So, your financial institution is considering a new form of checking account. Congratulations on your initiative!
Savvy consumers know there are many options in checking, including:
- Credit unions
- Community banks
- Mega banks
- Online banks (that includes PayPal now, too!)
- Neo banks/Fintechs (Dave, Varo, Chime, etc.)
- Even Apple now offers banking products
That’s a lot of choices, spread between traditional banks, innovative fintechs, and tech titans. These options make your checking accounts a commodity.
Compared to all these options (and similar companies acquired by the big banks), a basic checking account is a gray painting on a grey wall. It’s fine, but it definitely doesn’t stand out.
What if it could?
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Two kinds of checking account options can brighten up your wall of services, and help address your liquidity challenges:
Rewards & Subscription (Value-Added) Checking
Both offer the potential to grow loyalty and income, while attracting new account openings. But which approach is best for your financial institution?
We’re here to help. Even though we specialize in Subscription (Value-Added) Checking, our goal is for you to walk away satisfied, and part of how we achieve that is by providing information on each type of Checking program, not just the one we offer.
For the purposes of this comparison, even though there are several firms offering these services, we will focus on two of the most popular providers:
- Kasasa® for their Rewards program
- StrategyCorps® for their Subscription (Value-Added) Checking program
We want you to be able to choose the service that’s best for your institution. We’ll discuss how the two types compare in these areas:
- Revenue (Non-interest income)
- Implementation
- Cost (initial and lifetime)
- Qualification
- Training
- Account holder benefits
- Institution benefits (other than revenue)
- Account acquisition
- Account holder loyalty
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Rewards Checking
Let’s start with Rewards Checking, and get the “uncomfortable” money part out of the way first: The account generates income through interchange fees as your account holders use their debit cards. The provider may also pay referrals for connecting account holders with various insurance products or other services you choose to offer.
Of course, because you’re offering rewards based on usage, more swipes will occur. It becomes a form of “profit sharing” between your institution and your account holders.
The most common form of rewards is cash-back with higher interest rates. In this arena, Kasasa® is the leader and most popular provider to financial institutions.
The Kasasa® account is always linked to a free checking account, generally with no minimum balance. The goal is to generate income for your institution while sharing a portion of the overall revenues with your account holders.
What Does Kasasa® Checking Look Like?
Rewards checking can take a few forms. Here are the current offerings (As of February 14, 2024):
- Kasasa Cash®: A high interest rate account, paid in cash, for every month the account holder qualifies
- Kasasa Cash Back®: Earn cash back on everyday debit card purchases with no category restrictions
- Kasasa Eats®: Earn monthly cash back on select grocery stores and delivery services
- Kasasa Play®: Get cash back on select streaming services
Checking That’s Still Yours
Just to be clear, even though the account is marketed with Kasasa branding, it’s still 100% an account at your financial institution. That means it still receives full NCUA or FDIC insurance.
The rewards features are an add-on on top of your existing account. Kasasa makes money through a contractually-agreed upon fee. Their role is to supply the administrative software and services, as well as the training and consulting needed to maximize your institution’s returns.
Your institution decides:
- Minimum $ to open account (usually with no minimum balance after opening)
- Cash back percentage
- Interest rate (if any)
- Debit qualifications
- Overall marketing plan
How Do Account Holders Enroll Their Kasasa® Accounts?
After staff training, your institution receives recommendations, templates, and materials on how to effectively market the new account(s) to current and new account holders.
These tools use traditional “opt-in” methodology, reaching account holders through e-mail, newsletters, branch signage, statement notices, on-hold messages, and social media.
What’s The Eligibility Period for Rewards?
Rewards are calculated based on a rolling monthly cycle. This period begins on the last day of the previous month through the second-to-last day of the current month.
For example, the January cycle is December 31 through January 30. Qualifying actions and rewards-eligible transactions must post on the account within this time. See some of Kasasa’s limitations and qualifications (in footer).
When Do Rewards Arrive?
ATM fee refunds post on the last day of the month. Interest posts on the 1st of the month and migrates to the Saver account if it’s available.
