Financial institutions are deploying investment technology in a bid to stop customers from withdrawing funds from their accounts and depositing them elsewhere. 

According to an October Fitch Ratings report, deposits for all United States banks dipped 2.4% between December 2022 and September 2023.

U.S. Bancorp Investments and TD Wealth, for example, have doubled down on automated investment technology. 

U.S. Bancorp Investments, an affiliate of U.S. Bank, is giving customers a $100 incentive to open an Automated Investor account within the institution. Automated Investor is the bank’s low-cost solution that uses investing rules advanced by computer software. 

“In a recent survey, U.S. Bank found that three out of four aspiring investors aren’t sure where to start when it comes to investing and more than three in four [investors] need more guidance and support in making financial decisions,” Kai Sakstrup, chief product officer of wealth, corporate, commercial and institutional banking, told Bank Automation News.  

The bank’s Automated Investor solution has seen an increase in new accounts since last year, Sakstrup said, with account openings in October seven times higher than the previous year. 

Customers can pick an investment goal such as preparing for retirement, buying a home, or saving for education, Sakstrup said. “Funds are invested in a portfolio consisting of exchange traded funds that is appropriate to their goal, time horizon and risk tolerance.” 

Leveraging tech for CX 

According to a TD Wealth survey published last month, 74% of investors between the ages of 18 and 44 have explored new investments for their portfolios — and 85% of those investors are taking investment advice from generative AI.

Customers withdrawing funds from bank accounts and depositing that into fintechs that offer easy technology usage is a “natural evolution,” Jim Beam, head of investment management, brokerage, planning, retirement and strategy U.S. at TD Wealth, told BAN. 

Technology must be a priority in an FI’s discussion of its product, Beam said. “We’re obviously cautious about some of the technology that’s out there right now and want to make sure that it’s fit for purpose and actually can help us serve our clients better.” 

In October 2021, TD Wealth launched its Robo-Advisor, an automated investing solution that helps customers achieve financial goals. 

Game of deposits 

As interest rates climb higher, customers are looking to gain higher rates on their savings and deposits, Jacob Morgan, principal analyst at Forrester, told BAN. 

“Companies that could offer higher rates of interest” will gain clients, Morgan said. 

Banks are seeing outflows from customer accounts to investing fintechs like Robinhood as more people jump into the equities market for better returns, Dani Fava, group president for product innovation at wealth tech company Envestnet, told BAN. 

On average, a customer withdraws $140 from their bank account to put toward other investing solutions, amounting to billions of dollars for many banks, Fava said. 

“Deposits are hard to come by this year [and automated investing offerings are] a method to drive engagement and a method to retain deposits” Fava said. “This is a method for the banks to keep money in their ecosystem and to drive engagement.”  

Envestnet allows bank customers to decide on an investing category like travel or health care and will invest in companies in that category, Fava said. 

Last month, Envestnet teamed up with $53 billion Central Bank based in Jefferson City, Mo., to provide an automated investing solution for the bank’s customers. 

Envestnet has seen a surge in demand for its automated investing solutions from banks and credit unions as FIs compete with fintechs, Fava said. Envestnet clients include 16 of the top 20 U.S. banks in addition to regional FIs like CNO Financial Group and WestPoint Financial Group, according to the company’s website. 

Despite competitive offerings from fintechs, banks can improve their digital offerings to retain customers by playing to their strengths, Forrester’s Morgan said.

“One of the things that banks have in their favor is a high degree of trust from their customers,” he said. “Banks need to double down on their digital offerings and ensure that they have a really good customer experience, provide customization and personalized customer service to hold onto their customers.”

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