What if Amazon Offered a Checking Account?


Amazon Prime, Video, Music, Fresh, Alexa—all loved by many, but would consumers also care for an Amazon checking account? One recent survey says that, yes, a subscription based, value-added checking account is the best thing since free two-day shipping.

In a study conducted by Cornerstone Advisors, consumers were asked about their banking attitudes and behaviors and presented with this account option:

Amazon is thinking of offering a checking account. For a fee of $5-10 a month, the service will include cell phone damage protection, ID theft protection, roadside assistance, travel insurance and product discounts.

Forty-six percent of “Old Millennials” (ages 31-38) and 37 percent of “Young Millennials” (ages 22-30) say they would open that account. Of those who say they would open the account, almost a quarter say that they would close out their existing checking accounts—most likely with a traditional bank.

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When the same responders were asked about a free checking account from Amazon, without the bundled services, interest in opening the account is lower.

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“This is music to Amazon’s ears,” says Ron Shevlin, Director of Research at Cornerstone Advisors. “Why would they want to offer a free checking account when they can bundle the services of various providers on their platform—merchants and financial services providers—and charge a fee for it. A fee that consumers are willing to pay for.”

When asked about the hypothetical Amazon account stated above, 73 percent of 30-somethings say they would definitely switch or would consider switching accounts if their primary financial institution offered a checking account with those valuable services. Sixty-four percent of 20-somethings said the same.

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Which of the age segments has the most fee based accounts—millennials, Gen Xers or boomers?
About three in four (77 percent) of all survey respondents have a free checking account. Of the millennial segments, 31 percent have a fee-based account. That number is actually less among Gen Xers and boomers—22 percent of Gen Xers are in a fee-based checking account, and boomers report in at only 12 percent.

As loyal users of subscription services, millennials are accustomed to—and willing to pay for—value in order to get something valuable in return. They recognize that you usually get what you pay for, so what you get for free probably isn’t worth much. Even worse, many associate free accounts with the fine print fees you’ll inevitably end up with anyway. And customer reviews on hidden fees will always be 0 out of 5 stars.

Turns out, among those surveyed with a free checking account, nearly every account holder paid at least one fee in the prior year.

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When survey respondents were asked how many friends and family they have referred to their primary FI over the past year, results show that more people with fee-based checking accounts are referring their primary FI than those with free checking accounts. This is true across each generational segment as well as each type of institution (megabank, regional bank, community banks and credit union). Plus, they grew their relationship by adding non-deposit products.

“Among fee-based account holders, 58 percent referred friends/family, and 43 percent added non-deposit products,” says Shevlin. “In contrast, among free checking account holders, 44 percent referred friends/family, and just 27 percent added non-deposit products.”

In short, the results of customers’ relationships with fee-based accounts are positive, for them and the bank:

  • Nearly half of the millennial age segment say they’d opt for a fee-based account with value added services from Amazon.
  • Less say they’d open a free account from Amazon.
  • Almost 75 percent would at least consider switching accounts if their primary FI offered this same Amazon-type checking account.
  • Millennials beat Gen Xers and boomers in having the most fee-based accounts.
  • More people in fee-based accounts are referring their bank than those in free accounts.

According to Shevlin, “The prescription for mid-size banks and credit unions is simple: Reinvent the checking account to provide more value to how consumers manage their financial lives.

For more insights about how to reinvent your checking accounts and thrive in the subscription society, download Shevlin’s free white paper, commissioned by StrategyCorps, at strategycorps.com/research.

What Do Costco, Verizon and AAA Have to Do with Checking Accounts?


12-16-13-StrategyCorps.pngWhen most financial institutions think about designing consumer checking accounts, they usually check out what their financial institution competitors are offering. The result is a homogenized product that customers don’t think is worth paying for. There are companies outside of the banking industry that have tapped into powerful, appealing, lifestyle-based value propositions in the products and services they provide. And the value propositions of these products and services are applicable to designing and building consumer checking accounts that can compete on a superior level, engage customers more broadly and generate sizeable amounts of fee income.

Let’s start with Costco Wholesale Corporation (and include their competitive brethren Sam’s Club and BJ’s Wholesale Club). These warehouse clubs collectively have more than 120 million customers who each pay $50 to $100 per year just for the opportunity to do business with these companies. So what’s so compelling that consumers will pay just to be able to shop here? Clearly it’s the potential to save money when they have to spend it on everyday items and other needed purchases. Costco and others have proven that consumers are very willing to pay to save, as long as the anticipated savings exceeds the upfront fee for the opportunity to do so.

Next, how does Verizon Communications Inc. fit in? They (and other major mobile phone carriers) know how important the cell phone is to consumers, and how they wince at the thought of not having an operable mobile phone at their immediate reach. These companies have connected with this mobile phone lifestyle by ensuring a non-working phone is only a temporary situation. How? They provide phone insurance to more than 60 million consumers who each pay $5 to $12 per month to have it. Verizon and other mobile carriers have verified that consumers love their mobile phones so much, they are willing to pay to ensure that they won’t go more than a few hours without having a replacement phone at their fingertips.

And what about the membership in auto clubs known as AAA? Although AAA has recently expanded offerings to merchant discounts and AAA auto repair stores, the core service in the minds of consumers is roadside assistance. AAA has tapped into the desire for peace of mind on the part of the consumer who doesn’t want to get stranded somewhere with a car they can’t drive. AAA has demonstrated that this personal security and safety benefit resonates with consumers as they have more than 50 million people that each pay $60 to $160 per year to be a member.

By now, hopefully, you’re seeing a pattern emerge. These are just three examples of non-banking companies with product and service-based value propositions that connect well with customers—millions and millions of them are willing to pay fees for these products and services.

So what’s that got to do with a consumer checking account? Well, unless you’ve cracked the code on a unique checking account that resonates so well with the majority of your customers that they happily pay fees for basic banking services, then finding other benefits worthy of a fee should be at the top of your to-do list for strategic and financial reasons.

And the beautiful thing about studying these non-banking companies is that these kinds of benefits can fit very neatly and naturally into a checking product, complementing your traditional banking benefits.

Plus, banks can deliver these types of benefits (and others) conveniently online and through mobile apps, which are clearly the ways consumers want benefits delivered these days. Mobile and online delivery also align with the banking industry’s rapid movement towards mobile and online banking.

So as you try to figure out how to make your consumer checking accounts different, more connected to your customers’ needs and relevant enough that they will actually pay for them, look at companies like these and others outside the banking industry that have proven this case with millions of consumers. Don’t stay locked into traditional banking benefits that customers won’t gladly pay for. Look for providers of these types of benefits that have the ability to deliver enhanced products and services to your financial institution that can generate some badly needed fee income and product differentiation.