Stop Trying to Talk Your Customers Into Liking Your Checking Accounts


Recently I was reading an article from Chris Nichols, chief strategy officer of Winter Haven, Florida-based CenterState Bank, entitled Public Perception of the Cost of Checking.

Nichols shares how CenterState interviewed 200 randomly selected potential customers about what they thought about the bank’s pricing and value of its checking accounts. The pricing ranges from a fee of $5.95 to $9.95 per month with a variety of ways to avoid this monthly fee (balance waivers, minimum transactions, etc.) The accounts also have the typical features included—online banking and bill pay, mobile banking and an expanded ATM network. It was also noted that this pricing was lower than competing banks and within the range of 75 percent of banks nationwide. Therefore, the pricing was reasonable and the features, while undifferentiated, were comprehensive.

The feedback from these consumers was that 34 percent of them had negative comments about CenterState’s checking line-up. Clearly, this is a number with lots of room for improvement.

Nichols didn’t go into much detail about the negative comments, but the essence of those comments are similar to StrategyCorps’ own consumer market research about consumers’ attitudes about checking account products.

Fees on Checking Accounts

First, almost unanimously, consumers don’t like to have requirements with a penalty fee structure for not meeting these requirements to access to their own money, especially when those requirements are not fully and clearly disclosed. Very few consumers have a basic understanding of the banking business model, thus don’t understand the business need for these requirements. Even those who do understand banking don’t like these requirements. The reason is the same, they don’t like to pay for access to their own money.

Second, despite the intrinsic value of a consumer checking account—the fact that it’s insured, customers have zero liability debit cards and a myriad of choices on how to bank, including online, mobile, ATM, and in branch, just to name a few—consumers feel it should be “fee-less” to have all this. Why? In short, financial institutions intentionally “sold out” this intrinsic value with free checking. Why pay for these things when they can be had at another financial institution in most cases, literally down the street? Selling out and totally diminishing this intrinsic value was the ante to get to the extremely lucrative source of nonsufficient funds and overdraft (NSF/OD) revenue. While it was the financially right thing to do at the time, the free checking hangover continues to plague financial institutions as they try to get customers to accept monthly recurring account fees to replace declining NSF/OD fees.

How does a financial institution restore the underlying value of a checking account in the eyes of consumers to warrant a more positive perception? At StrategyCorps, what we’ve seen work is NOT to spend time, money and marketing dollars trying to persuade customers that the checking account with traditional bank benefits is worth paying for. Trying to persuade consumers that traditional checking is valuable enough to pay for it, when it has been free for nearly two decades, is a tough proposition.

Instead, spend time, money and marketing on offering new product benefits that consumers will view positively. Which benefits are these? In general, these benefits have to be ones that are already proven in the marketplace that consumers view positively and are willingly and gladly paying for. Examples of these new types of benefits are cell phone insurance, roadside assistance and mobile merchant discounts. Nearly two of every three consumers already view these types of benefits positively enough to pay for them every month (think Verizon, AAA and Amazon Prime). These new product benefits either save consumers money when they have to spend it (effectively making them money) and/or provide protection to everyday items or situations.

So, stop trying to talk your customers into liking your traditional checking account with undifferentiated, traditional benefits they don’t appreciate despite the inherent value of the account. Rather, modernize your checking accounts by adding some new product benefits that are already viewed as valuable.

To see more of our consumer research videos including a variety of topics in banking, mobile apps and more, visit strategycorps.com/shape-your-story.

What to Do About the 65% of Checking Customers Making You Money


In a previous article, I wrote about the challenge of how to handle unprofitable customers, headlined “What to Do About the 35% of Checking Customers Costing You Money.” The logical follow-up question is what to do with the remaining 65 percent.

Below is the composition of a typical financial institution’s checking portfolio, based on the relationship dollars (both deposits and loans) each of these segments represent, and the revenue generated by household by segment.strategycorps-chart-5-11.png

Super: household produces annual revenue over $5,000. Mass Market: produces $350 to $5,000 in revenue. Small: produces $250 to $350 in revenue. Low: produces less than $250 in revenue. Figures are based on the average bank in StrategyCorps’ proprietary database of more than 4 million accounts.

It is commonly thought that the 80/20 rule applies to relationship dollars and revenue for checking customers, where 80 percent of each is generated by 20 percent of customers. However, if you were to add up the Super and Mass columns for the relationship dollars and revenue segments, the “rule” is closer to 98/2 and 97/3, respectively.

