Community banks are struggling to find ways to locate
The $500 million-asset bank will pay its customers to increase their use of debit cards and automated channels as a way to increase fee income, attract younger consumers and adhere to an anticipated regulatory squeeze on traditional credit card fees.
"We are flush with cash as a lot of banks are right now — lending is down. So we want to focus more on accounts," says Jim Muse, senior retail banking officer of the Peabody, Mass.-based North Shore, whose footprint includes Boston's northern suburbs.
The bank will pay $3 each month to consumers who hit certain balance, digital channel and transaction targets; and will reimburse up to $25 per month in ATM fees from other banks. While this fall's hubbub over new debit fees at larger banks has waned, North Shore hopes rebates tied to debit cards can be part of a broader retention and account acquisition play that also includes a free checking account option and an onboarding service.
The cash-back checking program requires an average daily balance of $1,000 to avoid the $12 service fee. To qualify for the cash-back reward and ATM reimbursement, the consumer must receive direct deposits into the account, sign up for and receive electronic ATM statements, and conduct a minimum of 10 debit card point of sale transactions and a minimum of three bill payments through the bank's consumer web portal.
While transaction-based rewards aren't new to banking, particularly to larger banks, they are new to North Shore. "This is our first foray into a rewards loyalty program," Muse says. "The only thing we'd really done before was a quarterly debit card promotion."
To execute the program, the bank licensed relationship reward software from Fiserv that is integrated with the bank's current underlying systems that lets it set parameters and configure the loyalty program (Fiserv also hosts the bank's data centers). North Shore is additionally using a consulting service from Fiserv to model the rewards program to help the bank optimize the mix of requirements and perks. "Putting together a loyalty program is tough to do. You try to find a way that's easy for consumers, and is also salable and profitable for us," Muse says.
The tech firm examined past customer behavior, along with other demographic data, to determine how many customers would qualify each month, and matched that against the bank's goals to increase debit card and online activity. Beyond Fiserv, other tech firms offer similar services, such as FIS' Loyalty Service and Scorecard Rewards. Jack Henry offers BIG Rewards, which allows banks to offer high interest checking, cash back and merchandise incentives.
North Shore is pressured by ample competition — its territory is dotted with large banks with expanding loyalty programs of their own. TD and Citizens are among the larger institutions with an active presence, along with a number of other community banks.
Larger banks are looking for new ways to wring income out of loyalty programs because of the anticipated impact of the Durbin amendment to the Dodd Frank financial reform package. While North Shore is too small to be directly impacted by the law, like a lot of community bank execs Muse believes his bank will eventually have to comply with the new rules, at least in spirit, to respond to the moves made by larger banks to offer
"We know it's going to filter down to us. We are across the street from four branches of other banks," Muse says, adding his bank is also hoping to increase its volume of debit transactions per account, which is below average.
Muse says the bank's research found that its consumers preferred cash back rewards as a loyalty preference, over other options such as high interest checking accounts and merchandise gifts tied to account activity. He also says the bank's existing customer base is getting older, and North Shore hopes to attract younger consumers by focusing on digital transactions. "We wanted to keep things as simple as we could," he says.
