Consumer Deposits – Optimizing Decision Spaces
Where Portfolio Management and Customer Decisions Meet
Overview
Financial Institutions and Customers are solving different optimization problems.
We optimize deposit portfolios from the perspective of funding, cost of funds, liquidity and interest rate risk. Customers optimize deposits from a different perspective: finding an acceptable solution without excessive effort. Two decision systems shaping one portfolio. One well understood, the other less so.
With that in mind, we set out to discover what decisions Customers actually make, by studying data of 2 million deposit Customers over 10 years in multiple US markets.
Eight distinct Decision Spaces emerged from the data, each with a distinct Customer response function (where funds go). And that means eight opportunities to increase effectiveness of the deposit management capabilities you already have.
This paper proposes a framework, operating model and path to optimization of Customer decision response for Consumer deposits.
This is not just theory. Every behavior described in this paper is observable in data. The facts exist in your own data. We have simply organized them into a coherent framework.
This is practical. We have included steps that can be taken with little to no investment to help you prove applicability in your Institution and generate value immediately.
The value lies in precision and control. Eight separate Decision Spaces enable strategic and tactical actions to be operationally targeted and optimized.
The goal is not merely better pricing. The goal is better deposit portfolio management.
Explore the Big Ideas by Subject
Discuss With Your Team - Infographics
Friction creates Decision Space Boundaries
Why do deposit customers make seemingly suboptimal rate decisions? Discover how friction creates decision space boundaries, shapes customer choices, and influences deposit portfolio outcomes.
Should CD Promotional Pricing Target New or Ongoing Customers?
Should CD promotional pricing focus on new or existing customers? Explore how decision spaces reveal where pricing incentives can most effectively influence deposit behavior.
Operating Model in Renewal Decision Spaces
CD renewals create opportunities to influence term choices, funding and liquidity. Learn how managing customer decision spaces can improve deposit outcomes.
Operating Model in CD–Money Market Decision Space
How do customers choose between CDs and Money Market accounts? Learn how decision-space management identifies decision boundaries and influences deposit behavior.
Price Optimization at Decision Space Boundaries
Traditional pricing changes rates for everyone. Learn how decision-space optimization targets customers near decision boundaries to improve deposit outcomes at lower cost.
What Really Happens At CD Maturity?
CD maturity is more than a renewal event. Discover how customers evaluate alternatives, cross decision boundaries, and choose deposit options at maturity.
Money Market 2.0: The Zero-Term CD
CD investors may use Money Market accounts as a temporary stop between investment decisions. Discover the concept of the Zero-Term CD and its implications for deposit management.
Can You Manage CD Early Redemption?
Can CD early redemption be managed? Discover why early redemption is a predictable customer decision, how pressure to redeem develops, and what financial institutions can do to reduce runoff risk before balances leave.
Depositor Self-Segmentation Through Choice
Customers may already be segmenting themselves through the choices they make. Discover how behavioral segmentation uses observable deposit decisions to reveal customer preferences.
How Do Deposit Customers Make Up Their Minds?
Customers don’t choose products. They choose options that best meet their needs. Discover how customer decisions reveal the criteria driving deposit behavior.
New Money Is Not New Customer
Most new deposit money does not come from new customers. Discover how deposit growth and attrition are driven by money allocation decisions within existing relationships.
Customers as Decision Makers
Bankers see products. Customers see options. Explore how understanding customer decisions can improve deposit strategy, pricing and portfolio outcomes.
CD Investors as a Distinct Consumer Deposit Segment
What if CD Investors represent a distinct behavioral segment? Explore how their deposit choices create different funding, liquidity and portfolio patterns.
