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The Battle for Deposits and Retaining Customers for the Long Haul

Growing and retaining deposits is more difficult than ever, and there is not a one-size-fits-all approach. How do you create engaging experiences that drive adoption and engagement in an increasingly competitive market?
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Hi, how is everyone? We're the first meeting after lunch, right?

So let's talk about deposits. I'm gonna kick us off here. So, I'm gonna start with, according to American Banker, total deposits decline for the fifth consecutive quarter, dropping by $98.6 billion or 0.5% between the first and second quarter of 2023.

This on top of shrinking interest margins as costs of funds, outpaces yields and assets, has created a battle for deposits. So, I'm Heather Warner. I'm a vice president of commercial financial institutions here at mx. And I will be your panel host today. Joining me, we have some of our partners, and industry experts that I'm gonna let introduce themselves.

Testing. Okay, you got it. How's everyone doing? Uh, pleasure to be here. My name is Matt Smith.I'm responsible for a number of functions at Webster Bank, um, including marketing, product, digital, banking as a service, transformation, et cetera. I'm, really excited to be here and join the discussion.

Hi there. My name is Jordan Wright. I am the Co-founder and CEO of Atomic. I also started another company space called Unbill, which is sold to Q2. I love FinTech. I don't think I built for anything else anymore. Um, so yeah, that's me.

Hi, Chancze Lepore, Senior Vice President at US Bank, and I lead our digital account opening and onboarding for deposit products.

And I'm Anthony Termini, Senior Vice President of Business Development on our FinTech Alliances team at Morningstar. And our mission is to empower investor success, which is not

too far off from MX's Mission. Uh, it's good to be here. Thank you.

Awesome. Well, we're gonna dive right in. Um, normally we've got 45 minutes, we cut a little bit short 'cause the morning session went, um, a little short, but we're gonna try to leave a few minutes for Q&A at the end, So we'll see if we get there.

First question I have for the group. So, growing and retaining deposits is not a one size fits all.

So how do we create engaging experiences that drive adoption and engagement in a competitive market?

Yeah, I think for us, in US Bank first is really understanding the customer and making sure internally there's a shared vision of who we're going after, right? So I think it sounds very simple, but it's really hard in large organizations to all align around where we can win and where we can outperform. From there, it's really then about what are the things that the customer needs or the jobs to be done. And then lastly, it's really around how do we show up as a bank to help that customer meet their needs and their financial, uh, their financial journey. And so those three steps, I think, again, are really hard in terms of aligning, uh, across a large organization. But by doing that, you're able to create those experiences, uh, that really help to engage and retain, uh, clients.

When it comes to deposits, I would say competition is fierce, right? Um, the lines are being blurred, right? From how investors and savers look at their financial life. And, uh, and we're closely looking at, um, things all in one pretty picture, right? So the way we spend, the way we save, the way we lend and invest, uh, it all really comes together. And it's definitely true that the convergence of banking and wealth is really coming together. And so, you know, Morningstar, we, we acquired this company called PitchBook and did some research, and it looks like there's about 40,000 fintechs and wealth techs across the globe that are looking to disrupt the way we look at our personal finances, and how we look at the incumbent banking system. And, uh,

so that's 40,000 really unique ideas, and that's aside from what's out there in crypto web three and blockchain. Uh, so that's a lot of interesting ideas. So not only that, the expectations have changed, right?

And we've talked about that and heard about that earlier today. Uh, so it's very clear that the competition is fierce. And so we do need to look at new ways of, um, whether it's new products and services, bundling them in a way that makes sense or incentivizing, uh, the businesses. And so I've talked with lots of bankers and lots of advisors, financial advisors at the bank, uh, and it really revolves around three things. It involves incentives, getting the bank and the wealth management arm to be well aligned. It's about data, having it ubiquitously flow throughout the organization from one side to the other. Um, and then it's about the technology stack. How do we modernize that experience to make it truly a beautiful experience for that consumer and that investor?

Yeah, something that comes to mind for me, I've heard chance talk about this and several other team members at US Bank about when build, viewing it as building a relationship with a consumer. And if I think when it's viewed through that lens, and I think Jim covered this a lot this morning, that this is not just a zip code, this is not just a, you know, that's not what we're looking at here. It's an individual relationship with a person and sometimes a commercial entity, right? And when you think about it as a relationship, I think technology is a critical part of that.