Although they make up just over 10 percent of customers, Super households generate the highest percentage of both, 63 percent of relationship dollars and 57 percent of checking revenue for a typical financial institution. Mass households represent the largest relationship segment at 55 percent of customers, but generate less than their pro-rata share of relationship dollars and revenue.

Clearly these two segments, especially the Super segment, are what other financial institutions are looking to steal away with all kinds of marketing messages and incentives, and even some very targeted, prospective individual sales efforts.

A deeper dive into the profile of each segment reinforces why these customers are so sought after by competitors.

Segments Super > $5,000 Mass $350-$5,000
Distribution 10% 55%
Per Account Averages Averages
Relationship Statistics    
DDA Balances $28,079 $5,746
Relationship Deposits $63,361 $6,323
Relationship Loans $68,250 $4,542
Total Relationships $159,890 $16,611
Revenue Statistics    
Total DDA Income (NII + Fees + NSF) $1,349 $448
Relationship Deposit NII $2,367 $231
Relationship Loan NII $2,654 $171
Total Revenue $6,370 $850
Account Statistics    
Have More Than One DDA 73.2% 52.8%
Have a Debit Card 46.2% 65.1%
Have Online Banking 26.0% 29.6%
Have eStatement 16.0% 17.5%
Debit Card Trans (month) 8.4 15.7
Have a Relationship Deposit 74.3% 52.8%
Have a Relationship Loan 56.3% 25.4%
Have Both a Deposit and Loan 44.4% 15.8%
Average Age of Account 5.4 3.8
Average Age of Account Holder 57.0 51.2

The challenge: What should your financial institution do to retain these Super and Mass relationship segments that make up 65 percent of customers and yet are responsible for nearly 100 percent of relationship dollars and revenue?

A common response from bankers when asked this question is their stated belief that people in these Super and Mass segments are long-term customers who are already well-known. However, the data in the next to last row of the chart shows that the average age of the accounts in these two segments is only about five and a half and nearly four years, respectively, so they really aren’t long-term customers on average.

Another popular view is that these customers are already being taken care of. When asked to clarify, the response is typically something general about customer service. Rarely is the response that these customers are being provided with the best products and top level service at the financial institution, or that investments are being made in these customers that are above and beyond what is invested in overall retention efforts. And in too many cases, many community financial institutions don’t have the information organized to even identify which customers are in what segment.

It’s understandable that with today’s tight interest rate margins, compressing fee income and rising operating costs, it’s difficult to make a business case for above average investment in customer retention. However, with an overcrowded competitive marketplace and the commoditization that’s occurring from digitizing retail banking, taking for granted that Super segment customers won’t move is riskier than making the incremental financial investment to do something extra to retain them.

The math on this is straightforward—losing one average Super segment household that generates revenue of nearly $6,400 would require investing in the acquisition of 7.5 average Mass segment households, 29 Small segment households or 88 Low segment households.

The biggest banks know this and are, on a relative basis, out-investing community financial institutions through better mobile and online products, more attractive acquisition incentives and aggressive pricing campaigns in the Super and Mass segments.

While it may feel nearly impossible to invest more in existing Super customers, the cost of not doing so will be much more.

For consumer checking financial performance on all the relationship segments (Super, Mass, Small and Low), a more detailed executive report is available if you’d like more information.

What to Do About the 35% of Checking Customers Costing You Money


Consumer checking, while the simple hub product for most retail deposit and loan relationships, produces some not so simple challenges related to financial performance.

Here’s the composition of a typical financial institution’s checking portfolio, based on the revenue generated by a household relationship. “Super” customers generate the highest percentage of a typical bank’s revenues although they make up only about 10 percent of its customers. Super customers also make up the highest percentage of overall relationship dollars, meaning they have more combined deposit and loan balances with the bank.strategycorps-chart-5-11.png

Super: household produces annual revenue over $5,000. Mass Market: produces $350 to $5,000 in revenue. Small: produces $250 to $350 in revenue. Low: produces less than $250 in revenue. Figures are based on the average bank in StrategyCorps’ proprietary database of more than 4 million accounts.

The challenge: What to do with the Small and Low relationships that make up 35 percent of customers yet represent only 1.6 percent of all relationship dollars and 2.9 percent of revenue?

