Now that free checking has become commonplace, some bankers are looking for other products and services to attract deposits.
The early candidates include holistic reward programs and free credit monitoring.
Tammy McIntosh, a senior vice president with National City Corp., said that the reward program her Cleveland company introduced in March of last year has “exceeded our expectations” in terms of customer enrollment and cross-selling.
The free program rewards customers for most transactions, including writing checks, direct debits from their accounts, and debit purchases. It does not offer points for withdrawing cash from an automated teller machine.
“You choose how you want to bank with us, and we’re going to reward you for it. It’s based on your choices, not on our choices, and that’s a differentiator, because you don’t see that out there,” she said.
According to a report Synergistics Research Corp. released last week, other banking companies are realizing that such programs can make checking products stand out.
“The most effective strategy for achieving competitive differentiation is reward programs,” William H. McCracken, the Atlanta market research company’s chief executive, said in an interview last week.
The report was based on a phone survey of 1,000 U.S. consumers conducted in May. The survey found that only about 10% of households participated in a checking account reward program. By contrast, about 75% of households have signed up for free checking accounts.
Debit rewards have grown in popularity, but offers that go beyond card transactions have “more robust rewards benefits,” Mr. McCracken said. “We believe that rewards-based checking accounts are much more powerful and increase stickiness.”
Co-op Financial Services began offering reward programs to its credit union clients about a year ago, but James A. Hanisch, an executive vice president of corporate development at the Ontario, Calif., vendor, said that only a handful of credit unions are offering its programs now, though many are considering doing so at the start of next year.
Competition has forced some credit unions to offer rewards — for example, if “there’s some large institution in their market” offering them, Mr. Hanisch said. “This is a competitive response.”
The companies that have had the most success with rewards have taken a “holistic approach” by linking them to the bank’s needs and customers’ interests, he said. “If they were running a promotion on new loans or on new saving accounts, or other behaviors that they wanted to incent, they added those to the rewards programs.”
Free credit monitoring also is gaining traction, though Mr. McCracken said only a few banking companies are offering it now.
SunTrust Banks Inc. started including free credit monitoring from Equifax Inc. of Atlanta in its checking account package in May of last year. The service watches customers’ credit reports and notifies them when accounts are opened in their name, if there are multiple credit inquiries to their files, of if a particular account’s balance increases substantially.
Craig Kelly, the chief marketing officer for SunTrust, said that identify theft and privacy rank highly on the list of consumer concerns. Though the response to the service has been low, he said his Atlanta company expects use to increase.
“You know you ought to exercise, and you know you ought to have your financial things in order, but people procrastinate,” Mr. Kelly said. “People like the idea more than they actually execute against it.”
And the customers the service has attracted tend to be more affluent, with higher balances, and they tend to stay longer, he said. “People who have more money obviously have more to lose if they have a problem, and therefore seem to have a higher interest” in credit monitoring.
