Feb. 27, 2017
StrategyCorps’ second annual “Consumer Checking Financial Performance Report” provides detailed analysis on more than 4.5 million checking account relationships incorporating over 600 million data points using its database from its CheckingScore analytical solution. The result is the most insightful and actionable information on consumer checking for financial institutions to use in benchmarking their own performance and to incorporate into their product and checking line-up decision-making.
The report shows that 35% of checking customers (“Small and Low Relationships”) only represent 2.1% of all householded relationship dollars (consumer deposits and loans) and generate just 3.7% of total checking related revenue. With an average checking balance of $958 and relationship deposits and loans of just $543, only $122 in revenue is generated annually, well below the $350 in revenue needed to cover servicing and maintenance costs.
“The prevalence of free checking in the past decade or so has created a Catch-22 situation for financial institutions. 100% of financial institutions want more fee income to shore up checking’s inherent lack of profitability, but 100% of customers vehemently dislike paying fees for traditional checking benefits,” said Mike Branton, managing partner for StrategyCorps. “Combine this with the reality that many checking customers don’t have lucrative cross-selling needs or want to spread their banking business around and it makes it difficult to fix and grow the over 35% of these checking accounts that don’t generate enough yearly revenue to reach the $350 break-even revenue threshold.”
On the other end of the financial productivity spectrum, only 10.6% of total checking customers represent nearly 63% of all relationship dollars and nearly 56% of revenue. These “Super Relationships” (over $5,000 in annual revenue) average nearly $152,000 in DDA and relationship deposit and loan balances generating $6,046 in annual revenue.
“These Super Relationship customers are at risk because they are the ones that every financial institution wants and are being targeted to be stolen by competitors (especially the mega banks paying big incentives to switch institutions),” said Branton. “To reduce the incremental attrition risk for these customers, who only average 5.4 years at their current institution, financial institutions must invest more in these customers from a product benefits and service standpoint. Anecdotally, we find that many financial institutions don’t know exactly who these Super Relationship customers/members are and/or think that those who are actually are not.”
Branton added, “In order To improve the financial productivity of low performers that are a drain on overall checking profitability and maintain the financial performance of high performers, financial institutions need to modernize, simplify and design their consumer checking line-up be a ‘Good/Better/Best’ configuration to align with the three dominant buyer types – fee averse, value and interest. This is what the most successful financial institutions have done – first, they objectively understand the financial reality of their checking performance, as shown in this report, before they take action. They then fix and grow Small/Low Relationships by upgrading them to better checking products and incentivizing them to increase their commitment to the financial institution be their primary one for which they bank. At the same time, they protect and grow the best performing by investing in them with additional product benefits and services that meet not just their traditional banking needs but other every day needs that can be met in an array of checking benefits.”
Banks and credit unions can download a complimentary copy of the Consumer Checking Financial Report at https://www.strategycorps.com/performancereport.
StrategyCorps is a Nashville-based company that works with hundreds of financial institutions nationwide to deliver mobile and online consumer checking solutions that enhance customer engagement and increase fee income. This includes two premier products – CheckingScore, an analytical tool that ranks each customer’s total financial productivity, and a customizable BaZing mobile rewards app that delivers thousands of local merchant discounts and name-brand national retailer offers to their mobile phone, among other protection benefits.