A deeper dive into the profile of these segments is enlightening.

Segments Small $250-$350 Low <$250
Distribution 9% 26%
Per Account Averages Averages
Relationship Statistics    
DDA Balances $1,561 $682
Relationship Deposits $444 $117
Relationship Loans $161 $32
Total Relationships $2,166 $831
Revenue Statistics    
Total DDA Income (NII + Fees + NSF) $160 $62
Relationship Deposit NII $16 $4
Relationship Loan NII $6 $1
Total Revenue $182 $67
Account Statistics    
Have More Than One DDA 28.9% 14.5%
Have a Debit Card 71.4% 57.1%
Have Online Banking 27.3% 22.0%
Have eStatement 17.1% 13.9%
Debit Card Trans (month) 13.3 5.0
Have a Relationship Deposit 31.5% 17.9%
Have a Relationship Loan 7.1% 2.7%
Have Both a Deposit and Loan 2.5% 0.7%
Average Age of Account 3.1 3.4
Average Age of Account Holder 48.9 48.8

Obvious is the lack of revenue generation from these segments given average demand deposit account (DDA) balances and relationship deposit and loan balances on an absolute dollar basis and a comparative basis to the Mass and Super segments.

Less obvious is that the other revenue-generating (debit cards) or cost-saving activities (online banking, e-statements) of the average customer in the Small and Low segments is not materially different from the Mass and Super relationship segments. For some products, like a debit card, the percentage of customers in the Small and Low segments who have one is higher than Mass and Super segments.

The natural response from bankers when confronted with this information is, “let’s cross-sell these Small and Low relationships into more financial productivity.” This is well-intentioned, but elusive and arguably impractical.

First, for many consumers in these relationship segments, your FI isn’t their primary FI, so they are most likely Mass or Super segment customers at another institution. Second, if you are the primary FI, these segments simply don’t have financial resources or the need for additional financial products beyond what they already have today. At their best, these are effectively single service, low balance and low or no fee customers. Therefore, traditional cross-selling efforts either compete unsuccessfully with the primary FI’s cross-selling efforts or don’t matter because there aren’t available financial resources to be placed in other products.

How then does your FI competitively and financially engage with these Small and Low relationship segments to improve their financial contribution by increasing the DDA balances, relationship balances or generating more fee income? The answer is to relevantly offer them a product that impacts how they bank with your institution.

More specifically in today’s marketplace, this relevant offering is accomplished by being a bigger part of your customers’ mobile and online lifestyle. Consumers of all types are in a relationship with their smart phone, tablets and computers. A FI’s checking product has to be a bigger part of that relationship. It can’t just be another online or mobile banking product they can get at pretty much any FI. For the unprofitable customers who have a primary FI somewhere else, the mobile and online offerings have to be engaging and rewarding enough to move deposit balances to your bank or buy more products from your bank to generate more revenue.

For those unprofitable customers who simply don’t have the financial resources to aggregate deposits or be cross-sold, the mobile and online banking solutions have to include value worthy enough to willingly pay for. Why? Because generating recurring, customer-friendly fee income based on non-traditional benefits or functionality is the only way you’re going to make them more profitable. Top retailers like Costco, AAA, Amazon and Spotify understand this retailing principle, which is transferable to FIs if they will design and build their checking products like a retailer would instead of a banker.

For consumer checking financial performance on both the Small and Low relationship segments as well as the Super and Mass ones, a more detailed executive report is available if you’d like more information.

What Bankers Should Know About Consumer Checking Financial Performance


Every financial institution (FI) is trying to optimize the financial potential of a checking account customer. Mega banks are paying up to acquire a checking customer from another institution. And all FIs are pursuing the elusive cross-sell to round out a checking account customer that is inherently unprofitable on a single product basis.

StrategyCorps actively tracks, quantifies, ranks and analyzes nearly 4 million checking account relationships of primarily community FIs (below $10 billion in assets) related to our CheckingScore analytical solution in a database that we affectionately call “The Brain.” Each checking relationship is scored by the total annual revenue it generates on a household basis (the total of demand deposit account fees plus estimated net interest income on DDA balances and related deposits and loans) and then ranked into four relationship segments:

  1. Super: annual revenue over $5,000
  2. Mass Market: annual revenue of $350 to $5,000
  3. Small: annual revenue of $250 to $350
  4. Low: annual revenue less than $250

Based on our experience as well as the research of industry groups like the American Bankers Association, the Federal Deposit Insurance Corp. and banking consultants, we have determined that those relationships scoring below $350 don’t generate enough revenue to cover the FI’s cost to service the relationship. (Click here for some advice on how to make checking relationships profitable again.)

