LOST PINES, Texas–A financial institution is a simple business model—take money in at one price and loan it back out at a higher price—but that doesn’t mean it’s easy, especially when it comes to attracting and retaining deposits, according to one person who shared strategies for doing just that.
Speaking to Catalyst Corporate’s Strategic Summit on the subject “Deposit Growth Playbook,” Gaurav Bhatia, chief marketing officer with Pentagon FCU (PenFed), outlined his thinking and that of PenFed in bringing in and keeping deposits, including “five pillars” every credit union should consider.
“Attracting deposits is easy; retaining is really, really hard,” Bhatia said, noting there are not just 9,500 other banks and credit unions chasing consumer funds, but brokerages, the stock market, fintechs such as Chime and Stripe, and more.
And then there is the competitor credit unions never think of: Starbucks, which has $1.83 billion in customer deposits on gift cards. That’s more than 3,900 banks and credit unions that have under $1 billion in assets, he noted.
Decreasing Deposits Chart
“Financial institutions are paying too much for deposits,” Bhatia said. After being cheap during the pandemic, the cost of funds became “much more expensive” over the last two years. And yet without cheaper deposits, a credit union can’t lend less expensively, which is why PenFed has worked to reduce deposit costs and become more efficient as it strives to drive more value back to members.
The challenge in attracting cheap deposits, Bhatia acknowledged, is all the aggressive offers from competitors. He said in his case he was offered a $900 bonus by Chase just for bringing direct deposit and $1,600 in other deposits to the account.
Not surprisingly, he noted, customer and member acquisition costs have soared to between $600 and $750 per person in 2025. Many consumers, Bhatia noted, have multiple checking accounts, making it harder and harder to identify a “primary financial relationship.”
The New PFI
But deposits aren’t just about rate, which has become fundamental to PenFed’s strategy, he explained.
“Consumer banking has changed, and we must adapt,” Bhatia said, sharing a graphic that stated the phone has become the new primary financial relationship, representing digital payments, branches, digital wallets, online loans, AI, digital ATMs, call centers, money movement and more.
The ease of technology has become the expectation of consumers, and Bhatia noted PenFed can open a new checking account for a current member within minutes—but it can be difficult to be as fast with new members. He encouraged credit unions to make that process much easier for new members, noting fraud rails are often the glue in the process.
“A bank or credit union closes every day,” Bhatia said. “You want to make sure you are not in that number. You have to be able to adopt new technologies.”
In its case, PenFed is investing in both technology and marketing, Bhatia said, adding that credit unions have not traditionally budgeted big dollars for marketing. “You’ve got to get the brand out there. People won’t bank with you if they don’t know you. Even if you have a 6% CD out there, they will not trust you with their money if they do not know you. Digital convenience is imperative. Without an app, you don’t have much of a business.”
The debate every credit union should be having is over whether to invest in a branch or to invest in technology and marketing, according to Bhatia.
“I think we are in an environment where instant gratification has come to banking, and we cannot ignore it. If the Chimes of the world can do it, we can too.”
Strategies to Attract & Retain: How to Obtain Loyalty
Bhatia offered these tips:
• Focus on your core audience.
• Segment audiences (and focus on core).
• Pay attention to what’s happening in the market with pricing and promotions.
• Make sure your product is good (including online processes).
• Take advantage of member loyalty. “Members are under-penetrated. We tend not to think that way, and we tend to have members in silos,” Bhatia said. “We can do a better job in that we are smaller and nimbler.”
Bhatia also urged credit unions to recognize the value of content, including having some fun. “You have to have the human element there,” Bhatia advised.
Bhatia said PenFed has messaging in every channel a member touches, including email, branches, ATMs, digital, call centers and more.
What Ultimately Matters
In the end, however, he reminded the audience that the credit union’s product is what ultimately matters. PenFed’s surveys have found members rate highest the ease of use, a centralized hub, digital communication, money movement and account management.
And there’s one more thing: Take care of loyal members, Bhatia told the meeting. For example, if a member has a checking account but no card account, offer an incentive to add the plastic.
Focus on Five Pillars
Bhatia offered this advice for attracting and retaining deposits, noting that PenFed has been steadily reducing rates by focusing on core members and promotions. “People are more promotion-centric than rate-centric,” he said.
• Segmentation & Targeting. Segment by personas, regions and demographics. Target by channels, offers and spending patterns.
• Digital 24/7 Banking. “Your app has to be clean and simple to use. We use big, bold imagery. We use a lot of member feedback to improve our app.”
• Pricing & Promotion. “Decide who you are. Either offer the highest rates or provide service and value.”
• Product. “It needs to be intuitive and functional. If someone needs to use a YouTube video to understand your app, you’ve already lost.”
• Member Loyalty. “Loyalty is expected and implied. You can reward for different levels and relationships. I don’t think you need to pay for checking account deposits. You can instead say, ‘We will give you 35 extra basis points on your CD.’”
Five Points of Emphasis
In conclusion, Bhatia emphasized these five points:
• Focus on your core audience.
• Invest in digital.
• Prioritize your product.
• Engage your existing members.
• Leverage marketing
