What are the Costs of Value-Added Checking?

(Last Updated On: June 7, 2022)

Ok, so that’s not what you meant. Fair enough. It’s a great question which raises many others. A Subscription Checking program (another name for Value-Added Checking) is more than the monthly rate you decide to charge.

Let’s dive in together to help you learn about the costs of Subscription (Value-Added) Checking for your institution.

On the surface, it seems an easy answer. One that Siri, Alexa, or Google Assistant should have no trouble answering. In fact, I’ll ask right now!

“Alexa, how much will Subscription (Value-Added) Checking cost my financial institution?”

• “Hmm, I’m not sure.”

She wasn’t much help. What about Siri?

“Hey Siri, how much will Subscription (Value-Added) Checking  cost my financial institution?”

• “Ok, I found something on the web for ‘how much will value-added institution.’ Take a look.”

Um, Siri, that…wasn’t…even…close.

I’m not even going to waste your time asking any other assistants. It just shows how hard it can be to learn about pricing for B2B items.

Definitely nothing like finding a good price on that new TV, car, or the trendy pair of shoes you’ve been eyeing.

Here’s a quick answer if you don’t have the time for the entire article right now:

What are the Costs to Value-Added Checking?

There are upfront setup costs for Subscription (Value-Added) Checking , no matter the provider, which can be as much as $10,000. Once running, costs to the provider are simply the base portion of the monthly fee (everything else is your institution markup).

Is B2B Pricing Some Big Secret?

When it comes to B2B products and services, prices are as well-protected from potential buyers as passwords (likely more so).

Why? Are they trying to keep it secret? Surely not from you. Maybe from competitors? Do those companies only believe in price-transparency during sales calls?

That’s just silly. Consider Shark Tank. What happens when the people pitching aren’t transparent with their costs, pricing, and margins? Mr. Wonderful shoos them off with his quip, “You are dead to me.”

We know pricing is a major factor in your decision-making process, perhaps especially when those costs are passed on to your account holders.

We understand. You don’t want to waste any time. And we already established that neither Siri nor Alexa are any help here.

Since finding pricing on something like Subscription (Value-Added) Checking  seems to be hard-to-find, we’re going to make it easy. Right here. Right now.

---

Before reading below (it’s awesome, for sure), you’ll want to take a look at this. Quick 1-page PDF: 4 Easy Tips to Increase Checking Revenues!

Get the Cheat Sheet

---

Menu Pricing

More than likely, your institution uses menu pricing on at least one other product line. However, if this term is unfamiliar to you, imagine going to a restaurant.

The waiter presents you with a menu. It organizes their choices, accompanied by pricing for each. Your bill reflects only what you ordered.

Menu pricing works the same for your financial institution. It allows you to pick-and-choose the products/services and pay only for those.

For Value-Added Checking, your “menu” may include account holder benefits such as:

• Identity Theft Protection
• Accidental Cell Phone Damage Insurance
• AD&D insurance
• Roadside Assistance
• Shopping Rewards/Discounts
• Vision Plan
• Dental Plan
• Buyer’s Protection

Each of these options carries with it a certain cost. To keep it simple for your account holders, you will determine the bundle ahead of time, so they have a single choice: Subscription (Value-Added) Checking or not.

Several factors determine the pricing beyond what their fixed cost to the provider:

1. Opt-out or Opt-in
2. Marketing Option
3. Benefit “Bundle”
4. Staff Training

A closer look at each helps us better understand the relationship between Cost and ROI.

• Much of this article will discuss the ups and downs to these differing approaches. In the former, the feature is active unless the account holders act. In the latter, the account holder must take an action to subscribe. The decision on which to use is up to your credit union, after discussing with the provider and assessing your specific data.

We know of providers which recommend both approaches, so cannot say which works best. However, from our perspective, the opt-in approach provides the greatest choice for members and the lowest “noise” for your staff.

1. Account holder communication of these new benefits plays an important part in the pricing. Will your institution be responsible for the marketing? Even if that includes expensive mailing(s) to account holders? Will the Subscription (Value-Added) Checking company take on this project (and expense)? We talk more about what to ask and consider below.
2. Which benefits will you offer? Most Subscription (Value-Added) Checking providers know what works best and will serve as a guide to ensure the benefit package you build meets your budget, cost to account holders, design, and performance goals.
3. Staff excitement creates account holder excitement (and engagement)! Of course, for them to understand why it’s so cool, they have to learn about it. Ensure staff training is built-in to the pricing and look for references on how successful it was for other clients. As you know, your staff can make or break many initiatives. It’s essential to have their support and buy-in!

One final point: The level of training may be determined by the offerings you choose; confirm all these details with your chosen Subscription (Value-Added) Checking provider.

Pricing

The question you came to get answered: What does Subscription (Value-Added) Checking cost?

As we brought up earlier, each “menu item” benefit has a set bulk-rate price which can vary depending on the issuer and the number of potential account holders and enrollment process.

The monthly price range to the institution for most benefits is between $0.10 and $1.00.

Naturally, the premium benefits, such as ID Theft Monitoring/Restoration and Accidental Cell Phone Damage Insurance, occupy the higher side.

However, they also convey the most perceived value to your account and are important to include.