The distribution of these relationship segments by customer count, dollars of relationships and revenue is a much skewed one:

  • 35 percent of Low and Small relationship customers represent only 1.6 percent of all relationship dollars and 2.9 percent of revenue
  • 10 percent of the Super relationship customers represent 63 percent of relationship dollars and 57 percent of revenue.

Below are some more key performance benchmarks that show the average financial performance of all four relationship segments combined for a typical financial institution, according to The Brain database.

Key Performance Benchmarks—All Segments Combined  
 Percentage of Accounts That Are Profitable  65.1%
 Percentage of Accounts That Are Unprofitable(e.g., Sale, IPO)  34.9%
 Average DDA Balance  $6,367
 Avg Deposit Relationship Balance per DDA  $10,081
 Avg Loan Relationship Balance per DDA  $9,563
 Total Relationship Balance per DDA  $26,011
 Annual DDA Service Charges  $8.92
 Annual NSF/OD Fees  $81
 Annual Miscellaneous Fees  $7.26
 Average Estimated Annual Debit Interchange Income  $50
 Average Monthly Debit Card Swipes  12.0
 Percentage of DDAs That Are Non-Interest Bearing  75%
 Single Product Households  32%
 % of DDAs with a Relationship Loan  21%
 % of DDAs with Both Deposits and Loans  14%
 Average Age of Primary Account Holder  51
 % of DDAs with Primary Account Holder Over Age 50  51%
 Average CheckingScore  $1155

It’s no surprise that not all checking products and their associated relationships are alike in terms of financial performance, but which products perform better than others?

In summary, based on the CheckingScore per product type and the percentages of a product type in the Super and Mass Market relationship segments, below in rank order are the most financially productive checking account products:

  1. Interest Accounts
  2. Value Added Flat Fee per Month Accounts
  3. High Interest Checking Accounts (reward checking)
  4. Basic Checking (non-interest, non-totally free)
  5. Senior Checking (mostly free to 50+ to 65+ year old customers)
  6. Free Checking (totally free)
  7. Student Checking
  8. Second Chance Checking (for unbanked or underbanked)

The consumer checking account remains the hub account for a customer identifying which FI is “my FI,” especially with the popularity of mobile and online banking, which are now essential components of checking.

So FIs must have a well considered consumer checking strategy in terms of which and how many products to offer, knowing the reality of checking economics. FIs can’t just “wing it” when it comes to checking and expect to win, given competitive and financial performance challenges.

More specifically, the challenge goes beyond just generally acquiring and retaining customers in a super-competitive marketplace. Protecting the Super and Mass Market relationship segments of customers from being stolen by competitors cannot be best accomplished  if those customers aren’t in the best checking products that provide optimal customer engagement. FIs must also fix and grow the Small and Low relationship segments of customers by successfully offering them better financially performing checking products like Interest and Value Added checking and not the lower performing and less engaging ones like totally Free and Senior checking (which place sixth and fifth out of eight account types), and more effectively cross-selling other non-checking products.

These performance-based statistics are what bankers must know about the financial reality of consumer checking. Not understanding or avoiding this reality is a how-to guide for designing and building a chronically underperforming lineup.

A more detailed executive report on consumer checking financial performance is available if you’d like more information.

When Free Checking Is No Longer Enough


When-Free-Checking-Is-No-Longer.pngCity National Bank is a perennial industry leader in retail checking performance. By adopting free checking earlier than most banks in the region, City National helped grow its customer base by appealing to many types of customers in their communities looking for a no-fee checking account. Despite the success, City National realized there was a major market opportunity that was being missed—the chance to attract and appeal to the overlooked value buyer, those who gladly pay a fee for things they feel provide some form of commensurate value in return.

While this buyer type may sound strange for a mature banking market that has been dominated by free strategies, it is a large consumer segment that other top retailers have already capitalized on. More than 125 million Americans pay fees to save at Costco and Sam’s Club or with Amazon Prime. Nearly 100 million pay monthly fees for cell phone insurance and roadside assistance services. Providing value like these money-saving and protective services can be applied to checking products to attract these types of customers and grow relationships. It also helps with a new problem for the banking industry— regulatory initiatives that have reduced overdraft fees and other checking account-related fee income.

