As global economic conditions drive interest rates lower, banks face increasing pressure to adapt and thrive in this challenging environment. The Asia Pacific region has been clocking consistent GDP growth at 4.4 percent, but interest rates have remained low.1 While some central banks are expected to further reduce interest rates it will be at a much slower pace compared to the U.S. Philippines, Indonesia and New Zealand have already reduced interest rates. The Thai Central Bank has not cut key interest rates despite government calls to reduce borrowing costs in a bid to revive the economy.2 Singapore typically follows the U.S Fed and their interest rates are influenced by global trends and are therefore likely to experience some drop in interest rates, but they are unlikely to be as drastic as the Fed’s interest rate cuts.3 Further, Malaysia’s Central Bank does not want to change interest rates till 2026 and Australia is holding rates steady, while Vietnam is looking to increase interest rates.4, 5, and 6
By rethinking their deposit strategies, banks can improve fee incomes and boost commercial deposits to weather these challenges.
Differentiated Strategies for Deposit Growth
Here are a few strategies that banks may consider as they strive to improve deposit growth:
- Customer-Centric Strategies: The modern customer expects hyper-personalized, relationship-based offerings and engagement from their financial service providers. Banks must focus on delivering just this. Now is the time to adopt customer-centric and hyper-personalized strategies ranging from pricing and rewards, to offers and bundles. With data-driven insights at their fingertips, banks can focus on crafting personalized offers and customer relationship-based deposit products. In mature markets like Singapore and Australia, such a personalized, customer-centric approach may be a key differentiator and driver of customer satisfaction and retention.
- Dynamic, Differentiated Deposit Offerings: Banks must think beyond static, traditional deposit products. Customers in mature Asian markets like Singapore and Australia particularly are looking for deposit options that protect their funds and ensure balance liquidity, safety, and optimal returns amid low interest rates. Customers in these markets are aware of market trends and want flexible options that can keep their money safe while offering competitive interest rates. Tiered, or flexible deposit products that adjust interest rates according to market trends would work well in these markets. Hybrid products that combine the features of savings and fixed deposits may also work well.
- Sustainable, Value-Driven Deposit Strategies: Banks can focus on long-term stability with their deposit offerings. Rewarding customers with innovative loyalty offers, bundled products, and enhanced experiences can be successful especially in emerging Asian markets like Indonesia, Vietnam, and Thailand.
- Innovative New Growth Options: Customer-centric innovation holds the key to continued revenue growth and profitability even amidst a challenging economic environment. Technology-powered product innovation, leveraging the API economy, exploring open banking, embedded banking and Banking-as-a-Service models must be high on the banking agenda at this juncture. These emerging trends can open new revenue sources, and help banks meaningfully engage with customers for long-term loyalty and retention.
Robust Technology Platforms to Accelerate Innovation
Banking systems in use today are not agile or powerful enough to meet customer demands for innovative, hyper-personalized offerings. Transforming core banking systems is not just expensive and time consuming, but also risky. Fortunately, banks do not need to touch their core systems to modernize their technology foundations and roll out innovative, customer-centric products and pricing. Instead, they can collaborate with a specialized partner to deploy a powerful, cloud-native, and microservices-based technology platform as middleware. Such a platform sits over core systems and integrates seamlessly with them to drive data-backed, hyper-personalized innovation and differentiated deposits strategies.
Banks today are operating within disruptive market conditions Asian banks in the region must take proactive steps to modernize their deposits strategies to ensure continued growth despite changes in the interest rate environment. Transforming their technology foundation must be a top priority, as powerful technology can accelerate innovation and unlock new opportunities.
