CFO Focus: For hybrid savings accounts, not all friction is bad

New kinds of savings accounts can give members with commitment to their relationship with the credit union both high yields and short terms on their deposits.

Credit unions strive to become their members’ primary financial institution. The theory is that being the PFI increases the likelihood of a continual and robustly valuable relationship. We want to be the go-to source of financial services for our members. Our teams work diligently to be top of mind and top of wallet for good reason. We strive to make our services frictionless and intuitive. We know we are in competition and we are looking for a durable competitive advantage. Many on our team are seeking ways of becoming stickier.

Sticky accounts sound good to credit union executives. Let’s close the back door so that few people leave. Meanwhile, don’t we want to eliminate friction for our members? Yes, we want our offerings to be intuitive and uncomplicated. Our members enjoy the freedom to make choices as we help people who need money they don’t yet have; have money they don’t yet need; want payments made simply as they expect; and want accounting and documentation for everything.

Can we really offer frictionless sticky deposit accounts? Generally not if you think conventionally and traditionally. On one end of the spectrum, you set up the offering to be easy in and easy out—frictionless. On the other end, you formally restrict access to deposit funds in return for higher interest rates. Today we generally observe this in the binary choice of savings versus term deposits. Traditionally, members choose liquidity with low yields in savings or high yields as they sacrifice liquidity in term deposits.

But things are changing…


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