How One Bank Leveraged FinTech for a Major Account Win
Our torrid affair with Groupon has always been a love-hate thing: The more consumers embraced it, the more businesses discovered it was just another form of pay-to-play. That, and outflanking by copycat discount sites, explains in large part why Groupon stock eventually tanked and CEO Andrew Mason was forced out of the company he created.
But where Groupon weathered many setbacks (from which it’s never bounced back), banks can learn from and tweak the company’s revolutionary model. Consider Southern Bank, a 116-year old institution headquartered in Mount Olive, N.C. Its early and prescient FinTech partnership paved the way for something unique: a suite of revenue-generating checking products that delight consumers and support local merchants.
The story begins in 2007, when free checking was ubiquitous—except at Southern. Reluctant to cannibalize the non-interest income its traditional retail checking portfolio generated, Southern was hemorrhaging roughly 100 checking accounts per month.
“At the time, industry averages showed that introducing a free checking product attracted about 85 percent of new account openings,” recalls John Heeden, Southern’s senior vice president and marketing director. “We delayed free checking because we wanted to offer a viable and credible alternative.”
From checking reality check to inspired FinTech
Enter StrategyCorps, a startup offering a new type of turnkey online loyalty program called Member Headquarters. It works much like Groupon, with consumers netting discounts from several hundred thousand businesses, in categories ranging from food to travel.
Besides offering access to national name brands, the StrategyCorps model includes a local merchant procurement program that leverages a dedicated acquisition team to seek out new businesses—at no cost to the bank.
Likewise, participation for merchants costs nothing beyond the spiff and swag they offer consumers (for example, a free fountain beverage at a convenience store with a gasoline minimum purchase).
And beyond anything Groupon had ever provided, Member Headquarters offered identity theft protection as an early perk. This addressed a burgeoning consumer angst a decade hence, and could help Southern Bank show its customers that it fully understood a matter of great concern to them.
Diving for dollars
With all this potentially working in the bank’s favor, Southern took the plunge. It revised its portfolio to offer fee-based options that featured Member Headquarters, alongside a single free checking product. This not only stopped the bank’s bleeding: It began to boost revenues as well.
“When we first launched Member Headquarters, roughly a third of customers would choose one of the options,” he says. “We charged a nominal fee for those products and kept most of it.”
During subsequent years, they expanded to include benefits such as identity theft monitoring, roadside assistance, cell phone protection, and a savings program for pharmacy, vision and hearing services.
Other innovations included the launch of an analytics tool, dubbed CheckingScore, to quantify the value of existing checking relationships. And as a watershed, it introduced an updated app-centric version of the deals-and-discounts loyalty platform in 2012, dubbed BaZing.
Yet Southern only adopted new options as they made sense. For example, Southern’s demographic skewed too rural and mature to immediately embrace the BaZing app. As the bank evaluated what to do, it stayed with the Member Headquarters platform while adding other StrategyCorps loyalty benefits.
Each time, the ratio of loyalty-based accounts rose.
And the BaZing goes on
By late 2013, market and industry dynamics had sufficiently shifted. “We knew it was time to revisit our account offerings so we decided to take a second look,” says Heeden.
Using StrategyCorps’ CheckingScore to provide a quantitative analysis, Southern determined it could optimize its checking products by dropping free checking while also upgrading small and low-performing accounts to a StrategyCorps-enabled product in mid-2014.
“The analysis proved very accurate in forecasting outcomes,” says Heeden. “Our increase in non-interest income tracked almost exactly where it was forecasted, at about an 80 percent lift. Account attrition levels were far less than modeled.”
In addition to restructuring its checking portfolio, Southern also shed Member Headquarters in favor of BaZing. New accounts selecting an applicationenabled product rocketed up to 85 percent, a level that remains today.
Meanwhile, StrategyCorps continues to update the application with bank-favorable features. For instance, whenever a consumer opens the app, they see a running total of how much Southern has helped them save. Most recently, new location-awareness capabilities enable the app to push merchant offers to users based on their current position, whether they’re near home or miles away.
As for Southern, it offers two tiers of accounts that cost $6 or $7 per month. “We include a 90-day free trial on our BaZing-related products,” says Heeden. “Only a fraction of people decided it’s not for them.”
On the merchant side, Southern presents the application as a benefit. “When our business bankers call on prospects they pull out their smartphone, demonstrate the app and suggest the business could offer a deal,” says Heeden. “It’s a value-add, especially when we move into a new banking market—where scoring points with the small business community is always a plus.”
Stickiness, strategy: The Southern sky’s the limit
Overall, Southern’s partnership with StrategyCorps continues to evolve and thrive.
“Our BaZing offerings are definitely stickier,” says Heeden. “The CheckingScore analysis was advantageous and worth considering again in the future.
“Most importantly,” he adds, “we’ve grown our non-interest income significantly over time.”
For the bank, its customers and participating businesses, it’s just the kind of triple win that could teach the struggling Groupon brass a thing or two—or three.
By Anne Rawland Gabriel
Originally published on BAI.org
Anne Rawland Gabriel is a contributing writer to BAI Banking Strategies who has spent more than 20 years writing about business and business technologies as a journalist and marketing communications consultant. She is based in the Minneapolis/St. Paul, Minn. area.