But if you look at what happened, I actually sit on the board of a small regional bank as well, Vice Chairman of that bank. And what happened when SVB hit was a really terrifying experience for a lot of small regional banks. And one of the interesting things that we saw is our, the Chairman of that bank gave his, we identified the customers that we just couldn't lose.

He gave them his personal cell phone number and on a daily basis was texting out what the liquidity ratio was at the bank.


And I think that it was easy to have that because there was already an existing relationship. And then when it came to it, it was, uh, they had almost net zero negative outflow from the bank through that experience. And so I think that it starts with the relationship in digital, which is where many customers are acquired. But look, we talked to a lot of big banks that say 75% of our customers are still acquired in-branch. And so it starts with that relationship that somebody feels like I have the inside scoop, I have a relationship here where I can feel safe. So I think that that's a little old school, but I think that's a big part of it.

Yeah, I think just to add on, right, money's super personal, right? It's a high stress transaction, whether you're buying a or you're opening a loan, you're buying a home. And so for us it's that digital human connection. And so to your point around building awesome digital experiences,

but giving the customer the confidence of having a banker there that they can call or reach out to. And we also built a cobras experience.

So all of our experiences now, uh, bankers are able to co-browse with the client and walk them through step by step to get them that extra assurance. So it really is not a one size fits all approach we have. You can do it yourself, you can do it together, we'll do it for you.

Yeah. I think for, so for Webster, slightly different, um, constraints that we have a shared goal in terms of like, Hey, we need deposits to fund loans. I think the constraints that we have are

mildly different because consumer for us is essentially a cost of funds, right? We're primarily a commercially focused bank, which essentially means that any deposit gathering strategies we have are designed to fund commercial loans.

So we don't have larger spreads like credit cards or, you know, any of these other consumer yielding assets that tend to give you a little bit different risk profile. Like those are things that we don't love as an asset class. And so the way that we approach this particular problem is connecting with the customer in very specific ways, understanding like very targeted strike zones, and then leveraging things like embedded banking and strategic partnerships to be able to deliver a best in class experience.

I think the same thing when it comes to like products and services, right? Like before, it used to be a situation where like you had to kind of just reside yourself into one lane and say, this is where we're going and this is what we're gonna do. And I think through open APIs and the things that those deliver into an experience, we're now able to kind of connect with customers differently and get, you know, a vast array of products and services that we can offer through third party partnerships that don't, uh, necessarily present balance sheet risks to us.

But we understand that as a thing that is like, essential to build a deeper relationship from a deposit perspective. So that's kind of how we looked at it, um, as we're solving this on a day-to-day basis.

Yeah, and actually I'm gonna double click on that. So from your perspective, how do you think the FI should be leveraging partnerships to grow deposits?

Yeah, I think, so this has been a, uh, an ongoing discussion for us and, and our team, right? I think, you know, there's again, establishing a goal, right? Like, how do you want to kind of approach a thing? And then there's always this build versus buy component. I think for us at Webster, we've already established we're not a build shop, right? And so therefore leveraging strategic partnerships is really important to us.

That said, you don't want to over rely on one vendor, right? To be able to create optionality and create, um, better experiences, whether that be like customized experiences or being able to embed different products and services. So I think the way that we've approached kind of this concept of like, Hey, what's the best way to like, you know, approach a partnership, are you able to offer something that we can't, right? Mm-hmm. And, and in most cases that's, that's gonna be correct, right?

But then the other thing is like, okay, how does that integrate into our ecosystem and what we've set up? And so if you've got the ability to very, uh, seamlessly connect to our environment, give us more of an opportunity to retain more of the UX, which I think is really important from a client experience perspective. Um, and then also, you know, if you're an established company that, you know, we're not worried about, Hey, you're gonna go under in a couple months, right? You've got good cash flow, you've got good capital. I think that creates a recipe for us to be able to partner in a successful way.


Yeah, I think for us too, it's obviously also very important to partner. And I think two really easy examples around the stage today, right? So we're working with you all on insights, right? How do we deliver, uh, insights to our clients and also to target our messaging, uh, in order to make sure they understand what the products and solutions we offer. Um, so they do wanna open those accounts with us and bring those deposits over.