“There are customers looking for something more out of their checking account,” said Tim Quinlan, senior vice president at City National Bank in Charleston, West Virginia. “Customers are more willing to pay a monthly fee if they feel they’re getting more than basic banking benefits.” To provide this, City National implemented StrategyCorps’ BaZing checking program. For $5 per month, customers who choose a BaZing account— which the bank brands as City Gold—receive protection benefits like roadside assistance, identity theft protection and cell phone insurance. They also receive shopping, dining and travel discounts with participating local merchants and national retailers, plus traditional checking benefits like check discounts and surcharge-free ATM access. “We want our customers to be excited about their relationship with City National,” Quinlan said.

CityNational.png“City Gold has been a big part of that solution: ‘Wow. I get all these extra benefits and services.’ They feel like they are getting a good deal with us.” When helping a customer determine the right checking account, City National employees are extremely disciplined in educating the customer— without a high-pressured sales pitch. They start each conversation about opening a new account by telling customers about City Gold rather than just having the customer select from a list of checking types. The bank understands that City Gold is not for every customer. But when the fit is right, that customer who chooses City Gold ultimately develops a deeper affinity for the bank.

“We believe our employees should have fun and be excited about offering the product to the customer,” Quinlan said. “We want to make sure we present all the options and that they feel they received great service, not that they were sold something.”

That not only builds customer loyalty but also referrals. “When customers get excited about an additional service they enjoy at their bank, they tell another customer,” Quinlan said.

City National employees also successfully sell City Gold by being active users of its benefits themselves and telling their own personal experiences about the product.

The BaZing program also provides banks with a way to participate with the local business community by allowing local merchants to offer discounts on the BaZing network. Local businesses that want to join the BaZing discount network do not have to pay a fee—they simply offer a discount. They don’t even have to be a City National business customer to participate. Bringing this type of relationship opens the door to a deeper connection between the bank and a key business in the area. City National is seen as a partner that can help these local businesses grow.

“Successful banks like City National are always looking for customer friendly ways to grow fee income. By offering products that fit with customers’ mobile lifestyles, they have succeeded in delivering real value, savings and security that customers will pay for,” said Dave Crook, a partner with StrategyCorps.

The alliance between City National and BaZing’s parent company StrategyCorps will soon mark a decade. Neither firm looks the same as it did in 2005. City National has grown to one of regional prominence, while StrategyCorps has significantly grown and expanded the discounts and other services offered through BaZing.

City National has proven that keeping a sharp eye on serving the value checking buyer with quality products and coaching and motivating employees to meet goals makes it possible to boost customer satisfaction and significantly improve fee income generation on a customer-friendly basis.

Customer Analytics: Solving the Checking Account Profitability Quandary


6-11-14-SC.pngWhat are banks to do when zero percent of customers will gladly pay fees for their basic checking products, yet 100 percent of banks need more fee income, and an average of 43 percent of checking customers aren’t profitable? Simply slap a new fee on an existing product, especially one that’s been free? Sounds easy, but this just ticks off customers, especially the most profitable ones.

It is this Catch 22 situation that led StrategyCorps to create a customizable BaZing consumer checking solution that delivers customer-friendly fee income, fixes unprofitable accounts and protects the profitable ones. As a bonus, it also better connects with the mobile/online financial lifestyles of consumers. Here’s how it works.

Using BaZing’s analytical tool (called CheckingScore), we determine the profitability of each customer’s total householded relationship based on total deposit accounts, loans and fee income. Each customer gets a score based on profitability. With this financial foundation, the bank can then begin tailoring the BaZing-related checking product to the bank’s needs and deciding its place in the checking line-up.

This involves building exactly what the bank’s BaZing product will be, given specific market realities (such as fee income needs, competition, brand identity, marketing resources, current state of mobile and online platforms).

6-11-14-SC3.pngStrategyCorps and the bank determine which traditional banking benefits are necessary to combine with precisely chosen non-traditional benefits, like discounts with local merchants (including the bank’s small business customers) or cell phone insurance, which consumers have already shown a willingness to pay for. These benefits are delivered with a mobile application and online for a reasonable monthly fee of $6. The most profitable customers are provided these non-traditional benefits for free as a reward for being the most loyal and productive customers.

