Deposits, Checking, Savings, CDs

Washington Mutual’s ID Theft Play

By Jim Bruene Posted on
Categories: Credit Reports & ID Theft Protection, Deposits, Checking, Savings, CDs, Security & Privacy, Washington Mutual

Wamu_idtheft_logoWashington Mutual <wamu.com>, which has been pitching free checking in Seattle for as long as we’ve lived here (mid 1980s), recently added ID Theft Services to its list of free checking account enhancements.

A mid-October direct mail we received at our home touted the following benefits, along with a $75 American Express Gift Cheque, for signing up for a new checking account (italics are theirs):

  • No direct deposit required
  • Free Telephone Banking
  • Visa Check Card
  • No per-check charge
  • Free Personal Online Banking
  • Free Personal Bill Pay service
  • Free ID Theft Services

In addition, to the above bullet points, the Free ID Theft Services had its own paragraph, one of just four total in the short sales letter:

Exclusively for Washington Mutual customers: Free ID Theft Services. If you become a victim of identity theft, we provide insurance that helps you with your legal and other identity theft expenses up to $5,000 with no deductible. This valuable service also provides professional assistance, plus access to credit reports, management tools and more.

Wamu_idtheft_shortNo other information was provided in the letter or the fine print. But looking at the bank’s website we find that the free services lead to a pitch for full three-bureau credit report monitoring from Intersections <intersections.com> (click on inset for partial screenshot or download the entire screenshot, links will not work). It’s all explained on Washington Mutual’s proprietary identity theft site, ID Theft Inspect <idtheftinspect.com>.

Analysis
With all the concerns about online safety and fraud protection, it makes perfect sense to offer identity theft protection services to customers, especially when you will be helping defrauded customers whether you make it an account benefit or not.

We like how WAMU offers certain services to all account holders, then upsells them into full credit report monitoring. However, the bank’s pitch for fee-based protection could be far more effective if it:

  • Offered online signup — Currently customers must signup in branch or call a toll-free number.
  • Disclosed the price — There is no mention of a monthly fee, either in the main body of the copy, or in the detailed disclosures. This is a sure way to lose customers.
  • Provided a more detailed view — The promotional copy does a good job of explaining the benefits; however, beyond a few blurry screenshots, there is no way to preview the level of detail to be provided with the service. The bank needs an online demo, tutorial, or FLASH presentation.

Overall, we give it a B+; disclose the price and it’s an A-.

—JB

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Everbank Markets to SmartMoney List

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs, Email Marketing, Everbank

Everban_asiancd_email_previewEverbank <everbank.com> dropped an email solicitation (click on inset for closeup) to the registered users of SmartMoney.com. The message featured the bank’s newest specialty CD, the Asian Advantage which rewards depositors with above-market Everbank_asiancd_basket_2returns IF the dollar falls against a bucket of Asian currencies.

Last week, the Internet-only bank dropped an 8.5 x 5.5 inch postcard mailer with a similar theme. Recipients could respond by calling toll-free 800.926.4922 or going online to www.everbank.com/asiancd.

Analysis
This is a great example of deposit product email marketing.

  • Focuses on the unique selling benefits
  • Good graphics and copy
  • Landing page with a minimum of distracting navigation choices
  • Visible call-to-action with Apply Now! button

We like the opening sentence in the postcard better than the email (see below). With an advanced investing strategy, the direct statement of how the user will earn a profit is more understandable. However, without the results of the bank’s testing, it’s difficult to know which pulls a better response.

   Email: "There’s a great new way to invest in the active and healthy Pan-Asia currency market."
   Postcard: "Do you want to profit if Asian currencies gain on the U.S. dollar?"

Screenshots (links will not work):

  1. Everbank’s Asian CD full email
  2. Everbank Asian CD landing page
  3. Previous article on Everbank foreign-currency deposits

–JB

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Bank of America’s Unusual Automated Savings Plan

By Jim Bruene Posted on
Categories: Bank of America, Credit/Debit Cards, Deposits, Checking, Savings, CDs

Bankamerica_keepthechange_graphic_1We’re not sure whether this is incredibly brilliant or insanely stupid, but Bank of America gets high marks for creativity with its latest debit card enhancement. The bank’s "Keep the Change" program allows debit card users to round up their purchase transactions to the nearest dollar, with the difference added to a savings account automatically.

