The lowly checking account. Once the primary vehicle for member transactions, but now second fiddle to an assortment of payment alternatives. At least that is what many postulate and pronounce. Recently, we reported on the significant competitive developments that have occurred in the checking/debit arena. Based on resultant questions around the importance of checking, we felt it important to share our basis and state our contention that checking is as critical as ever and deserves more focus, effort and attention.
At the most basic level, checking is a vehicle for member growth. We see a direct correlation between member and checking growth. And why not, as it is the most widely owned product among CU members (outside of required share savings) and now sports a penetration rate of ~58%. Our researchalso shows that debit revenue (interchange and debit courtesy pay programs) drive half of non-interest income. Bottom line for credit unions – grow checking, grow members and grow non-interest income.
It is evident that a few others get this. Consider Chase, who is constantly stuffing most mailboxes with up to $600 offered for a new account. And the challenger banks who are targeting the U.S. as a lucrative market, with their primary basis for competing being checking/debit. Their stated rationale is that this is where the payment volume is today, and competition is less intense than for credit cards. They are right.
continue reading »