“Checking” Eligibility & Earnings
The account holder will receive an email letting them know whether or not they qualified and, if so, what rewards were earned. If they don’t meet qualifications, they receive a guide on what is needed next month and encouragement to try again.
Subscription (Value-Added) Checking
Now that we have seen the rewards side, let’s look at Subscription (Value-Added) Checking.
A leading company in the arena is StrategyCorps® (which we represent). Their premier retail offering is Bazing®, a mobile-ready package of consumer benefits headed up by their comprehensive cell phone protection, gas rewards, and ID theft program. A fee-based replacement for free checking, it provides a unique value proposition.
Wait…what? Pay? But wasn’t that the point of free checking? Well…the average checking account fee at top US banks is $10.77, and credit unions which have free checking may be missing out. Both Millennials and Gen Z are increasingly choosing financial apps (Neo-banks) for their banking needs. However, they will pay for value, and have become quite comfortable subscribing to various services for shopping, food, entertainment and more.
How Does Value-Added Checking Work?
If you’re using StrategyCorps®, it starts with CheckingScore®, an analysis system that performs “householding” to give you a better picture of account holder activity.
StrategyCorps® focuses on Primacy. Before considering any account changes, you have to know where you are. CheckingScore® uses over a billion data points, along with your own data, to identify who is a primary accountholder and who isn’t. Then, it helps bring that together into individual “households”, and places them into 4 activity “segments”.
Typically, the Small and Low segments, while encompassing approximately 35% of accounts, represent only a fraction of your annual revenue. These members represent a substantial drag on your institution’s earnings. They’re not using your institution as their PFI. What can you do? Business 101 – Grow from within.
Bazing® Benefits
Now you know where your institution stands. Only then does it make sense to plan out an engagement strategy. StrategyCorps® does so with a white-labeled mobile rewards app. Account holders use it to access the agreed-upon benefit mix, amplifying your checking account’s value, and associating your brand with those perks.
The cost to an institution for a typical benefit package is in the range of $2.00-$2.20/month/account. The recommended retail pricing is between $3.95 and $10.00, depending on the mix. Institutions currently offer it at an average of $6.45. These benefits sit on top of your regular checking account, with all its normal features.
Training for Perks
StrategyCorps® provides robust on-site training for every staff member, who can then transfer that excitement and knowledge to your customers. Your institution may opt to provide the service free of charge to staff, so they can enjoy the benefits and services for themselves.
Marketing to Your Unengaged
Two direct mail packages, with full-color brochures, are collaboratively designed and then mailed to your current unengaged (Small and Low) account holders, on an opt-out basis. The materials explain:
- Benefits and advantages of the new account
- Cost
- Date when the first fee will be deducted
- Requested action for the accountholder to retain or switch back to their current free account
Awareness and education are essential for a smooth launch.
While the initial opt-out marketing is only targeted to your unengaged segments, your institution will likely wish to offer the new checking program as an opt-in at your new accounts desk and customer service branches.
Expectations Upon Announcement
Once the letters start to arrive, expect a slight increase in inbound communications from account holders.
There will be questions about the new account, the cost, and from some, requests to keep their free account.
That’s totally normal. This is where your staff training really shines, so they can explain the value of the account, as well as manage these inquiries.
Your social media channels must be monitored as well. Online, the snowball effect is very real and can become an avalanche of misinformation and frustrated account holders if not proactively addressed. Be upfront, be clear, and be responsive.
The volume typically falls back to normal levels around 60 days after the letters go out.
Comparing Rewards & Subscription (Value-Added Checking)
Now that we have a clear background on what each approach includes, we can begin to assess their strengths and weaknesses across a variety of categories. Join us as we work towards a winner!
Program Cost
Rewards Checking
There are set-up costs to your institution. There are also monthly costs which support marketing and training. The company would also charge your institution a small monthly fee for every opt-in account.