To give it a bit more excitement, BofA will add a 5% bonus to each savings deposit. Since the average round-up amount is 50 cents, the bonus costs the bank just 2.5 cents per transaction, a very cost effective incentive program, if it works.

To kick things off, Bank of America will match the round-up amount 100% for the first 3 months. That will be like giving everyone a 50-cent discount on each transaction. That should spur signups for the program.  Bankamerica_keepthechange_math

Analysis
The overall concept of automatic or forced savings is excellent. The bank’s press release tosses out stats on the recent negative savings rate and quotes David Bach, the relatively well-known author of "The Automatic Millionaire," a best-selling book that espouses automated investing.

The webpage touting the program is attractive and well written. There are few items in the fine print that users will find potentially disturbing:

  1. You must visit a branch to enroll (ouch!)
  2. The savings account pays just 0.50% and will likely have a service charge unless a minimum balance is maintained (e.g., $300 minimum for Regular Savings)
  3. The savings account has a $100 minimum opening balance requirement
  4. The bank’s contribution will be made annually, and only if you keep your account open for a year

But despite the fine print landmines, we like how "Keep the Change" introduces consumers to the concept of automatic savings and helps them store away a few bucks a month. However, most people need more than nickels and dimes going into their savings account. To be more effective, this program needs an easy way for consumers to add to their savings amount beyond the monthly debit card cash.

For example, a month-end email detailing the total debit card change deposited could include a mechanism that allows users to designate an additional amount to be transferred into their savings account.

We don’t expect anyone else to copy this program, so it gives BofA a unique selling point for their checking accounts and debit cards. It should make a little money for the bank from increased debit usage and savings account growth, and it will give users a few extra dollars at the end of the year, so what’s the harm. But if you are truly interested in spurring automatic savings among your customers, there are more straightforward approaches that should be equally effective and far less complicated (see Online Banking Report, 120/121 for more on automatic savings).

Ref: Screenshot of Bank of America’s Keep the Change page on 5 Oct 2005

—JB

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HSBC Joins the U.S. High-Rate Savings Account Race

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs, HSBC

Hsbc_us_highrateHSBC’s U.S. unit launched a 3.50% APY savings account that competes directly with ING Direct (currently 3.30%) and other high-rate financial institutions. The rate is featured in an eye-catching red box smack dab in the middle of HSBC’s homepage (click on inset for a close-up). 

For more information on high-rate savings products, select Checking & Deposit Accounts from the navigation in the right-column of this newsletter. Also, read our latest Online Banking Report devoted to the subject, Lessons from the High-Rate Marketers (OBR 120/121).

Update 9/1/05:
The rate was raised to 3.75% today vs. 3.30% at ING Direct

—JB

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Netbank Wallflowers Concert Promotion

By Jim Bruene Posted on
Categories: Advertising & Promotion, Deposits, Checking, Savings, CDs, NetBank

Netbank_concert_logoMaybe I’m biased as a fan, but I think Netbank’s Concert Connection, sponsoring a free Wallflowers concert, is a great stunt. Especially if the bank can leverage it to gain exposure in more than just the Austin market.

Here’s the offer (click on inset below to see landing page): Customer’s who plunk down $500 into a new checking account, or $1500 into a CD or Money Market, get two free tickets to a private Wallflowers show in Austin, TX on Sept. 17. The money must be kept on deposit for at least 90 days or the bank will deduct $85 to cover the tickets.

The bank’s press release says it will be promoting the offer with a mobile vehicle along with billboards, print and radio ads. The concert venue holds 5,000, so Netbank can use the offer to attract a maximum of 2500 new accounts.