And then secondly, we're working with Atomic over the last year to deliver our automated deposit solution. Um, which really we know is one of the biggest pain points for customers opening a new account is moving over that direct deposit. And so by building that into our new account onboarding solution, we've seen tremendous engagement from customers being able to not only open their account very seamlessly, but now start to move over their direct deposit and start that new relationship with the bank.

Yeah. Which goes into a conversation we were having yesterday around primacy.

So, um, primacy, is it even still a metric? Is it something banks should be focused on? And how are we measuring it? Because with even kind of the Apple experience and a lot of people running to open these CDs, we saw outflows happen, and then as those CDs mature, they come right back. So it's not a long-term play, it's a more short-term play, but it is showing that most customers have anywhere between three and seven external financial accounts. So I guess, what are your thoughts on primacy? I'd love to hear how everybody is looking at primacy, and if you're measuring it differently than you've previously done.

My definition of primacy changed in a meeting with you on this trip. Yep. And, um, you know, traditionally I have heard banks say, you know, one, do we get direct deposit? Two, is there a payment activity in the account? And three, have we been able to successfully upsell this customer on other products and services with us? But as we've seen in the last year and a half, two years, sometimes you don't want to sell that customer on other products and services, right?

So, my measure that I added this trip is eyeballs, right? Are we, do they check our app every day for everything that's going on, or are they going somewhere else? Because if I'm getting those eyeballs every day, when I wanna pull that CD back, I can, when I want to, when I want to push a loan to them, it's easy because I have their eyeballs every single day. And so I try not to pitch our, my company too much when I'm in a panel like this. But Atomic does try to help significantly with not only direct deposit switching, but we'll be launching next week a payment switching platform that will allow customers to not to see, okay, I switched my direct deposit and now I'm gonna switch over all my payments here, so that the financial institution can truly be the primary account that they're going to, to check all of their financial activities. And I think that's important. And actually I think there's some interesting wealth implications there too.

Yeah. And thanks for handing off there. Um, I definitely think so as well. I think my perspective's a little bit different. The word lifestyle brand really comes to mind when I think of primacy. And I think of, you know, uh, I think customers want to associate themselves with a brand because it's a reflection of the lifestyle where they're at today and maybe where they aspire to be. And I think that, um, I, I think of lifestyle brands like Tesla, for example, right?

You have this wonderful thing that's not just a car, but it can drive itself and it has integrated zoom, right? And it has funny features where you can prank your kids and make whoopie cushion noises, right? And so that's a whole lifestyle that they've created, and especially when you now talk about expectations for the customer, uh, we're not far off where they're gonna expect things to be autonomous and self-driving. Why aren't, why isn't my financial life self-driving? Can't I just turn it into, uh, self-driving mode and just let it go from there?

Um, and so we're almost there, uh, with the use of data, with aggregation, viewing it through a holistic lens, understanding your full financial picture, and now you layer on their insights from Morningstar, for example, how to personalize portfolios that align with that investor's interests and their behaviors and where they want to make impact in the world. Um, and then you layer into that generative AI to elevate engagement and really take it to the next level to align products and services to the customer. That's like the new expectation.

Yeah, I think you guys hit it all. The only thing I'd add is, for us, a lot of them are really about engagement too. That is a key piece of our metric when we think about primacy. And a lot of this actually happens too, in that in the first weeks or in the first month after that a customer starts the relationship with the bank.

And so we've been on this journey over the last, you know, two years to really make sure we're creating the best onboarding experience, um, in the industry. And a lot of that is tied to those key metrics that we're talking about, right? So when the customer comes in, they open up their account, number one, make sure it's super simple and easy to open. But then number two, um, taking that experience after they're logging in the first time, which historically could be, um, a bad experience.

How do you make that a moment of delight from opening the account, getting them their debit card into their digital wallet, transacting right away? How do you serve up the right digital features to get them enrolled and engaged in digital? And then lastly, helping them move the relationship over with direct deposits. So those key things, if you do that right over the course of the first couple of days and weeks, then you've earned the right to then offer them and deepen the relationship based on either, uh, explicit information they've told you about them, or implicit information that we pulled from data and insights.