However, all Kasasa accounts are free to account holders. Your institution may set its own qualifications such as requiring:
- Minimum deposit to open
- A minimum # of Direct Deposits or swipes
- Enrollment in online banking
- Enrollment in e-statements and log-ons
Subscription (Value-Added) Checking
There is a start-up cost for the CheckingScore® reports, marketing, and training. The ongoing costs depend on the benefit bundle selected, which averages about $2.20 monthly per account.
The revenue-generation for your institution comes from the decided mark-up to that monthly cost. Generally, it averages $6-$7 monthly per account.
Conclusion
Rewards checking does have up-front costs, plus continuing monthly costs. With Rewards, there’s usually no cost to account holders.
When account holders fail to use their debit card, the bank may take a loss on these accounts, since fees are charged regardless to the bank.
On the flip side, marketing encourages more overall debit usage, thereby generating income. Value-Added checking does have a fixed up-front cost, but also a built-in system to avoid monthly costs as they are passed on to account holders. Winner: Rewards.
Checking Account Implementation
Rewards Checking
New accounts are set up, ensuring they meet the Kasasa terms and conditions (and requesting any approvals as needed). Integrating Kasasa’s recommended marketing strategies requires minimal staff and time resources.
Subscription (Value-Added) Checking
The process for implementing Subscription (Value-Added) Checking is a bit more complicated. For your most profitable account holders, you want to hug and thank them for their relationships, while ensuring they know this new option is available. Meanwhile, your most unengaged accountholders are gently informed and transitioned from a free to a fee-based account.
To ensure a smooth conversion process, your institution works with the experienced team at StrategyCorps® (or chosen provider) to select the appropriate group and manage communication seamlessly. You may need additional communication staff and resources available for the transition period.
Conclusion
Changing from free to fee for Subscription (Value-Added), even when offering additional benefits, along with the choice to retain a free account, can be viewed negatively by some. With hundreds of implementations, this is the most important spot to follow best practices.
Staff will need to be sensitive to this and closely monitor social media channels. Rewards checking offers a simple opt-in enrollment process, promising benefits and no costs for account holders. Winner: Rewards.
Revenue
Rewards Checking
Account holders typically don’t pay a fee for their accounts. There are two factors which determine the net revenue of a Rewards checking program:
- How successful the marketing is in gaining enrollments
- The qualifying debit card usage by account holders
Marketed correctly, Rewards checking will generate a burst of “opt-in” enrollments when the program is first introduced.
Consistent marketing, combined with knowledgeable staff, can continue to grow the number of enrollments, and the volume of qualifying debit card usage.
According to Kasasa®, the average debit card swipes for Kasasa Cash® is 21 per month and 26 for Kasasa Cash Back®. This typically yields a 45% increase in non-interest income.
Subscription (Value-Added) Checking
While institutions may vary in which benefits are offered, and the fees they charge, non-interest income from a Value-Added program is more predictable.
A typical Bazing® Checking bundle combined with an average fee of between $5-$6, will generate approximately $45-$50 annually per account.
This translates to approximately $1,000,000 every year in non-interest income for every 25,000 account holders. And your institution begins receiving this new income monthly only 90 days after implementation.
When your unengaged become engaged, all other products and services experience large increases. For example, both checking and savings accounts will see significant growth in deposits, debit card usage will grow, and with it, interchange revenue. Even lending can experience a bump in volume.
Conclusion
Subscription (Value-added) checking’s unique partial “opt-out” implementation creates a large and immediate revenue stream. Plus the accompanying engagement of thousands of accountholders suddenly “re-discovering” the benefits of banking with your institution.
Using past experience, roughly 80% of the current engaged account holders will keep the Subscription (Value-added) account (and 30% of opt-ins will adopt) generating substantial and more predictable non-interest income. Winner: Subscription (Value-Added).
Account Qualification
Rewards Checking
Account holders must take certain actions to qualify for rewards. These generally consist of a minimum number of qualifying debit card swipes, and possibly also direct deposits and enrollment in e-statements.
Subscription (Value-Added) Checking
The only qualification is the monthly fee. No other account holder actions are necessary to qualify for benefits. In the event of insufficient funds, the benefits may continue during a 60 day grace period.
