Savings Apps Cost Consumers. Banks Can Help Save Them.

Community banks can
reclaim the customers and deposits they have ceded to digital savings

It can be difficult for
community banks to find the right tool to help them gain low-cost deposits in
today’s low-rate environment. Although rate specials on certificates of
deposits can be an obvious quick win, they do not provide the right “stickiness”
needed to create a long-term relationship that generates future deposit
gathering. Personal finance apps like Digit, Qapital and Acorn bring even more
competition to community banks, taking away deposits in small amounts that can
really add up.

Consumers want more digital products and automated mobile banking options in today’s smartphone-centric world, but many of the popular savings and investing apps charge fees that may not be in their best interest. Qapital charges up to $12 a month in fees, while Digit charges anywhere from $2.99 to $5. If a consumer saves $1,000 over 12 months but pays $2.99 per month for an app, that consumer is getting an interest rate of -3.59%. If the consumer saves $2,000, their interest rate is -1.79%. Unless these platforms are offering consumers interest in excess of those rates, the consumer ends up underwater on their own money.

Micro-investment applications like Acorns invests a consumer’s spare change. If a consumer purchases a coffee for $4.50, the purchase is rounded to $5 so the 50 cents can be automatically invested. Acorns charges between $1 and $3 a month in fees on accounts with less than $1 million, depending on the selected features. But when consumers are investing just a few dollars each month, even that $1 fee can seem pretty steep.

These apps are beautifully
designed and have gained user traction promising big results under the guise of
saving and investing, but consumers aren’t seeing the big results they promise.
This gives community banks an opportunity to win.

Community banks can take a leaf out of these app’s playbook by leveraging an attractive, digital interface that meets consumers’ needs but doesn’t charge them fees. An auto-savings tool can help banks provide additional value to existing customers by providing them with the digital banking tools they desire. Most importantly, they offer a low-cost acquisition method of a new net saver bringing in low-cost deposits.

Some accounts, like
Plinqit accounts, can be opened in under three minutes so users can start saving
immediately. These accounts carry the same or lower administration costs than a
traditional savings account and can outsource the customer service.

Educating customers on how to save is another key to increasing deposits and developing long-term customer relationships. Customers desire personal finance education: 41% of Americans say their lack of financial knowledge keeps them from progressing financially. One area ripe for education is why customer funds should be stored at a bank.

Many customers habitually leaving money in Starbucks Corp., PayPal Holdings and Venmo apps. Helping them realize their money is not working for them in these noninterest bearing accounts can show them the value of earning reward or interest on these funds at your bank. It is important to craft marketing messages that help consumers how they could be making money on the funds saved at your institution.

Some automated savings
interfaces offer ways for banks to deepen relationships with customers. For
example, Plinqit incentivizes customers increasing their financial knowledge by
rewarding with money added toward their savings goal. This increases engagement
with the app, and costs a fraction of the typical-pay-per click engagement.

Ultimately, an automated savings tool like
Plinqit can be a cost-efficient way to attract consumers for community banks.
Building a relationship that provides consumers with valuable education and
savings without fees fosters a long-term connection with the bank. In a crowded
market, having the customers’ financial wellness as a top priority will help
your institution stand out and grow deposits.


Kathleen Craig

CEO & Founder

Kathleen Craig is the founder and CEO of Plinqit, which offers two ways to help banks and credit unions attract deposits.

Prior to launching Plinqit, Ms. Craig served as vice president for digital banking at a well-regarded community financial institution. Her experience in banking and technology and her passion for financial wellness education led her to the development of Plinqit. She has successfully raised over $10 million in venture funding for Plinqit and has partnered with several of the largest financial technology companies in the world.