Credit unions can emphasize the value of checking accounts, increase penetration without fees

MOUNDS VIEWS, Minn. - Of the 11,000 credit unions in the U.S., an estimated 6,800 offer checking accounts. But among those CUs offering the product, there's less than 50% member penetration. Why isn't that number higher and is it possible to increase it without attaching fees to checking accounts? Yes, answers Brian Burke, director of marketing for Liberty. He posits that "the checking account can be profitable and have an impact on a credit union's bottom line without being fee driven. It can be a source of low-cost funds and the centerpiece of members' transactions." What's the secret? A profitability model developed by Profit Resources in Lakeland, Fla. for Liberty shows how credit unions can leverage the popularity of the checking account by using a variety of technology and marketing tools. To generate the model, Liberty analyzed 1.4 million credit union checking accounts from a database of 6.7 million total credit union accounts from credit unions of all sizes nationwide. There are two types of costs associated with maintaining a checking account, explained Burke. Fixed costs, such as those associated with accounting costs, marketing and the credit union's facilities, are those fees that remain basically unchanged despite fluctuations in checking account penetration. Incremental costs, in comparison, are costs related to maintaining a checking account and adding new accounts. These include items like data and check processing, ATM service and teller salaries. "Adding a new checking account does not add fixed costs, only incremental ones," said Burke. Liberty recommends six steps credit unions should follow to achieve a successful checking account program: * recognize the strength of the checking relationship; * identify those members who are most likely to open a checking account. Target marketing efforts to determine pertinent demographic member information; * educate potential account holders about the benefits of your checking account product. You can have all the data in the world but if you don't have a vehicle such as direct mail, posters, brochures or a Web site to carry your message that information isn't worth much, says Burke. * compel members to open a checking account. It's fine to make members aware of the benefits of your checking account, Burke says, but what can you do to bring them to the table to open an account? Liberty suggests using tools such as direct mail call-to-action, attractive check designs, free checks and other incentives to motivate them. * strengthen members' commitment to your checking program, make it members' primary choice for transactions. Promote direct deposit and payroll deduction programs, provide them instant access to their new checking account with personalized starter checks. * deepen your relationship with your members. CUNA's Member Survey shows members with a checking account at the credit union are four times more likely to designate the CU as their primary financial institution; they're five times more likely to use credit union direct deposit benefits and nearly 30 times more likely to use a debit card service with the credit union. -ekingoff@cutimes.com