Netbank_concert_promoAnalysis
This is an expensive promotion for a single market, with the concert alone cost an estimated $100,000 or more, not to mention the cost of promoting it in the Austin market. It might make more sense to sponsor an entire Wallflowers tour, providing tickets to new Netbank customers around the country. That would be even more costly, but would guarantee broad exposure to the offer.

Yet, we still like the Austin promotion for several reasons:
1. Free publicity: There’s nothing like a free event to garner media exposure.
2. Lasting brand impression: Unlike other media campaigns, this event should provide a more lasting brand impression, especially with the 25-35 crowd attracted to this music.   
3. Dylan connection: The Wallflowers, led by lead singer Jakob Dylan, son of rock legend Bob Dylan, is an especially good choice for this promotion. Along with its younger fan base, the band will also attract attention from an older crowd that might drop $1500 into a CD to see if Jakob can carry on dad’s legacy.
4. Concert tie-ins: Even though the event is primarily oriented to Austin-area consumers, it will pull in business from Wallflowers fans all over Texas. But to reach beyond Texas, Netbank should consider negotiating rights to offer the concert as a free download for all its customers. Other tie-ins with merchandise, fan clubs, and so on are also possible.

The downsides:
1. Demographic mis-match: Alt-rock fans aren’t usually old enough or wealthy enough to be parking big cash piles in a bank. Many will deposit the bare minimum and pull it out after 90 days or when their CD matures.
2. High acquisition cost: As you can see by the mini-business case below, the acquisition costs are hefty. Assuming Netbank ends up with 500 new accounts that remain open after the 90-day minimum, the cost per new account is $2000 or more.
3. Extra customer service load: The first law of marketing applies here: for every customer delighted with your offer, another is mad because they missed out on it for some reason. We can already see brewing discontent on the Wallflowers bulletin board from rabid fans that don’t have the extra cash to plunk down into Netbank to earn the tickets (we have one word of advice for them: eBay). Also, there can always be headaches when third parties are involved. As we were researching this article, we noticed that the ticket fulfillment site, Tickets.com, was not functioning properly. We were able to download two Wallflower tickets without fulfilling the offer requirements. We notified Netbank right away who will likely have it fixed within hours. Now if we could only find a business reason to be in Austin on Sept. 17….

Back-of-the-envelope business case:
Cost = $150,000
$100,000 for the concert + $50,0000 out of pocket promotional expenses (assumes radio exposure is bartered for with free tickets)

Accounts generated initially: 1500 x $2000 average deposit = $3 million in deposits worth $30,000 to $60,000 per year assuming a 1% to 2% spread (will depend on deposit mix)

Long-term accounts generated: 750 assuming a 50% fallout after the first year

Acquisition cost: $150,000/750 = $2000 per long-term account

—JB

 

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Everbank’s MarketSafe CD

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs, Everbank, Investment Products

Everbank_marketcd_2 When I was a deposit product manager in the late 1980s, I worked on a project to bring out an equity indexed certificate of deposit. That project died, one more merger casualty, but I've always been intrigued by the product.

Over the years, a number of banks have offered market-indexed CDs, but they've never been much more than a niche product. That's OK. More than half of Amazon's book sales are from titles not found at retail bookstores. The Internet is a great place to mine the niches. Everbank has already proved that by moving nearly $1 billion worth of foreign currency-denominated deposits.

Analysis
The problem with equity indexed CDs is that they are crummy investments. By the time you pay for the hedging, marketing, and bank overhead, there's not much left over to pay the investor.

Let's look at Everbank's latest incarnation. The MarketSafe CD provides a total return based on a relatively complicated formula that averages S&P 500 prices at six-month intervals during the five-year term. In an up market, the CDs typically return 40% to 60% of the S%P gain (click on inset below).

The main selling point: Investors are guaranteed a minimum 5% total return over the five years (APY = 0.98%). The CDs are FDIC insured up to $100,000 with a minimum investment of $1500.

