What advice do you have for the financial institution that’s considering revamping their deposit product strategy?

Look at product quality and design—not just rates, fees, and customer experience. Too many institutions focus on rates as the central piece of their revamped deposit strategy. For sure, that can work—in just a few years, Marcus has amassed roughly $60 billion in deposits. But Marcus spends more than $100 million on advertising. You spending that kind of money on advertising just your deposit products? I didn’t think so. And please don’t try to convince the market that you have a superior “customer experience.” A recent analysis by S&P Global looked at the advanced mobile banking capabilities of 70 banks with assets from about $10 billion an up. They found that the megabanks have, on average, about 16 of 18 advanced features on their mobile apps. As the asset level declines, so do the average number of mobile banking capabilities. So what’s left to compete on? Product design.  

What opportunities does the subscription economy present financial institutions? 

With so many consumers subscribing to so many services, how about a financial institution offering a better reward rate on their credit card for subscription-based service? Then following that up with Billguard-like services that monitor those subscriptions to watch for those sneaky automatic renewals and gray charges. I don’t think the big opportunity is to turn checking accounts into “subscriptions.”

You mention the need to “accessorize the checking account.” How does this impact the financial institutions bottom-line? 

Accessorizing the checking account means integrating value-added services into the checking account. These can be fee-based services that would add non-interest income to the FI’s top line. If they’re not revenue-generating add-ons, they can, at the least, be attractors of new account holders, or they could play a role in collecting valuable data about the account holder.

Why do more fee-based checking customers provide more referrals and add more products? 

Because fee-based checking customers tend to be younger than consumers with free checking accounts, and because younger consumers tend to refer products than older consumers do, and because younger consumers are more likely to be in the market for new financial products than older consumers. The point isn’t that “fee-based checking customers provide more referrals, etc.”—it’s that charging a fee for the checking account DOESN’T DETER customers from providing referrals and adding new accounts.

You’ve suggested that financial institutions should avoid being “Paycheck Motels.”  It hasn’t always been this way, so what’s driving this phenomenon and what’s the risk to the financial services industry?  

What’s driving the phenomenon? Easy money movement. It used to be a pain to move money between accounts. You could write a check from one account to another, mail it to your provider, and it would take, what, 10-14 days? Forget that! Or you could pay a hefty fee for a wire transfer. Now it’s free, easy, and while not “real-time,” the cycle time is (in most cases) 2 to 3 days. Risk? Loss of affinity. Here’s today’s reality: There are a good number of consumers who use Venmo 10 times more than they interact (or transact) with their bank. When they have repeated good experiences with Venmo, their affinity to the startup increases. Then, when Venmo comes to them and says “Would you like a debit card from us to use for your retail purchases?” what do you think those consumers are going to say? (They’re going to say “Sign me up!”)

At one point you were working in your basement. Rumor has it you’ve come upstairs. How has this influenced your research?

Moving closer to the refrigerator and coffee maker has taken the quality of my research to new levels. I’m sure that my legion of fans who voraciously read every word I write are reveling in this transformation of my research. 

Hold on. Let me rephrase that.

I think it might be more accurate to say: If there was actually anyone out there who actually read anything I’ve ever written, they’d be sure to notice a difference in the research from the old basement days.