Experts Check In on Checking Accounts

By Marilyn Kennedy Melia

It’s long been checking’s duty to be the anchor of a bank’s retail business.

That tradition still holds, though banks must now work harder to stay relevant in an ever-shifting field of competition.

“The dynamics have changed pretty considerably,” said Mark Gibson of the consulting firm, Capital Performance Group.

Online “checkless” checking from non-banks brings low-cost competition. And Amazon’s recent announcement that it may partner with one or more large banks with a branded checking product raises a threat from a retail behemoth that has left a trail of destruction as it has made inroads into other industries.

Still, leaders in the field are optimistic that there are ways to navigate through the competition.

Lance Kessler—bank consultant and faculty member at the ABA Bank Marketing School—points to studies that show customers, including millennials, want digital, mobile checking abilities, but also value being able to visit a branch to have questions resolved.

Here’s what the experts are telling us about how to stay current with your checking programs by:

  • Keeping options simple, yet personal
  • Assessing your bank’s unique position
  • Staying current, profitable, but not disruptive

What’s on the menu?

“There is no magic number” for how many checking programs a bank should offer, said Amy Pierce of the consulting firm Bank Strategic Solutions.

“You do want products to meet the needs of different customers,” Gibson stilpulated. “But you need simplicity so that the banker in the branch can easily explain which options best fit the customer—and that suggests fewer rather than more choices.”

Checking options typically include:

  • An account geared to students
  • Another aimed at seniors (usually interest-bearing)
  • An interest paying account for more affluent customers who keep a high balance
  • A checkless or online account

While that roster is fairly common, there’s considerable variation underway. “Just two or three options might be best,” Gibson said, adding that Bank of America has pared down to just two basic plans.

An online offering with mobile capabilities has become a necessity, Kessler noted. Large institutions—and non-banks like Amazon—are able to harness cutting edge technology. What about the smaller banks? Kessler pointed out that they can have state-of-the-art technology in some areas, but not all. His advice: “You must pick and choose the technologies that are right for your market.”

No matter how carefully the checking programs are crafted for various market segments, front-line staffers need to be able to communicate the features that are right for different customers. With technology, Kessler said, that’s a more sophisticated task. “They need to be able to pick up an Android, or an iPhone, or tablet and show customers how to use [technical features],” he said.

Finding the sweet spot.

The big national institutions have an advantage with millennials, said Gibson, “and maybe also Gen Z. They like better-known brands.”

But the lure of banking with a well-respected institution in the area, coupled with easy accessibility, is still a powerful draw, noted David Giesen of the consulting firm Navigant. “You can call or visit and say, ‘Help me out on this.’”

Moreover, since most individuals open their first checking account at the end of high school, Gibson recommends that banks use their own data to identify households with young members to market a student account.

Once a customer opens a checking account, and keeps it at least three years, the chance that they will leave diminishes considerably, Giesen said. Many customers go on to establish other banking relationships, like taking an auto loan. And, once a customer automates payment on all their regularly occurring bills, it’s more of a task to make a switch.

Make frequent check-ins.

Marketing officers are constantly monitoring whether customers are satisfied with a bank’s checking offerings.

But even if research shows customers love the options—and accounts keep growing—that’s not the total picture.

“When you look at any retail deposit account,” Giesen advised, “you must ask: Are the fees and costs associated with reaching a particular group advantageous for the bank?” He added that evaluating the costs is a “fairly sophisticated process.”

Cue the asset and liability management committee.

Kessler explained that this group is typically headed by a finance department officer, and also includes the marketing officer, as well as representatives of all the “key profitability areas” of a bank.

Because marketing officers have studied the demographic breakdown of customers—and tallied their respective share of the bank’s deposits, mortgages, and consumer debt—they’re in the best position to show the committee “where the opportunities lie.”

In today’s rising rate environment, an important part of the process is forecasting attrition under various interest rate scenarios, Giesen added.

Kessler pointed out that seniors age 50 and over are likely to hold the majority of the retail deposit base. Designing a senior checking to offer perks on CD rates might fit in with the bank’s overall strategy on growing deposits.

However, changes to checking plans—even adding perks—shouldn’t be too frequent, the experts advise. No more than once a year.

Any tweaks will have to be carefully communicated to customers.

Customers can be resistant to change of any kind. “Show how useful the change will be to a customer,” Pierce suggested. Staffers must be ready to explain how customers can adjust their habits to benefit.

For example, Pierce said, if there is going to be a charge instituted for paper checks over a certain monthly limit, “You could show them how to set up automatic payments online.” Outstanding customer service can help banks avoid the kind of backlash that sometimes comes with transition.

Marilyn Kennedy Melia is a banking and personal finance writer based in Chicago. Email: [email protected].