In the battle for direct-deposit relationships, new technology is a game changer
The inconvenience of switching used to be an effective defense against losing direct deposits and the status of ‘preferred financial institution’ that often came with it. But fintechs now make it so simple for consumers to change where they deposit their paycheck that it only takes about 90 seconds to make a switch. And some fintech competitors, like Square's Cash App, are coming after direct deposits hard. Retention is a lot harder than it used to be.
Direct-deposit relationships are not as sticky as they used to be, with technology making it easier for people to switch the account where they send their paycheck.
Companies like Pinwheel and ClickSwitch are turning what used to be a cumbersome process into one so simple it can be done in 90 seconds with a few mouse clicks.
This has become a useful tool for neobanks and fintechs trying to woo customers away from traditional banks and credit unions. And it is forcing all financial institutions to get more active about playing defense in trying to retain direct deposits.
“We think of the direct-deposit relationship as so important because having that generally means that you have the primary account relationship,” says Jamie Warder, head of digital at the $190 billion-asset KeyBank in Cleveland, Ohio. “And having that primary relationship means that you get the first crack when that customer is looking for additional financial products and services.”
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