Meeting Customers Where They Are

Author Joseph
Read time 6 minutes read time

How a Highly Targeted Campaign Reduced the Cost of Consumer Debt While Adding Profitable Short-Term Loans

Banks and credit unions are seeing the steepest decline of deposits in the last decade, and the Fed is anticipating a recession by the end of 2023. Financial institutions need to find ways to engage their consumers but the economy has been tough, leading many to turn to their high interest/high fee credit cards to make ends meet.

Is there anything that financial institutions can do to increase their deposits, while also helping customers manage mounting debt? One overlooked path to increasing deposits for a key segment of any consumer base is by reducing one of the costliest forms of debt – revolving high-interest credit card balances.  

With over 90% of this debt sitting with the 15 major banks, other financial institutions have an opportunity to improve their consumers’ financial health by lowering their interest rates through loan consolidations.  This can quickly boost the financial institution’s assets under management with highly profitable, short-term loans, and also create pathways to create new deposits if customers use the savings from interest and fees to open new savings accounts. But the targeting and order of offers to customers is important for success.

Said another way, marketing focused on increasing deposits  to a consumer segment that is revolving on third-party credit card debt will be largely ineffective. Those revolvers are already paying  20%+ interest on their revolving credit card debt so a savings offer will be meaningless to them until that pain point is resolved. Those consumers should first be targeted with a message and product about saving money on interest and fees via debt consolidation. Nickels recently used this segmentation approach and created a targeted, tailored marketing campaign that increased deposits within a 30 day time frame for one of the country’s largest credit unions.

Creating Value for Existing Consumers Can Grow Loan Portfolios and Unlock the Ability to Start Saving

With inflation hitting most household budgets, people that didn’t have huge financial cushions were turning to high interest credit cards to make ends meet. The credit union knew they had members that were paying high interest and fees on third-party credit card debt; they just didn’t know which ones.  The credit union knew that third-party credit card debt was a meaningful cost category as their members had paid nearly $2B to the major card providers in the past year alone.

Nickels has a proprietary approach to help financial institutions identify which consumers are revolving on their third-party card debt and paying high-interest charges and fees.  This helps financial institutions quickly shift their marketing strategy to target this critical segment who would most benefit from refinancing revolving debt into lower-interest products instead of a blanket ask of customers to open new deposit accounts. 

First, Nickels identified the credit union’s third-party revolvers and transactors via a Checking Account analysis, but that was just the first step. Next, Nickels developed a marketing playbook that included an email with targeted messaging and offers applicable to each segments’ specific credit card situation.

Developing the Campaign to Reach the Right Segments

To maximize marketing ROI, the credit unions’ marketing team wanted to understand how the third-party revolvers and transactors responded to different offers. The offers were customized to help members pay down their revolving debt by converting it into lower interest loans or opening a new, lower interest rate, line of credit.  

The third-party revolver and transactor audiences were broken out into four separate groups, and Nickels helped the credit union run an A/B test. 

Each group received either a debt consolidation loan offer, or a Visa Platinum offer. 

  • This test provided insight into what offer resonated with the individual groups, and further proved out the effectiveness of the checking account analysis.
  • Nickels provided several variations of emails, text and push campaigns to simply and effectively drive action and produce strong results. 

Learnings: Proof that Targeting the Right Product Matters

Promoting personal loans increases personal loans across both groups, and similarly, promoting a credit card increases credit card applications across both groups. This may be obvious and expected.

However, third-party card revolvers applied for a personal loan at a higher rate than a credit card even when they received a credit card offer. 

Similarly, third-party card transactors applied for a new credit card at a higher rate than a personal loan even when they were sent a marketing email about personal loans.

Third-party card transactors applied for the credit union’s credit card at higher rates even when they were offered a debt consolidation loan in the outbound email.

The takeaway here is somewhat intuitive: communicating the right product to the right group creates the optimal fit for the customer, and optimal lift for the financial institution. Marketing products that aim to increase a consumers’ deposits will only be effective if it’s a product that serves the consumers’ needs.  For a significant segment of customers, the key is to lower their cost of debt BEFORE they get any offers about savings/deposits.

Nickels Email Campaign:  Targeted for Success

Refinancing debt into new lower interest loans is a win/win:  it helps increase assets under management and helps customers save from paying steep interest and fees from third-party credit card debt. This could even create new deposits when those savings are used to open new accounts. However, financial institutions need to know which customers are targets for debt refinancing, and of that group, which are likely to open or add deposits to their accounts.

Nickels’ Checking Account Analysis helps financial institutions identify which segment of their consumer base has the highest propensity for a debt refinance offer, and then provides Marketing Playbook with ready-to-send, targeted and behaviorally-based communications that drive refinance and engagement opportunities for those consumers. These playbooks can easily be edited or adapted to the needs of the financial institution, and then placed into an existing content management system for streamlined outreach. 

Promoting a specific product to a qualified audience can significantly drive engagement and loan applications that give consumers a way to consolidate their debt or take on lower interest rates debt during a time when every dollar counts. 

To learn more about how Nickels can help your financial institution analyze customer credit card data and target customers via customized marketing playbooks, contact Pierce Sloan at pierce@nickels.us.