Since the finalization of the Durbin Amendment, many credit unions have been considering how they will compensate for lost interchange revenue with other forms of noninterest income.
Attaching fees to checking accounts is one way CUs can help fill the gap, which leaves fee-based checking product providers with a golden opportunity to snag new members.
One newer such product on the scene is the approximately one-year old Choice Checking from BancVue, an Austin, Texas-based provider of online banking, marketing and consulting services to more than 1,300 financial institutions.
Choice Checking comes with a base monthly fee that account holders can reduce or eliminate by taking actions that BancVue said may be ultimately good for the CU – making debit card purchases, which could generate interchange revenue, using e-statements or signing up for direct deposit. Whether a member pays all, part or none of the fee, the CU wins, BancVue CEO Gabe Krajicek said.
“The Choice Checking fee is the first form of noninterest income for the credit union, but members can reduce that fee, and they do so in ways that benefit the institution,” Krajicek said.
One factor that sets Choice Checking apart from its competitors is transparency in regards to changing fee amounts, Krajicek said. BancVue provides account holders with a dashboard program, which can be accessed through a Web, desktop or mobile platform that explains exactly how their behaviors led to the rise or fall of their account fee.
“Showing members how they can impact that fee gives them more control,” he said.
Another option is the six-month-old FLEX Checking from Affinion Benefits Group LLC in Stamford, Conn., which provides more than 5,500 financial institutions with customer engagement and noninterest income services. Wayne Conte, senior vice president at Affinion, said one of FLEX’s strongest differentiators is that the product can be tailored to meet the specific needs of each credit union’s pool of members.
“We build unique products for credit unions based on what we know members seek out from their credit union,” Conte said. “For example, if the demographics of a credit union identify members who are likely interested in saving money on everyday purchases and protecting their identity, we can customize a product to fit those specific needs.”
The big question is how can CUs convince their members to favor a fee-based checking account over a free one. Providers say CUs can overcome this dilemma by offering incentives and ways to reduce fees.
According to a BancVue case study, one Choice Checking customer charged account holders a monthly fee of $4.95, but allowed them to reduce the fee by $1.50 for using e-statements and by 15 cents for every $5 debit card purchase they made. Choice Checking also provides account holders with increased fraud prevention and a shopping discount program with local and online merchants, the company said.
FLEX Checking follows a similar formula that allows account holders to lower or eliminate fees by exhibiting behaviors such as signing up for online bill pay or direct deposit. The account offers rewards such as identity theft protection, retail savings and travel discounts.
“Because consumers can ‘earn down’ the cost of their share draft account, credit unions end up well positioned, because they are offering their members services they want at no charge,” Conte said. “It’s a winning proposition for everyone.”
And providers recognize that by not offering a free a checking option, credit unions could drive potential members away. Krajicek said BancVue advises CUs to offer a free checking account as their headlining checking product in addition to Choice Checking.