Ask bankers how they go about designing their retail checking products and most will answer with much more of a focus on the checking part than the retail part. Don’t get me wrong, the checking part is essential. The account has to be operationally secure, reliable and accurate in terms of supporting transactions and related information. However, customers have overwhelmingly shown they aren’t willing to pay for just checking. To be different, to generate much needed fee income and to really change the game of checking, banks must focus more on the retail part of retail checking. Here’s why.
With mobile and online banking growing rapidly, customers’ face-to-face interaction with bankers is becoming less frequent. As a result, customers’ experience with and connection to the bank is more tied to their direct interaction with their checking product and what that product delivers. Plus, the checking account continues to be critically important as the primary fee income vehicle on the retail banking side.
This begs the question, how does your bank design its retail checking accounts to be so relevant and engaging to your customers that they will gladly pay a fee for them? This is where the retail focus in the design of your checking products comes into play—your bank has to deliver to your customers a more meaningful and emotional experience with the product itself. It seems like the banking industry has talked forever about being retailers. Yet, very few banks apply basic retailing principles to product design. Even fewer have been willing to commit to doing what they need to do to experience the success of top retailers. For the last decade or so, it was easy to understand why—free checking and overdrafts were the gift that kept on giving, so thinking about retailing in regard to product design and relationship-building took a back seat.
To learn how to incorporate retailing to make your checking accounts more relevant and engaging so that your customers willingly pay for them, just take a look at the best retailers outside the banking industry. The online shopping websites LivingSocial and Amazon make incredible emotional connections with their customers yet rarely interact with them face-to-face. The customer relationship is almost entirely defined through the design of the product and the value it delivers. In most cases, the only interaction with the customer is by email.
So the next question begging to be answered is what retailing best practices are naturally transferable to incorporate into your checking products? There are many possibilities, but there are primarily three that easily fit into the design of a checking account and aren’t so costly as to make the monthly fee non-competitive. These three are local, mobile and social.
First, nearly every geographical market today is promoting the local mindset—thinking, supporting, buying local, etc. Banks already know this power of local as they already classify themselves as community banks (even the mega-banks employ this positioning). So it is very logical to extend this role to becoming a community connector. This means connecting your consumer customers who buy things locally with your small business customers who are looking to grow their sales.
Second, mobile delivery of banking products/services is here to stay. Banks that think like a top retailer already know that three of the top four ways consumers want to use their mobile phones involve shopping and coupons. (The Federal Reserve reports on “Consumers and Mobile Financial Services,” March 2012 and March 2013, provide a wealth of information about how consumers want to use their mobile phones, not how banks think they want to use their mobile phones.)
So combining these local and mobile best practices into a checking benefit like a local merchant discount network that delivers the discounts via a customer’s mobile phone is not only a difference maker but a game changer. Think about it—your retail customers talking about how their checking account saved them money on purchases and your small business customers seeing how your bank helped grow their business. Plus, it’s already proven that your customers will gladly pay a monthly reasonable fee to get access to attractive local merchant discounts, around $6 per account.
This leaves the social best practice. To be clear, we’re not talking about social media. What we’re referring to is purposeful communication that is unexpected, unselfish and engaging. The typical social experience of checking customers is they open an account and the bank doesn’t meaningfully communicate with them again until the customers have some type of issue or problem, or they come back in the branch. Smart retailers already know the power of purposeful communication, sending periodic emails to customers that make offers that usually save them money or at least recognize them as valuable customers.
If you want to put the retail back in retail checking, then study up on how other top retailers are using the local, mobile and social best practices and determine how your bank can incorporate these features into your checking accounts. Doing so will make your checking accounts different, change the game for your consumer and small business customers, and provide ample customer-friendly fee income that every bank needs.
*This article has been updated from an earlier version.