I was gonna say, um, I think I've told you this, but last year I opened a US Bank checking account, and then this year I opened a US Bank CD. And both times, uh, within a day of me opening those accounts, I got a phone call. Um, so first opening the account, they, I, I'd opened it online, so I'd already digitally active and they specifically reached out and they said, let me, let's download the app. Let me walk you through our features.

It was great a) 'cause they highlighted some of the MX features, which I liked. Um, I started testing them on it and they passed. So you're doing a great job educating your, uh, call center agents. Um, but then secondly, um, on the CD I'd opened the CD, but I hadn't funded it. And so, um, they walked me through, you know, funding that account and the instructions and funding the account. So I think there's also the human component too, and that goes into the driving the deposits, um, ensuring that the time to fund is fast and if, if it's not able to be done online, that you're following up with those customers and giving that personalized experience too.

Absolutely glad to hear it was a good experience.

Um, Anthony, I have one for you. So one area I'm seeing financial institutions invest more in is the wealth and investment space. These accounts typically carry higher depository funds and they have higher margins. How can enhanced investment data help financial institutions and their customers drive deposit growth and financial wellness?

Yeah, that's a great question. Um, and at Morningstar data's at the core of everything we do, and it's there to inform the investor and ultimately help to produce better financial outcomes. Um, and in the wealth side, we're seeing this wonderful, uh, aggregation of moving all this data into one place.

So you think of like aggregated data, you think of investment data, you think of IRS data and IRS rules. You think of peer and um, customer benchmark data. Now you have alternative data into the mix. And so from the wealth side, we're looking at all that to drive what we call "next best action." And it's how to drive insights quickly and be what we, what was presented earlier in a really proactive manner to get in front of the customer to say, okay, you've turned, uh, 50 years old. Well, guess what? You're eligible now for catch-up contributions to your IRA.

Or Hey, you're 72 years old now you're eligible for required minimum distributions. Or, Hey, you're 30 years old, you have beneficiaries assigned to your accounts, but there's no life insurance or 529 plans in place. So it's just, that's some simple examples. But then you mix in alternative data, LinkedIn profile changes, LinkedIn job changes and whatnot. Then you get some really interesting dynamics where you can say, okay, now it's time to roll over a 401k or so. That's how you drive, um really assets is, uh, is through that data lens, using it in a smart way, being there at the right time. Um, we're all getting used to data being a little bit more creepy. Uh, and I think, as an expectation we're, you know, we're there, we're getting used to that. So now we expect those insights to be spoon fed to us so that we can make good decisions with our money.

Can I add a comment there?

Yeah, please.

On the topic of growing deposits specifically, um, this bank that I'm on the board of, the reason that I joined the bank board is because they had a unique deposit generating engine seven years ago when I started talking to them that was around wealth. And so they do a bunch of self-directed IRAs and 401ks. And I realized your point about like be super targeted on something that you're focused on and then hit it out of the park. And as SVB happened, but also as rates have risen, this bank still has half of their deposits are non-interest bearing. And to be able to say that today is absolutely incredible.

And so I think that another thing that banks can do to be able to improve their abilities to, to garner deposits is make sure you find things that you can focus on. And you, you alluded to this as well, but find things that you and only you can do super, super well. And there can be, I guess they're not only you, but there can be five to 10 of these, right? But there's a lot of opportunity, like who's backing these, uh, 409, some of these wealth accounts, 529 accounts. Who's backing? 'cause there's cash sitting somewhere. Who's backing that? Who's backing these HSA cards who, if you look at the top five hyper, highest performing banks, sub 5 billion, a lot of those are doing some of these niche and specialty things be, and it's not hurting them right now as much when interest rates rise. And so I think that's, those are really new opportunities as well on the wealth side that are extremely beneficial if you can stay focused and deliver for that customer base.

Yeah, we just, yeah, one point on that too, so like to your point, right, we recognize that as a space where we think, hey, there's tremendous amount of deposit opportunities. So we went out and bought a sweeps platform, right? That essentially gives us 7 billion in deposits, we get the technology for it.

Um, and on top of that, now we're building out things like securities based lending and things of that nature, which again, I think helped to deepen those types of relationships. So to your point about like being targeted, we're saying like, Hey, there's an area where we think like we could plan that space. We saw an acquisition opportunity, we took that, and now we're gonna try and grow that into multiple different types of products, not just on the lending side, but also helping with deposit generation, fully insured deposits for consumers, you know, doing more around fully insured deposits for small business up to, you know, 3 million or 4 million, et cetera.

