The battle to acquire retail checking accounts is ferocious, with many regional banks experiencing a decline in their customer base.
Clearly something is broken. National banks are pulling in new customers with generous cash offers. New fintech entrants make it quick and easy to open a basic checking account. But many regional players are struggling to attract their fair share of these consumers.
Part of the problem is that regional banks just don’t spend enough time analyzing why consumers pass them by. After all, if a bank can determine the underlying factors that drive “negative consideration,” it can take actions to address the issues.
Novantas recently dug into the matter and found three high-priority tactics that regional banks can use to get back in the game: improve visibility, market to shifting customer priorities, and, of course, set the appropriate fee structure.
SHOP UNTIL THEY DROP
At any given moment, 1% of the U.S. population is shopping for a checking account and half of them are under age 35, according to data from findabetterbank.com, a Novantas website helps consumers choose a checking account. The website presents shoppers with roughly 700 checking products from nearly 200 institutions, allowing them to choose the features that are most important to them.
The upshot is that most checking-account shoppers gravitate toward a brand that they know, a development that isn’t surprising, especially when it comes to finances. For banks, the challenge is to familiarize potential customers with the institution before they start shopping. Otherwise, the bank may miss an opportunity with those consumers.
The Novantas research also found that consumers’ “must-have” features are changing. The importance of mobile banking and mobile deposit features increased significantly between 2014 and 2018, while the importance of old-fashioned characteristics like surcharge-free ATMS and unlimited check writing declined. (See Figure 1.) In a nutshell, digital capabilities are merely table stakes for today’s checking-account shoppers.
INCREASING CUSTOMER AWARENESS
Those features don’t mean much, however, if the consumer isn’t going to consider the bank in the first place. For regional banks, brand awareness is critical for consideration regardless of the checking account’s benefits and features.
Indeed, “unfamiliarity with the institution” is the top reason why shoppers won’t consider a regional bank. (See Figure 2.)
The research also found that 11% of potential customers wouldn’t consider a regional bank versus 15% who wouldn’t consider a national bank and 18% who wouldn’t consider a direct bank (likely because they want access to branches).
So how should a bank increase its awareness with potential customers so that it isn’t excluded from consideration? And what are the right tools when nationals dominate the share of voice to win prospective customers?
Novantas believes that smaller institutions should pursue lower-funnel marketing tactics to influence buyers of checking accounts, such as direct mail and digital advertising. These can be used to enhance the reach of branches so that the bank stays on the potential customer’s radar when they start shopping.
LISTENING TO THE CUSTOMER’S CHOICE
Once a bank lands itself in the consideration set, it must pay attention to how it got there — whether it’s branch proximity or having a product that speaks to the customer’s needs. The problem is that many regional banks don’t even think about why the customer chose them in the first place, making it all too easy for that customer to jump ship when another bank starts to woo them.
In some cases, this is because banks aren’t appropriately evaluating their products as they pertain to customer needs. Most banks, for example, offer several tiers of products for customers. But Novantas research has found that the premium level often isn’t the best fit for most customers and, in some cases, even comes with higher fees than the other tiers.
One regional bank, for example, doesn’t offer surcharge-free ATMs even though shoppers in its footprint ranked them as an important factor. Similarly, the bank offers free linked accounts even though that ranks as less important with prospective customers. If a bank isn’t meeting the needs of potential customers, why would a consumer choose that institution?
The same bank charges more than average in its entry-level account for items that prospective customers care about, such as monthly maintenance fees. But it charges less than peers for things that often go unnoticed, like overdraft transfer fees.
In short, fees can be a make-or-break decision for many customers. And when a bank’s offerings don’t align with the priorities of its prospective customers, it isn’t optimizing its products for maximum appeal.
The checking account has long been considered as the stepping stone to customer primacy. That may be changing as banks also consider other products to be integral to a solid customer relationship.
Still, the checking account isn’t going away anytime soon and neither is the competition for its customers. Regional banks need to spend more time figuring out what potential customers want so they can modify their offerings to attract the best ones.
Director, New York
Director, New York