The American Bankers Association reported that the average checking account costs a financial institution $250–$400 per year. This means an FI needs to make at least $250 in interest, fees, and interchange revenue to cover the low end of checking account expenses. The good news: about 60% of checking accounts cover these costs by bringing in $413 per year on average.
On the flip side, that still leaves 40% of checking accounts carrying a net loss. The factors for this are directly attributed to engagement. The difference between profitable and unprofitable is clear:
- A profitable and engaged account receives a regular direct deposit.
- Profitable customers have increased account ownership (savings, loans, etc.)
- Profitable customers use their debit card 15-20 times a month MORE than the unprofitable group.
These actions are the results of an engaged customer with a primary FI relationship. The question in the boardroom is: “How do we make sure our new checking account customers are profitable?” No one wants to see that 40%.
The answer is simple: make switching easier and accessible.
Easier means digital. Remove any paper or mailing from the switching process. Customers today are signing up for accounts completely online. Do not force a digital customer to use a physical channel, such as going into the branch.
Profitable customers have increased account ownership and use their debit card 15-20 more times per month.
Accessible means not just providing access, but providing that digital switch kit at the right time. Allow an applicant to start switching their direct deposit immediately from the checking application. The applicant is completely engaged while opening a new account: Don’t lose the engagement by sending an email with instructions to a switch kit. Instead, provide a direct link from the end of the application to keep the funnel moving
Making the switching process easy and accessible will make an immediate impression on the newly acquired customer. It will also make an immediate and positive impact on your FI’s bottom line. With each profitable account adding an average of $163 per year in revenue, simple accounting would say this is a no-brainer!
