Banks have spent heavily in recent years to upgrade their mobile and online banking capabilities, and now many are substantially boosting their marketing budgets to help drive customers to their new-and-improved digital channels.
Capital One Financial, for example, spent $831 million on marketing in the fourth quarter — or 81% more than it spent in the same quarter in 2017 — as it launched a new national ad campaign promoting its Capital One cafes as venues for opening digital accounts.
Many smaller regionals also dramatically upped their spending on marketing and advertising in the quarter, according to reviews of fourth-quarter earnings data.
Bob Meara, an analyst at Celent, said that banks need to be spending more on marketing to call attention to their digital capabilities, particularly as they continue to shrink their branch networks.
“For years, banks relied on foot traffic in branches for cross-selling and upselling. That’s where most of the sales calls had taken place,” Meara said. “New account openings now don’t need to take place in person, so you need to spend more on marketing” to encourage customers to use digital channels.
Fierce competition for deposits — particularly from online-only banks paying market-leading rates — is another reason why banks are boosting marketing budgets. While deposit costs have risen significantly over the past year as the Federal Reserve raised interest rates, deposits remain the cheapest source of funds for lending.
“It’s not a huge surprise to us to see elevated marketing expenses,” said Megan Fox, an analyst at Moody’s Investors Service. “Management teams are focused on marketing as a way to attract new deposits as competition rises.”
Banks are not required to provide details on their marketing expenses, though some institutions do release those figures. Banks are also not required to say how they use their marketing expenses.
The $373 billion-asset Capital One, however, disclosed details in both areas for the fourth quarter. Much of its spending was used to promote Capital One’s digital bank, formerly known as Capital One 360, now that it has been fully integrated with the company’s legacy bank, Chairman and CEO Richard Fairbank said in a Jan. 22 conference call.
We have been “building one integrated bank which is integrated across technology, product [and] the customer experience,” Fairbank said. “We reached the stage of sort of integration of these businesses that we are able to launch national marketing of our very digitally leaning bank.”
Capital One likely waited until the integration was nearly finished to launch a national marketing campaign because the digital and retail sides need to be on the same page, Meara said.
You don’t want “a customer to walk into a branch with a question about an application they filled out online and the person in the branch not have any idea what transpired,” Meara said.
Meara added that he is not involved in consulting Capital One on this project and does not have specific knowledge of its strategy. A Capital One spokeswoman declined to comment or elaborate on Fairbank’s remarks.
Many banks also invested in technology aimed at improving the effectiveness of their marketing.
The $33.1 billion-asset F.N.B. in Pittsburgh did not disclose its marketing expenses, but Chairman and CEO Vincent Delie said during a Jan. 22 earnings call that the bank has invested heavily in building out “the infrastructure necessary to expand the use of artificial intelligence and data analytics to support our marketing efforts.”
At Discover Financial Services, marketing expenses rose 8% to $230 million as the company invested in machine-learning technologies to “enable faster and better decisions about how to target our collection strategies and marketing campaigns,” CEO Roger Hochschild said during a Jan. 24 call.
Some marketing campaigns were also aimed at building old-fashioned name recognition. The $7.2 billion-asset WSFS Financial in Wilmington, Del., launched an advertising campaign in the first quarter of 2018 to promote its brand and capture more loans and deposits that ran throughout the year, said spokesman Jimmy Hernandez. WSFS spent $1.2 million on marketing in the fourth quarter, up 53% from the same period in 2017.
When WSFS announced its
At Pinnacle Financial in Nashville, Tenn., fourth-quarter marketing expenses increased 73% year over year to $3.6 million. Huntington Bancshares’ costs jumped 50% to $15 million, while marketing expenses at PNC Financial Services Group rose 40% to $84 million.
Some banks don’t place a high premium on marketing initiatives. The $8 billion-asset ServisFirst Bancshares in Birmingham, Ala., has never run an advertisement, Chairman and CEO Tom Broughton said during a Jan. 22 call.
“You don’t get quality borrowers when you advertise,” Broughton said. “You’re getting senior citizens at their retirement home.”
Other executives lament that, no matter how much they invest in marketing, they can’t match the spending power of JPMorgan Chase and Bank of America, both of which are spending billions on marketing. Even the $226 billion-asset BB&T struggles
“The largest banks are putting billions and billions very effectively into marketing,” Chairman and CEO Kelly King said in November. “It is swaying opinion, and it is swaying decisions, swaying behavior.”