BaZing’s list of available non-traditional benefits revolve around two premises: (1) saving customers money when they spend it, especially with local merchants and (2) protecting customers when something unexpected happens in everyday activities.

Plus, due to StrategyCorps’ purchasing power, the price of a bundle of several of these benefits in the checking account is typically less than the price of just one benefit sold on a stand-alone basis.

There are nearly 200 banks today with the BaZing solution out of thousands of banks facing the fee income and profitability quandary described above.

6-11-14-SC2.pngFirst Financial Bank in Abilene, Texas employed BaZing to simplify and standardize active and grandfathered accounts. The bank had more than 120 different deposit accounts due to acquisitions and its corporate structure, which were slimmed down to eight accounts across ten banks in its holding company. The bank also used BaZing to upgrade its value-based checking account (Wow! Checking). This allowed customers to save their hard-earned money with local community merchants (including nearly 200 small business customers), while generating substantial new customer-friendly fee income.

Lakeland Bank in Oak Ridge, New Jersey customized BaZing as Elite Checking to improve consumer checking profitability, with incentives for customers to increase their debit card usage. It also provided the bank with a competitive advantage in the crowded New Jersey/New York City metro market with a checking account that aligned perfectly with their brand identity.

The game-changing innovation of BaZing can be summed up in its typical financial results for a bank:

  • Unprofitable checking accounts (about 43 percent of all accounts) can be fixed by generating nearly $75 per year per account in customer-acceptable fee income. This is usually a fee income lift of 250 percent+ over existing levels.
  • Super profitable checking accounts (about 15 percent of all accounts) can be protected and retention increased by providing BaZing’s benefits as a reward for their loyal patronage.
  • When unconditional free checking is offered (a rarity these days), new checking customers will choose the fee-based BaZing-related account 30 percent of the time, and they will chose it more than 50 percent of the time when totally free checking isn’t offered.
  • The consolidation of grandfathered accounts into a simplified active account line-up saves tens of thousands of dollars annually in costs related to maintaining, managing and servicing these grandfathered accounts.

Strategically, BaZing engages customers differently, so they remember the bank when they’re not in the branches (average annual branch visits per customer is three) by going beyond basic banking.

Putting the Retail Back in Retail Checking Design


mobile-rewards.jpgAsk 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.

Does Checking Need a New Name?


6-19-13_StrategyCorps.pngChecking accounts have been around in some form or fashion since 100 B.C. when the Roman argentarii (money changers) issued an early form of checks to their clients. Checking accounts then made their way to the U.S. during the early 1700s as colonists adopted the popular checking system brought over from Europe. Then in the early 1860s, The National Banking Acts laid the groundwork for the national check clearing system.

Yet today, the main reason for calling this account a checking account—the writing of checks—seems to be losing its descriptive accuracy. Checks have been declining in importance and in volume for the last decade or so (down from 16.9 billion in 2000 to 5.1 billion in 2012 per the Federal Reserve). Ask folks 30 years old or younger about checks, and they’ve either never written one (and don’t even know how to write one) or could count the total number they’ve written on their fingers and toes.

As a frequent attendee, exhibitor and presenter at retail banking conferences, I get to talk to lots of bankers and listen to a lot of speakers. While the term checking is still commonly used (and the acronym DDA for demand deposit account, to a lesser extent), everyone in retail banking seems to be struggling with what else to call it. I’ve heard terms like the generic bank account and the slightly more descriptive transaction account and debit account.

However, these names fall as short as the term checking does. The drawback with these alternative names is they are way too bank- and functionally-centric, employing terms generally unrecognizable by the public such as debit and demand deposit.

With alternative banking channels like online banking, online bill pay, mobile banking, mobile deposit and bill pay, smart ATMs and electronic person-to-person payments driving down interaction with real live bankers, the product actually delivering these functions becomes even more the identity and reference point of the customer relationship. The product housing these functions is increasingly the primary connection of your bank customer to your bank. Or as Brett King, the author of the books Bank 2.0 and Bank 3.0, puts it, “Banking is no longer a place you go… it’s just something you do.” And most of the doing relates to typical checking transactions. So the new term for checking must express a more customer-centric purpose of engagement.