Conclusion
Not all account holders will meet the Rewards checking usage requirements every month, meaning benefits for them can vary. This creates an unpredictable income stream of interchange fees for your institution as well.
Benefits for account holders, and revenue for your financial institution are more consistent and predictable with Value-Added. Winner: Subscription (Value-Added)
Account Holder Benefits
Rewards
Some will get, some won’t. It all depends upon their debit usage and other qualifying actions. An account holder who makes 10-20 qualified debit purchases monthly could receive several dollars in rewards, in addition to any ATM fee refunds your program includes.
To ensure the highest percentage of account holders act consistently in this manner, regular marketing is necessary to keep these perks top of mind.
Subscription (Value-Added)
Benefits depend on the chosen feature mix and enrollment option. Let’s assume your institution is using a typical bundle with ID Protect, cell phone coverage, and Fuel Rewards.
All of these benefits are available to all the account holders. There may also be numerous other money and time-saving benefits which add up to substantially more than cash rewards.
Conclusion
Rewards gives back, but it’s dependent on your activity. Value-Added benefits and coverages are always there. Overall cost favors Rewards Checking. Here, account holder benefits favor Value-Added. Winner: Subscription (Value-Added).
Institution Benefits
Rewards
The more you use it, the more you get out of it. Therefore, loyalty and “top-of-wallet” mindset is reinforced, thereby aiding in retention.
In addition, marketed properly, Rewards Checking can be leveraged for new account acquisition.
Subscription (Value-Added)
As with Rewards, Subscription (Value-Added) Checking can also increase loyalty, retention, and new account acquisition. In addition, one of the main features, ID Theft/Resolution, has an interesting side-benefit.
While protecting your account holder, it is also protecting your institution, as their fraud becomes your responsibility. What they don’t lose, you don’t have to spend. Plus, all those shopping, travel, pharmacy, and eyewear benefits have your logo prominently featured upon access.
Conclusion
Both plans will positively affect account holder behavior. Value-Added includes benefits that can save your institution time and money while keeping your branding visible each time a service is used. Winner: Subscription (Value-Added).
Learn how one credit union made the change to subscription and the gains they saw following. Could you duplicate with your members? Get the data and honest insights needed in the Client Story.
Which checking account is right for your financial institution?
Do you come to a conclusion by just adding up the “winners”? Not at all. Some categories carry more or less weight within your institution. Providing this “scoring” system is our way to help you focus your search.
Your team understands your checking program priorities best. We can only offer guidance and education on different aspects to consider as you determine the best fit for you and your account holders.
Consider Rewards Checking If
Institutions which get the most value (forgive the pun!) out of a rewards checking account typically:
- Fully believe in Free Checking
- Have key retail staff to offer
- Will commit to consistent marketing to members
- Trust in building through “opt-in”
Go With Subscription (Value-Added) Checking If
On the other hand, adding literal value through a Subscription (Value-Added) Checking account is the best approach for institutions which:
- Want to re-energize a lagging segment & generate maximum income
- Has diligent staff and a system to effectively manage conversion (provider will assist in setting this up)
- Believes extra checking benefits are worth more than the cost (cell phone protection is worth hundreds per year alone)
At GreenProfit Solutions, Inc. we represent the Subscription(Value-Added) Checking program powered by StrategyCorps®. Curious if this checking program is the right choice for your institution? Choose a time in our calendar for a discovery chat.
While this was a lot to get through, it is merely a drop in our total Learning Library Checking category. More valuable insights and guidance are waiting for you!
Image credits: Handshake computer and dollar bills by Gerd Altmann. Credit cards by Republica. Falling piggy banks by 3D Animation Production Company. All from Pixabay.
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Dedicated to helping your credit union, large or small, deliver mission-focused financial empowerment to your members. And make a positive impact on your community while you’re at it.
Our Essential Guide to Checking eBook is for you! In 11 chapters of checking challenges…and opportunities, discover how checking can be your loyalty and revenue generator!