- Wired: Relationship checking
- Tired: Free checking
- Expired: Fee-based checking
The last two are self-explanatory and familiar. The first is one of the places credit unions can distinguish themselves, especially among young adults.
When I first heard about BancVue’s high-interest Reward Checking two years ago, I thought two things: 1) Great idea, and 2) Competent CFOs will be engineering similar accounts in-house within months. I was right on both counts as I know a handful of credit unions who are simply programming their own systems to offer a high interest rate to checking account holders who receive e-statements, use their debit card a dozen times each month, lock in direct deposit, and use bill pay.
So kudos to BancVue for abandoning their laurels to launch Kasasa a new iteration of the rewards checking account. In this new version, members can take their rewards in the form of cash, a deposit into savings, iTunes downloads, or most intriguingly giving which allows a depositor to send checking rewards directly to a cause she cares about.
In his thought-provoking book, CauseWired, Tom Watson argues that affiliating with causes is the next frontier of marketing, especially to young adults who support causes fluidly (and sometimes only nominally) online. But the ability to voice support for a cause and to support it financially in this way is a step forward and a differentiator for credit unions who use (or copy) BancVue.
Thus ‘relationship checking’ offers more long-term value than big banks’ $125 bribe for checking accounts. It also holds the potential to tie members to their financial institution in a much more emotional way than ever before. After all, if my checking account is not just convenient but allows me to support a worthy cause at the same time, I’m likely to remain happy AND think thrice about moving my money somewhere else.
As for attracting new money from cash-strapped young adults, a 2007 Cone Communications survey (free registration required) found that 83% of Americans say companies have a responsibility to help support causes, and 87% would switch from one brand to another if the other brand is associated with a good cause. Top consumer marketers – including Dove soap, Whirlpool appliances, and Nike – have been gravitating to causes that mirror their core business for years.
The recession doesn’t change the fact that consumers are increasingly demanding tangible benefits for their patronage. It’s clearer than ever that long-term consumer deposits are an incredibly stable source of funding, so programs that both intrigue and reward the common consumer are sure to stay wired.
Additional kudos to $102M Seasons FCU in Connecticut for being the first credit union on the Kasasa program, although they have not adopted the ‘giving’ aspect.
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The structure of Rewards Checking apparently generates “surplus promotional revenue,” which can be used to (1) pay higher interest rates, (2) giveaway iTunes songs or now (3) give money to charity. Financial institutions have options as to how they can utilize their “surplus promotional revenue,” but I’d expect to see more creativity and a greater range in the future. Assuming the Rewards Checking model is indeed profitable over the long-term, I’d bet financial institutions will explore many new and different flavors of this model.
It’s worth noting that an interesting-bearing checking account that donates earned-interest to charity isn’t entirely new. VanCity has had its Shared Growth Chequing account for some time.
Too bad Kasasa isn’t white label. I don’t understand why a financial institution would want to build the brand of a third-party checking product—something their competitors can easily add? If I deployed it at my financial institution, I would want to use my own, unique name, not the Kasasa brand (although I do like the Kasasa name).
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Good point about VanCity. I should also have pointed out that you don’t have to be a giant credit union to do something similar; $75M Santa Cruz Community CU has been running the Community Visa to give $0.05 to a local charity every time their card is used.
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Great article, I thoroughly enjoyed it!
Jeffry, you make an interesting point about the branding.. I think the overarching objective for creating a third party brand “KASASA” is to offer consumers a recognizable brand that will allow community financial institutions to compete against the big banks and their huge R&D/marketing coffers . In 1994, CFI’s controlled 70% of the banking market share, today big banks control 70% and CFI’s control 30%. At the end of the day it’s the big banks that are going after CFI’s market share.
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