But your bank can’t just call it something different and leave it at that. The account must truly be upgraded from ordinary checking delivered in the past. The checking account of today and in the future must deliver much more intrinsic value and convenience than ever before. It must connect with customers better and differently for your bank to be relevant in their lives.

Your customers are already thinking about their checking accounts differently (and using them differently too), so your bank must think about them differently as well, including not only what you call the account but also what it delivers—a relationship-building experience.

Who knows how that will evolve into a new name to replace checking or DDA? Something short, sweet and more meaningful will develop. I have some ideas already on this, do you? If so, let’s compare notes and maybe get this naming issue resolved sooner rather than later!

The Top Five Retail Checking Trends for 2013


outlook-new.jpg2013 holds much promise and potential for financial institutions (FIs) willing to think, believe and invest in checking product design and delivery that takes into account the top trends shown below. For those FIs that don’t, good luck waiting for overdrafts to make a comeback or for customers to start gladly paying for traditional checking-related benefits.

#1 Customer Friendly  Fee Income Will Continue to Emerge

2013 will mark the beginning of many more FIs deciding to design checking accounts that are so good that their customers will actually want them enough to willingly pay for them. Design previously   employed to devise complicated account terms and conditions that result in customer confusion and unfriendly penalty fees will be rechanneled into innovative design of great products focused on a fair exchange of value with customers for a reasonable monthly fee. This customer-friendly, fair value approach is the only way to generate massive, growing and sustainable fee income in today’s regulatory environment.  

#2 Relationship Building Will Necessitate  a More Engaging Product Experience

The rapid and projected growth of online and mobile banking (e.g. a March 2012 Federal Reserve study) has reduced branch traffic (25 percent over the past five years per consulting firm Bancography). This limits the number of opportunities for customers doing routine, checking-related transactions to interact directly with branch employees and experience firsthand exceptional customer service.

This means the checking product’s inherent value has to step up to play a larger role in building customer relationships. To do this, the checking account’s “customer connection factor” (CCF) will need to be much higher than it is today. In 2013, more and more FIs will realize the growing importance of the checking CCF and design and deliver accordingly. The top FIs are already there.  In 2013, they will smartly integrate applicable retailing best practices like local, mobile and social into their design and delivery. Those that wait to improve the CCF and rely solely on great customer service will regret this decision.

#3 Fixing the Unprofitable Relationships Will Be Required

The primary revenue generators (loans and fees) will continue to struggle to recover in 2013, while operating costs will continue to rise. This stubborn financial pinch will necessitate that FIs can no longer ignore dealing with the approximate 40 percent of their checking household relationships that are unprofitable (and make up only 3.5 percent of total revenue and 2.2 percent of all other deposit and loan relationship dollars). FIs will fix these relationships by actively employing the first two trends and not depending exclusively on the elusive cross-sale. Otherwise, the financial pinch will continue its squeeze and hurt.

#4 Optimizing the Existing Base of Profitable Checking Customers

Just as important as financially optimizing the unprofitable relationships is getting as many of the approximate 60 percent of customers who are profitable to experience your product’s improved CCF. This is the plan to optimize protecting (retaining) and growing existing profitable customers.

The top way to do this is to let them experience checking products with higher CCF than what you offer them today. Getting this done means FIs must also use innovative ways to get these enhanced products into the hands of these customers via unordinary marketing strategies like sweepstakes, contests, satisfaction guarantees, email communication, viral promotion and small business community tie-ins. Free or modified free checking will still be the dominant product strategy (only 9 percent of community banks have gotten rid of it and another 9 percent plan to). The difference maker when it comes to optimizing the experience of your best customers is for products to be better, not just free.

#5 Simple, Simple, Simple Will Win

This has been a trend for many years before 2013 and will most likely continue for years after. There are the three simple things FIs can do to win the retail checking game more in 2013 than in 2012. First, simplify your line-up down to three accounts (two if you don’t offer free checking) and clean up the grandfathered ones. Second, don’t invest in a branch sales report that tracks more than just direct sales, cross sales and referral sales by product that can’t be ranked in terms of sales performance down to the individual employee. Third, your checking-related sales incentive plan must be always on, (not just “on” when connected to a product or marketing campaign) and  explainable and calculable in less than thirty seconds.

Statistics stated are from StrategyCorps’ proprietary database of over two million accounts and polling research of about 100 FI executives.