So I think there's a lot of like interesting plays that you can get creative with if you think outside the box on how you can partner on that.

Agreed. And I'll just reinforce that one more.

So we have all these self-directed IRAs and some of these people are rolling over a million dollars as an IRA or more. They're like, you know, they're in their sixties, they're getting close to retirement, and now they wanna put in a different kind of investment vehicle for themselves. Well, in that moment we can also lend on the assets in that IRA.

How many of you have ever taken out or even considered taking out a loan based on your IRA? It's not a very common thing. And so that puts us in a special place that we have the IRA, we have the assets, and then in addition to that, we can now go loan on that and our interest rates are gonna be higher because nobody else offers it, right? And so I think there's some neat things that the wealth side can do.

Awesome. Um, we touched on this a little bit, but I wanna go a little bit further. So how does data play in driving deposits specifically within the differences across generations? Are you and your teams utilizing any data sets that is generational in how you're approaching customers and what products you're offering?

Yes. So I think a couple, a really poignant example over the course this year when you think about deposits is as you're going through the, you know, the financial crisis earlier this year with the bank failures, um, customers were scared. Number one was how do we just first reinforce that your money's safe here, but when you look at the data, different things are important to different customers.

So some customers it was, how do I just make sure my money's safe? Some customers were safe and secure with a CD for example. Some customers were, I'm just all worried about this rate. But then you still have customers too that are just worried more about brand message and making sure you're the right bank that they wanna move their money into. And so that's generational, that's associates socioeconomical, that means a lot of different cuts that you can look at, but all that drives and tailors the messaging to make sure you're resonating and showing up with that to that customer so that we have the right solution for them.

Yeah, I think for us, um, again, like we're a product of multiple acquisitions, right? So what's happened over time is we've acquired kind of community banks which have a very similar look and feel and a very specific, um, consumer type right? Is what I would say. And so going into, you know, like our last acquisition, we're kind of looking at it and we're saying, okay, we think we know specifically what this group wants. The thing that we're concerned about is where you are going in terms of wealth transfer and acquiring like new to bank clients at a younger demographic, right?

And so a lot of the research and data that we've been doing is trying to figure out, how do we facilitate things like wealth transfer in a really good way. So if somebody were to inherit a will account, right? We don't want you to take that and go to like Citi or one of the larger banks, right? We want you to keep that with us. What are the things that you would need in order to do that, right?m And so benchmarking the competition that way. And then I also think like when we think about what's happening in the market, it's really just figuring out, okay, how do people want to conduct within the account? And then measuring adoption.

So we had a mobile meeting, we use MX for mobile and we're very happy with that solution. And we had a meeting yesterday where we talked about this, like how do you benchmark specific, uh, functions that you're gonna put into the application? Well, a lot of it sometimes is not even necessarily, you know, just how many times have you used this particular thing? It's like, have you even adopted the product? Right? Is it a thing that's making your life easier? Where like, I'm not gonna see a lot of like 30, 60, 90 day activity, but I know you're using it because like you created a widget or you did such and such a thing.

So I think for us it's a combination of like trying to crack that code and leveraging all the data that we have to figure out where we can invest in specific enhancements or specific plays that are gonna help us facilitate both wealth transfer and new to bank acquisitions.

Yeah, I feel like we could have this conversation for about five hours right now, so I will try to keep it giving her 15 minutes to like two minutes. But I, when we sign a customer at Atomic, it's surprising to us how often when we're doing direct deposit activity, most of our banks don't know where their customers work, right? And so instantly after we have a relationship with a customer within the first week of launch, we can start giving them data on here are all the employers that you might want to consider targeting for retargeting purposes to acquire customers. And if you have 15 people that have come through from this given employer this week, well odds are if you target them, they're talking to other people that they're employ, that they're employed with and other teammates and their colleagues at the company. That's one example, um, of, of many, right?

Because once somebody comes in, we can then start doing A/B testing on all of the flows in our system to be able to say, should we change what we show a customer based on their geography in terms of their top employers in that area? And all of those things lead to improved conversion rates for our customers when we do that. But also the better the data, which was the topic of our conversation the other day, the better the data we get, the better we can then put people through.