Recall that many people pay upwards of $30 per month, per device, for cell phone damage protection from their carrier. And ID Theft Monitoring & Recovery can reach similar prices.

Even with your modest markup, you will be offering tremendous value to account holders.

One Subscription (Value-Added) Checking provider shared their standard benefit mix pricing with us for the purposes of this article.

With ID Theft Monitoring/Restoration, Cell Phone Insurance, and several other health and savings benefits, they have a monthly cost between $1.70 and $1.80.

They typically approach with an opt-in setup, but are open to opt-out if the credit union prefers.

So what does the financial institution charge? According to one provider’s case studies, their institution clients charge account holders between $2.95 and $8.95 per month.

Of course, the price you pay is only one piece of the question. You want to know the typical Return on Investment.

• Does Subscription (Value-Added) Checking make the institution money?

And because it’s partially intended to retain and attract checking accounts, one other question endures.

• Do account holders like it?

More on both below.

Opt-out Over Opt-in?

Stop us if we’re wrong…the main objectives of considering Subscription (Value-Added) Checking for your institution are:

• Generate revenue
• Differentiate from competition
• Stave off emerging Fintechs
• Delight account holders

Therefore, your goal is to ensure as many accounts become Subscription (Value-Added) Checking as possible.

We may not know you personally, but we know institutions like yours; you do things to create enormous success, not for “meh” results.

Right? Of course!

So, upon implementing a Subscription (Value-Added) Checking account, there are two paths the institution can take. The first is Opt-out.

With Opt-out, your existing Free Checking or other less benefit-rich account transitions to Subscription (Value-Added) Checking.

Account holders receive notice that their current accounts will be changing, what they will now include, and that no action is necessary to enjoy the benefits.

However, not all account holders will want a fee-based account (typically between 20-50%). That’s ok!

If your Free Checking account is the one in transition, we suggest adding a new Free Checking fall-back account. That way, these customers still have an option.

The other path is Opt-in.

What About Opt-in?

It’s a valid question. Here’s what some institutions say: “Instead of changing things for our members or customers, let’s just give them the choice and we know they’ll eat it up!”

Makes sense. Choice is good. Great options are appealing. It’s an incredible deal for what you get. Account holders should flock to the new account in droves!

And they will, with the proper marketing. Otherwise, people will just stick with what they have and you won’t meet your revenue expectations. That’s why you want to choose a great provider which aligns with your goals and ensures the best success for your membership.

Average Income of Subscription (Value-Added) Checking

If you net around $4 per month (that’s on a $5.95 fee with a cost of $1.75), per account, that could drive, on average:

$50 per year, per account

Let’s look at the income potential. Say your financial institution has 50,000 checking accounts. We’ll give them the option to switch into a $5 per month Value-Added Checking account.

We’ll go with best-case scenarios here. Let’s assume 40,000 of those accounts become Value-Added (the other 10,000 will stick with Free Checking and a very, very small percentage will close or consolidate their typically inactive accounts, further reducing your maintenance costs).

Since you chose a top-level benefit bundle, your costs are approximately $1.75 per account.

Some simple math gives us an impressive result:(40,000 X $5) – (40,000 X $1.75) = $200,000 (gross revenue) – $70,000 (net cost) = $130,000 additional income, per month!

What could you do with this extra income? Capital improvements? Community investment? Extra donations to your foundation?

We believe account holders need to experience their new Value-Added Checking account without thinking of the costs.

To that end, and to reduce customer service challenges from general friction, we recommend all financial institutions offer a 90-day money-back guarantee.

Other Costs To Subscription Value-Added Checking

At launch, the Subscription (Value-Added) Checking provider may charge an administrative or start-up fee. This can be as high as $10,000, depending on available marketing and outreach options. This initial fee helps cover a portion of the marketing and training costs.

Consider what TWO personalized mailings to all your account holders would cost your institution.

In reality, their costs will far exceed what is charged. They understand the profits available within the new account, especially when it is implemented well, and are willing to make the up-front investment.

Additionally, the Value-Added Checking providers view this as a partnership commitment.

In Summary

Checking accounts are now a commodity. They’re convenient places for consumers to keep and transfer their money. Though still the “hub” of banking relationships, their stickiness is diminished.

Plus, with competition from other financial institutions, Neobanks like Varo, and Chime, and threats from non-banks such as Amazon and Paypal, financial analysts advise differentiation through an increased value proposition.

While performing your due diligence amongst Subscription (Value-Added) Checking providers, please consider the following:

• Menu of benefits
• Marketing support
• Training
• Is it in person?
• For every staff member?
• Ongoing?
• Case studies
• Experience
• References

With other paths for improving your checking solution exist, including Rewards and Interest Checking, we realize that a Subscription (Value-Added) Checking program is not for every financial institution. For those which believe it may be a fit, we offer a program that delivers results along with the data to let your credit union operate more intelligently.

Want to learn more about enhancing your institution’s checking? Feel free to read these articles:

• What is Subscription (Value-Added) Checking and What are the Benefits?
• 7 Ways to Increase Checking Revenue
• Subscription (Value-Added) Checking Case Studies: Changing from Free to Fee

 Ready to have a quick, no-nonsense chat? Schedule here.