today’s digital age, money flows between financial institutions effortlessly, making it challenging to retain customers solely based on interest rates. To thrive, banks must shift their focus from short-term gains to cultivating enduring relationships with their customers.

Community banks have long recognized the essence of banking as a relationship business. Establishing trust and personal connections with customers is the foundation of loyalty and long-term commitment. But in the digital realm, banks must adapt their underlying principles and business models to replicate these crucial relationships.

Leveraging digital tools

Banks now have a wealth of AI-powered tools at their disposal to build and maintain customer loyalty and engagement. While most bankers view AI as a single solution, it should really be viewed as a collection of tools that can help bankers solve specific problems.

Bankers who solely focus on the novelty of AI and its speed of advancement will likely leave the technology’s full potential untapped, finding themselves unable to solve their original problem. Instead, the simplest and most direct avenue for successful AI begins with applying the right tool to the right problem. The best strategy is to start small and then iterate from there.

These tools enable banks to get to know their customers better while catering to their specific needs and desires. For example, adding real-time language translation in digital interactions enhances the human aspect of communication by going beyond mere self-service technology.

Differentiation through personal service

Banks can distinguish themselves from competitors by offering high-quality, high-touch services and fostering genuine customer relationships. Understanding customer needs and desires is key, and this human-to-human support is a unique advantage that community banks possess. Investments in such relationships ultimately lead to profitability and success.

Increasingly, we are seeing bankers differentiate by using AI in an externally visible form to enhance customer service by answering easy and routine questions for customers. Yes, this helps bankers realize cost savings, but more importantly, it focuses their human resources on higher value-add questions, which require more empathy and thoughtful answers to deliver the right resolution to the customer.

Moving beyond transactional metrics

While transactional metrics are essential, banks must look beyond these basic indicators. To truly understand and serve customers, banks should focus on more qualitative measures. Metrics like customer engagement frequency, recognition of customers by name and familiarity between bank employees and customers can provide valuable insights into the depth and quality of relationships.

By identifying qualitative metrics that continuously promote high-touch, high-quality interactions, AI can create more efficient and scalable engagements in addressing a bank’s specific needs. In turn, the development and maintenance of relationship management becomes a core value-add, allowing AI to do more mundane tasks that would be hard or complex otherwise.

In the digital banking era, success hinges on a bank’s ability to forge meaningful relationships with customers. Community banks, in particular, can excel at this by offering personal services and leveraging digital tools to enhance customer interactions. By moving beyond transactional metrics and instead focusing on building loyalty and engagement, banks position themselves for long-term growth and prosperity in an ever-evolving financial services marketplace.

Slaven Bilac is CEO and cofounder of Agent IQ.