And we see, you know, 30-40% improvements in conversion rates just by getting us better data so that we can better pro put that customer through a direct deposit switch or a payment switch once they come into our platform. It's easier now than ever to sign up a customer for a new account. It's easier for me to go open up an account. How are, if you had to pick one thing that you have focused on, what are you focused on to retain them?

When it comes to, when it comes to account opening, I think yes, it's gotten easier, but I think where I challenge my team often too as well, is making it easy and simple, yes is awesome, but how do you take something that historically is painful, um, and actually make it a moment of delight and memorable for that customer. This is oftentimes account opening digitally. It's the first interaction you're gonna have with an institution. And so how do you take from just filling in a form to actually make that something that people are surprised about and actually like, wow,

that was actually super simple and easy. I think that leads into, and it was one of the first steps to actually then retaining the client because you exceeded their expectations just at the first step when they opened the door up to open the account.

When it comes to retention, I think there's a couple key pieces we look at. Number one is, again, that onboarding experience. So within that first 60 to 90 days, how are you getting them set up and helping them move that relationship over to the bank and really selling yourself the solutions that you have to meet their needs. And then there's really that late stage when you get to, um, retention focus of bankruptcy for a while.

How do you start to understand the reasons that folks are actually leaving your bank and preemptively start to talk to them about how we can help you, whether it's saving money, whether it's, um, giving you better rewards, right? We are always looking for ways, excuse me, to let customers know how we can help them and be a better partner to them. And that's how we think we'll be able to win and retain our clients.

I would add, as just as you said, yes, it's been made much easier to open accounts, but I've been on lots of top financial institutions sites. Yes, it's very easy to click to open that account,

but let's tie it back to the purpose. And as we heard earlier, what does money mean to you, right? It's of course, meeting your short, mid, and long-term goals, right? But dig deeper. Each of those goals have very emotional connections. Uh, and you might even shed a tear if you go into why you're doing the things that you do.

Why are you saving, uh, for your kids? Why, uh, education? Why are you saving for this business that you wanna launch? Why do you want to do this and that? So if the, uh, the financial institution, the bank has that emotional connection more upfront and presents it in a way that, uh, is a lifestyle that that consumer, that, uh, banker, banking customer wants to, uh, affiliate with, um, I think the faster you do that and the more you get involved with the financial literacy aspect of it. 'cause there's so much education that needs to be done around all the ins and outs of all things investing, all things banking, right? All things tax. We all need help with that. And so they need to turn to someone, uh, to assemble those products, uh, a little bit faster, right? It's, it's fast open account, but we need to get some of those interactive capabilities up more up, in front and center with, uh, with the audience.

I think I agree with everything that everyone said, and I think there's one other point too, which is making sure you got the basics down correctly, right? Because I think a lot of times I'll find institutions want to jump to very advanced solutions when the UX designed for like very basic things is not where it should be, right? So example there would be, you know, can you easily move money in and outta the bank without like a very friction painful process? Can you easily navigate the application? Can you make very minor customizations to kind of make your day easier?

So I think in, in conjunction with all the things that, that we're saying here, I also think there that there's gotta be a focus on like continuously testing and monitoring like the UX design of your applications so that way you can make sure that like your client experiences is, is where it should be, right? Then you can add on all of these phenomenal things that we were just talking about, how deep in relationships,

Yeah, what was saying? You can put lipstick on a pig, but it's still a pig, right? So if you're have friction within the money movement experience, making your UX UI look better isn't gonna change the outcome for your customer.

So I agree, Heather, one statement I will make there though is that the bankers that I talked to are like, yeah, it's become so much easier and fraudsters love that, right? So I think that that's another thing that we have to keep in mind is that I love it when it's a way better experience for me and an easier experience for me, but so does every fraudster out there. And so I think that part of that post relationship experience also should be able to help you tease out fraudsters as well.

If you're monitoring for the right activities, you understand what's happening. Well, I think actually on the flip side too, when a customer experiences fraud, that is a key moment when you actually could lose a client. And so approaching that with empathy and transparency and actually helping that client through those types of experiences, I mean, that is really key to actually retain your clients because that is such a prevalent thing, which will drive someone to leave the bank, which really goes into the conversation around trust, right? And how our companies and organizations fostering and nurturing trust.

Um, it's been a topic that's kind of, you know, around financial wellness and and, and trust.

