Checks Don’t Matter, Primary Checking Accounts Do 

The Federal Reserve says check writing has declined almost 75% in the last 25 years. There were more than 4 billion checks written in 2000. Today, that number is around 750 million. 

And recently we’ve started to see both banks and retailers start to cool on accepting these standards of a bygone era. Giant retailer Target announced it’s going to stop taking personal checks at its stores. And megabank JPMorgan Chase has also had some troubles managing checks in as a paper check deposit scam went viral on TikTok that many people weaponized against Chase, as well as other banks.  

Yet, while checking accounts are now inaccurately named, they remain as the most popular banking account in America. 

“The checking account remains the hub account for customers and members. When asked, “Where do you bank?”, consumers think of where they have their checking account. And it is the bedrock product that financial institutions use to build a profitable banking relationship” says StrategyCorps CEO Mike Branton. “The physical check has faded in importance as personalized digital banking has replaced choosing your favorite background scene on your personalized paper checks. 

What’s also remained is the fascination bankers have with the total number of new checking accounts opened and not how many of them view their FI as their “Primary FI”. This misguided mindset was further fueled by the recent new account acquisition success of the digital banks and neobanks. The reality of many of the customers relationships with these digital and neobanks has been mostly “toe in the water” accounts that ultimately cost more to maintain than the real revenue they generate. (Even though those same consumers will identify digitals as their primary FI.) 

Smart, successful community FIs understand that the value of a checking account is tied to customer/member primacy and not just the total number of accounts opened. What they have learned from the digital and neobanks is the need to offer modern checking products that deliver relevant services to their customers/members to expand the relationship to generate profitable revenue.  

Quality Over Quantity Using Product Features 

The ability of community FIs to offer the kind of products features that inspire primacy, boost organic growth, build real product differentiation, and generate profitable revenue requires an open mind to what a modern day checking account’s features can be. Offering free paper checks doesn’t inspire, boost, build, or generate. 

Fintech and neobanks opened the floodgates to what was possible beyond traditional checking account features by using digital services like early access to paychecks, overdraft forgiveness, and identity theft protection. This offered consumers checking products beyond simply free checking (many still touting free paper checks) or better interest rates on premier accounts. 

And with modern features comes the flexibility to avoid some of the penalty fee issues of traditional features like OD/NSF fees and minimum balances. It provides the opportunity to change the “fee philosophy” to a value-based membership model.   

Regulatory pricing pressures on traditional checking-related fee revenue (OD/NSF and debit interchange fees) will require FIs to find ways to upgrade features with relevancy to customers/members beyond basic banking to generate replacement revenue. The good news is these upgraded features inherently build primary relationships that results in that needed replacement revenue.