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Steve Klinkerman
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Rick Spitler and Robin Foote Featured at BAI's Retail Delivery Conference, Speak on Free Checking Strategy
November 14, 2005
ORLANDO, FL - Retail banking companies need to look beyond the free checking product to the various kinds of people who use it, Rick Spitler and Robin Foote today told attendees at BAI's Retail Delivery Conference & Expo, the largest meeting of its kind in the retail financial services industry.
Managing directors at Novantas LLC, Spitler and Foote were featured speakers at a workshop titled "Free Checking Round II: Leveraging a Growing Customer Base." They explored the issues with free checking and made a variety of recommendations on how to place customer relationships on more solid economic ground.
Free checking "attracts a large proportion of inactive, secondary and unprofitable single-service transaction accounts, often causing an over-reliance on overdraft fee income for portfolio profitability," they said. Also, "free no longer works as a reliable way to gain deposit market share, as gains in account volumes do not dependably translate into balance growth."
Spitler and Foote advocated six initiatives: 1) cross-selling credit to utilitarian customers; 2) gathering additional deposits from free checking households with "excess" cash; 3) cross-selling "sticky" services, such as direct deposit and online bill pay; 4) up-selling selected households into advisory relationships and wealth management products, 5) revising product features and usage provisions to remedy the most unprofitable free checking relationships; and 6) studying customer usage patterns and fee sensitivities to boost fee income in sustainable ways.
To help drive these opportunities, three enablers were suggested. The first is improving "onboarding," or the process of cementing new customer relationships. Second, use free checking as the anchor in a broader product package to differentiate the offer and improve profitability. Finally, front-line incentives should be realigned to link sales rewards with customer relationship profitability.
Novantas is the acknowledged leader in customer science and revenue strategy for the financial industries. The Firm specializes in applying advanced analytics and technologies to help clients make better decisions in marketing, product, pricing, customer management, and distribution.