Is it something that your organizations are still investing in? And I guess what are the actions that you're taking around, uh, the trust with the customer specifically?

I just had this question from an investor three hours ago. He asked me, how are we building trust with customers? And my answer to him was, we're the only product in our space that offers a credential list direct deposit switching experience. How much, more can you build a trust for a product like ours than when we actually, we don't get your credentials? We'll take you to Gusto, we'll take you to a DP and you'll log in there. And I know that's been a big point of emphasis for MX as well, but when we give them an OAuth experience, instead of having them having to give up their credentials, something very, very important to them, uh, I think that's one way that we build trust, is we make sure that they have to give us as little as possible.

And in this case, 84% of our mobile traffic now happens where we switch a direct deposit without ever having received the credentials. From a wealth perspective, um, investment information is so critical, right? We're making big decisions with money.

And so Morningstar has to be right on all the data that we put in front of the hundreds of thousands of financial advisors that we work with. Um, and not to mention we have a wide retail audience as well. We power the likes of our own site,, reaching tens of millions. But we also power Google Finance, Yahoo Finance, SoFi, Robinhood, a lot of the emerging brokerages and neobanks, they rely on our data. So you have to be right, uh, on the quality side. And that's at our core is it's all about the high quality data to, so that the investor can trust us and, and turn to us when they need us most actionable, accurate data. Yes. Simple thing, but it's so important.

Um, all right. I have one last question and then we will open it up for audience questions. But what lessons have you learned while trying to increase consumer engagement and deposits?

So if there's any lessons learned or we say we learned most from our mistakes, any mistakes you wanna air, some dirty laundry?

I'm gonna jump in. Um, so generative AI, obviously you can't avoid talking about that. Uh,

so we launched a ChatGPT powered Research Assistant. Um, this is something new and interesting. I've been at Morningstar for 14 years and never seen us launch a product this fast. Um, but I think we have to, uh, realize that we're in this new era where we're a little bit more flexible in the things that we're engaging with. Um, meaning that, like when I go on ChatGPT or all of us are kind of working with these new tools. We know that they're still emerging. We know that there's some nuances and some hallucinations, right? That these AI, solutions present to us. So being flexible and just knowing that we're always in beta, we're always learning. Um, that has been a lot of fun.

So I think that's how we've tried to elevate engagement within the wealth

spaces. How do we use this as a way to handle some of the easy foundational questions that someone might ask? Um, but what have we learned? It's been, it's been a lot, right? Um, and so I think we're still learning on how this will be used in enhanced in the future, though I think the big one for me was, um, you know, prior to this year, we've always had a focus on deposits.

And so I had a, you know, I have a backlog that's five years long, but we had, you know, not as much funding focused on deposits. Um, and so we had teams that were focusing on credit cards, lending, you know, auto lending, you name it. and we've been on a journey for the last five years I've been at US Bank working on condensing down our platforms for what we used for account opening. And so when we saw the bank failures coming and the, we needed to pivot and focus on deposits, I think internally, one, we had a strategy and we had a backlog that we actually could execute on. Two, we had to build a culture where folks were actually, um, ready and willing to pivot and focus their direction to a new product and wanted to, and use it as a way to develop. And then three, because we're on a similar platform or the same platform, uh, across product lines, the the time it took for our development teams, our product managers, et cetera, to actually learn and start to execute on the different new product was reduced significantly.

And so when it comes to being in a space where everyone is fighting and competing for deposits, being able one to pivot, uh, two new direction, and then two, to actually reduce the time it took for our teams to become productive on a new product really set us up nicely to really massively increase our deposits over the course of this year.

That's great. I guess I'll go one more. So when we, when we're working with our customers on driving new deposits, I would say some of the lessons we've learned is the better they know their customers and the better they can connect moving over deposits with another experience, typically the much better conversion rate we see.

So if somebody comes in to open up a checking account and then they're asked to move over to their direct deposit as part of that, some percentage of them will, and that's fantastic. But if somebody's coming in to get earned wage access, but they have to put direct deposit on file in order to do that, then the conversion rate goes up, right? If somebody comes in to be able to participate in a financial institution's you know, payment offering or lending offering, but they have to connect direct deposit in order to pull that off, it drives direct deposit significantly.

