Why People Leave Their Bank

According to seventh annual household banking survey of 5,000 households conducted by Javelin Strategy and Research, it appears that fees and customer service continue to be the primary reasons a person leaves their bank (in addition to moving). What may be surprising to some, however, is that many millennial (ages 18-24) leave their bank due to the lack of ATMs while there is a growing percentage of households moving to a new bank to get mobile banking services. In fact, according to the study, 'ATM availability' edged out 'online features' as a factor that can predict customer attrition.

Don't Forget Small Businesses With Your Reg E Communication

While small businesses are not impacted directly by Regulation E, many of the banks at the Atlanta BAI Checking 2.0 Executive Forum where I spoke last week indicated that they will be reaching out to their small business customers to explain the law and the potential impact on their retail business.

Not only do many smaller businesses use consumer checking accounts for their small business transactions (with the potential for debit card rejected transactions), but with the potential for so many customers of small businesses having payments for goods and services rejected after the implementation of Reg E, banks are communicating details around this consumer legislation and options as to how to deal with transactions that are rejected.

Large Banks Not Adequately Serving Small Businesses

While there is little denying the revenue potential of serving the financial needs of small businesses, there continues to be a significant disconnect between small business needs and the way large banks serve this segment according to a research report released today by Aite Group (Small Business Opportunities: Are Large Banks Missing the Boat?). And with the continuing financial crisis, availability of sophisticated cash management products to smaller banks and the significant negative press around large banks, this gap in expectations is widening. In fact, the percentage of large bank small business customers describing themselves as 'extremely satisfied' with their primary institution has dropped from 50% in 2007 to 33% in 2009. This has led to a shift of small businesses considering a community bank to be their primary financial institution from 24% in April 2006 to 35% in April 2009.

Chase Card Innovation Gives More Control to Customers

Last September, Chase Bank introduced Chase Blueprint, an innovative set of features that improves the way customers can manage their credit cards with tools to pay down balances, manage spending and pay off major purchases. Available at no charge to more than 20 million consumer and small business Chase credit card customers, Blueprint is fully integrated into the account and consists of four unique features that Chase calls Full Pay, Split, Finish It, and Track It.

The components of Blueprint provide the following benefits:

Checking 2.0 Executive Forum to Discuss Reg E Strategies and Economics

On March 23 in Atlanta and April 20 in Chicago, I will be presenting along with leaders from Novantas, the Federal Reserve and others at BAI's Checking 2.0 Executive Forum. This one day session in two cities will allow senior banking executives to receive proprietary research and interact with peers in discussions around the best ways to respond to changing legislation impacting checking accounts. My lunchtime presentation will leverage the findings of research presented by BAI and Novantas, discussing ways banks are approaching the communication of Reg E changes with their customers and how future marketing initiatives will be impacted by this new legislation.

Bank of America's Overdraft Announcement is Great PR

Yesterday, Bank of America announced its intention to end its overdraft fees on debit and ATM transactions beginning this summer. Instead of being assessed a fee, the transaction will be denied unless a customers wants to opt-in to overdraft protection. The advertisement in today's Wall Street Journal positions the decision as a way to help customers from overdrawing their accounts and to provide more control and choice for their customers.

The problem is, Bank of America isn't doing anything that isn't already required by the Federal Reserve. They are just avoiding the cost of communicating with all of its customers to ask them to opt-in (at least for now). Excuse me if I don't believe that they will just walk away from millions of dollars in OD fee income.

It's Time to Require Email Addresses as Part of Account Opening Process

I have been in banking long enough to remember the roadblocks that stood in the way of collecting birth dates from customers before the government required this information as part of the customer account file. New account representatives complained that collecting the information was intrusive and impacted the privacy of the customer even though the information was already collected as part of other financial institution transactions (insurance and investments). Once the government required collection of this insight, the barriers came down overnight and marketers were immediately armed with an important tool in modeling households and targeting messages.

While it is doubtful that the government will ever mandate the collection of email addresses, now is the time to add this to the information your bank requires as part of the new account opening process. While some people won't have an email address to provide, this communication option is beneficial for both the customer and the bank.

Free Checking Obituary

Seeing that a lot of industry writers seem to be already announcing the death of Free Checking as a likely outcome of Reg E, I thought it would be appropriate to write an obituary for this product that saw such an active and successful life.

While many may claim to be the father of this service, paternity tests will most likely point to Ralph Haberfeld as the individual who most nurtured this service during the formative years and who was the strongest proponent of the benefits of the fee income associated with Free Checking. Ten years ago, when some banks (and consultants) began "pushing" free checking, there was concern about losing the meaningful income of monthly fees associated with traditional checking accounts.

Reg E Provides Opportunity for Enhanced Relationships

While many banks initially viewed the primary objective of Reg E communication as the recapture of potentially lost fee income, many banks are now positioning their Reg E communication around expanded overdraft options including linked accounts, checking reserve lines of credit and even electronic alerts. While the 12-18% of a bank's accounts that have had overdrafts in the past 12-24 months may still receive messaging primarily focused around opting-in, segmentation strategies will allow banks to reinforce the benefits of alternative overdraft protection to the roughly 80% of the households that do not generate revenues from fees or from higher balance spreads.

The benefit of communicating to a broader audience with alternative options is that the linking of accounts or the opening of a reserve line of credit can extend the life of a checking customer relationship by 2-3 years, thereby eliminating the replacement cost of the customer which can be between $200-$250 based on industry research. The value of this extended relationship far outweighs the potential for fee income for the mass market customer.

In addition, with media attention on Reg E, there is the opportunity to leverage this coverage and enhance the customer experience by educating the mass majority about overdraft coverage options available.