Chatter about the impending death of checking accounts reached a feverish pitch recently when Acting Comptroller Keith Noreika said he would support issuing banking charters to non-bank companies like Amazon, Walmart and Facebook. President Trump’s nominee to permanently head the OCC, Joseph Otting, is a former banking executive, so Noreika’s opinions might not amount to much.
However, his Nov. 8 speech did spawn a hashtag: #bankofamazon. Those who don’t understand the market value of a trending hashtag are probably too busy balancing their checkbooks to notice that few people under the age of 50 use checkbooks anymore.
A few days after Noreika’s speech, financial services market researcher Ron Shevlin coined the term deposit displacement to describe how consumers are storing their money in accounts other than checking accounts; for example, those used for HSAs, P2P payments and retailer mobile apps. Checking accounts have become nothing more than a direct deposit destination, he said, and there is little reason to keep money there before transferring it someplace else that offers actual value for those funds, like a tax break, cash back rewards or gamified benefits.
I couldn’t agree more.
Shevlin also described research in which consumers were told that Amazon was considering offering a checking account for a monthly fee of $5 to $10 that would include cell phone damage protection, ID theft protection, roadside assistance, travel insurance and product discounts.
After searching my Amazon app to figure out how I could sign up for the best banking offer in history, I re-read the article and was crushed to learn that such an account was only theoretical, created to gauge interest in bundled checking services.
Forty-three percent of millennial respondents said they would open that account, and approximately 25% of them would close their existing checking account, too. I’m no millennial, but I would join them. It’s not Amazon brand loyalty that would seal the deal, although I am a heavy Prime user. It’s the value of the bundled services. Heck, for $5 a month they’d have me at cell phone protection.
Remember when credit unions offered discounted movie tickets or theme park passes? Members loved them, but most credit unions discontinued those programs years ago because they were inefficient and didn’t generate revenue. Even today, the brand loyalty benefit is hard to measure.
However, as non-bank firms continue to woo deposits away from checking accounts by offering value beyond barely-there dividends and a debit card, credit unions should reconsider bundling these types of benefits with checking and other commoditized products.
Cell phone insurance, ID theft protection and product discounts offered in that swoony theoretical checking account aren’t completely out of banking’s left field. They all contribute to a consumer’s financial standing.
Perhaps there’s a regulatory reason credit unions couldn’t bundle these services. If so, those barriers need to be eliminated as soon as possible to level the playing field with non-bank competitors, especially if they’re granted a banking charter.
These benefits would also add value to membership and further differentiate credit unions from their competitors.