So we've seen our customers experiment with several different things, uh, that have, that have led to success on that front.

Yeah, I think, um, I can think back on one mistake that I think I made was earlier trying to get, I think, overly ambitious with solutioning, um, the design for some of the things we wanted to do in the consumer space. And I think you know, even though my heart was in the right place, I think I had to kind of take a step back and say, okay, let's reexamine the goals at the business level, right? And let's really break down what constraints that we have. And instead of trying to like bust through those things, are there ways that we can kind of like circumvent to achieve a goal in a different way, right?

So I think I went into it with a, I want this best in class, you know, solution that's like, you know, basically gonna be what you built and it's gonna be fantastic and everybody's gonna wanna do this. And then I had to kind of sit back and go, we're commercial bank, right? Like, okay, what are the goals here? How does this fit into the funding strategy? And then essentially what we decided to do was, you know be very specific in the space that we wanted to play and compete very heavily in that, in that space, but then also start to build out alternative funding vehicles through alternate ways to gain relationships like banking as a service, right? We're not the front end of it, we're the back end of it. They're core deposits, they are technically our customers from a regulatory perspective, but that's a good business for us, right? The sweeps, deposits, connecting with broker dealers, doing those things. I think that was a, a byproduct of me making that initial mistake and saying like, Hey, I want to go out and be this huge thing that does everything for everyone. And then really focusing and narrowing it down to what's better for, for my company.

Awesome. Well, we have a few minutes left. We wanna open it up for deposits or deposits. Wow. We do wanna open up for deposits, but for questions. Yeah.

You have a question right here? No. Anybody have any questions for the panel?

A lot of talk about friction and the impact that has on not only acquiring, but retaining customers. How are you measuring friction? Client complaints is one, right? So, I think the big one, um, there's, there's a couple different ways, right?

I guess one is adoption of a specific product and the usage of a specific product, right? But then I think the best voice is the voice of the customer, right? So, I can sit and I can look at, you know, the contact center, you know, complaint log, right? I can look at, you know, what emails have come into the office of the president, right? These types of things. And that kind of helps us figure out pretty quickly where we've got issues.

The other thing too is I think you, you've gotta set up, we have, um, software that kind of helps us gauge the experience, right? And like, and, and look through and see like, okay, how did somebody start and how did they finish? And I think we're really scientific with that on the, the, um, onboarding process, right? We've got a really great pull through rate and, and we're, you know, converting to funding.

I think where it gets a little bit, uh, tougher is on the back end on the servicing end, right? So transfers, post account opening, adoption of specific products or things that you consume through a third party. Like, uh, we consume Zelle through a third party, like in these types of things. But where you can really get, to me the most bang for your buck is like, where are you hearing the most complaints? And then coupling that with, you know, a small UX team that could essentially sit and go, let me go back and review this experience, right?

I think when we were doing projects originally, we were leaning really heavily on very technical people to essentially design and deploy things. And so we would say like, Hey, I want, you know, P2P functionality. They'd be like, cool, here's this thing. And we're like, that's not Zelle. Well, you didn't ask for Zelle, right? And, and this is a different thing, right? So we started now creating a team and some of my teammates are here where they're actually focused on like right up front, okay, let's think about how the customer's gonna consume this thing. And then we measure against how we built it and then we use the complaints and we use the data that we get in terms of usage to be able to inform what enhancements we need to make on a go forward basis.

I would add from a wealth perspective, uh, regarding friction, have you ever tried to roll over an old 401k? It is not easy at all. I think a lot of times there's purposeful friction, uh, unfortunately,

but that introduces a lot of opportunities to fin for fintechs to come into the space and really disrupt. But that's also an opportunity for us to partner and work with them. Uh, so I work, I've worked with a company called Capitalize, another one called, uh, Manifest, and they help you roll over 401ks in a really easy way and you just hand it over to them, they'll do it. So I think there's purposeful friction, but I think that is opening up opportunity for get, allowing us to get more creative, but ultimately it's helping the investor. It's helping the banking customer do what they wanna do best and ultimately align with their goals.

Well, I know we're right at time. I know that there was a couple other questions, so Alex, you can feel free to ask anyone later on. Um, but thank you so much for your time. If you, do you have any other questions, you can connect with us on LinkedIn, we'll be at the conference for the next day or so. So, uh, thank you again.

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