With this backdrop, it is more important than ever for banks to have access to as many diverse sources of liquidity as possible. In fact, the more sources, the better, as each can be leveraged when most efficient.
From brokered deposits to FHLB advances and even the Fed discount window, each type of liquidity tool plays an important role in a bank’s funding plan; however, deposits (and especially now, insured retail deposits) will always remain the most important funding source for banks. Advances in financial technology, such as online account opening or biometric identity verification have allowed banks to expand beyond their geographic boundaries and acquire depositors that will most likely never step foot in a branch.
Internet deposits have given banks natural reach and a way to engage younger, tech-savvy consumers, but the costs of building and maintaining a national online branch should not be underestimated. Even some of the most sophisticated and prominent financial institutions have struggled, if not failed, to stand up digital models that are economically viable.
As more competitors enter the digital deposit space, the cost of acquiring a new customer has steadily increased and the ability to monetize that customer relationship has become harder and harder. In many cases, leveraging advances in financial technology is the most efficient alternative to entering the digital deposit gathering space, especially as the tumult of the past couple of months have shown that sticky deposits are now more important than ever.
Fortunately, banks no longer need to be experts in digital banking or make huge investments in order to bring in new, insured deposits. They just need to be innovative and be able to tap into the right financial technology partners.
For example, with a partner like Raisin, banks are able to focus fully on what they do best, while allowing its digital funding platform to do the rest. They handle the end-to-end infrastructure, eliminating costly operational and build investments, and raise retail deposits nationwide with institutional simplicity. The entire value chain from marketing and KYC down to reporting and customer service is included, allowing banks to tap into a deep pool of incremental funding, thus growing those vital retail deposits — all with lower overall funding costs.