Everbank_marketcd_returnsBy Everbank's own figures (click on inset), its CD would have only beaten the S&P 500 index eight times during the previous 31 five-year periods beginning with 1970-1975. And by our estimates, the return would have beaten a normal 5-year CD more than half the time, 17 out of 31 periods. But only twice did the MarketSafe CD beat both the S&P and a regular CD.

Expected returns would be higher if the investor simply bought a mix of regular CDs and S&P indexed funds. The most conservative would be an 82% CD, 18% S&P mix that would still return all principal even if the S&P went to zero (assuming 4% CD APY). For the less conservative, a 67% CD, 33% S&P split would still return the principal even if the S&P dropped 40%. You get the idea.

But the target market for MarketSafe CDs is probably someone that never invests in equities. For that person, the MarketSafe is a reasonable way to put a little money "in the market." From Everbank's perspective, it's a nice addition to their unique deposit product line.

Addendum: View full screenshot of MarketSafe CD page

—JB

 

 

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What Not To Do: Verity’s 10% APY Come-On

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs, Verity CU

Verity_cu_10apyNormally, we don’t pay much attention to radio ads, usually pressing the Seek button as soon as one comes on. But today, a particular ad caught our attention. It was for a 10% APY CD offered by Seattle-based Verity Credit Union (see inset) which accepts any resident of Washington state as a member. The term was 10-months and the maximum deposit was $1000.

While we admit this rate did get our attention, we don’t like this tactic for several reasons:

1. Bait-and-switch: Sophisticated depositors know it’s a teaser rate; and they will only leave their money on deposit long-enough to grab the $83 interest check. However, it’s the less-sophisticated that actually think this might be a real rate, that get sucked in only to be deeply disappointed once rates ratchet back to the standard 3.25% rate.

2. Too expensive: Depositors receive $83 in interest instead of $27, a before-tax difference of $56. We think the credit union would be better off providing a straight $50 incentive for new deposits of $5000+ and/or $25 for $1000+. Not only is this a lower cost for the financial institution, it’s more straight-forward for the customer, and could bring in a higher average balance.

3. Too exclusive: Only applies to new members or existing members that convince a non-member to open one of the CDs. Blasting an offer across the airwaves and homepage that applies to new customers only is a sure way to disappoint existing members. Furthermore, the website has no explanation of how to refer a customer or how to take advantage of the referral bonus. As a matter of fact, the website has no more information about the special other than what’s shown in the homepage graphic (see inset above). The graphic image is NOT clickable.

4. Cannot apply online: Maybe we’re biased, but we strongly believe that red-hot products advertised on the radio and on the middle of the homepage, should have an online application. Verity’s promotion directs interested parties to its branches or call center.

—JB

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KeyCorp Enters High-Rate Deposit Game

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs

Keydirect_logo_1As we gave a cursory glance to the BankRate.com deposit rate table in today’s Wall Street Journal, we were surprised to see KeyDirect listed at the top of the Money Market and Savings Account section with a 3.66% APY and a $50 minimum deposit.

We were even more surprised to find that KeyDirect is not a small bank in the middle of Idaho, but a little-known division of KeyCorp, the $91 billion bank headquartered in Cleveland, Ohio. Key may be the first mainstream player to try to compete with the online-oriented direct banks such as ING DIrect, E*Trade Bank, and others. (See previous article.)

The success of Emigrant Direct, which said Monday that it has attracted more than 100,000 accounts with offers pasted all over BankRate.com, may encourage other traditional banks to test direct banking tactics. The New York-based bank said that the 100,000 accounts have an average balance of more than $30,000, meaning the bank has bagged more than $3 billion in deposits.

The next Online Banking Report (#120/121) will look at deposit gathering with a special emphasis in the high-rate game.

— JB

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Lockheed FCU’s Four Percent High Yield Savings Account

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs

Just when you thought your new 3% APR money market account would wow your market, the word on the street, virtual street anyway, is that the 4% APR mark has been breached for the first time in several years.

Lockheed Federal Credit Union is culprit with a new account paying 4% on balances of $25,000 or more. It's so new, or so secret, you can't find it on their website. You must call to set up the account (800) 328-LFCU.

Lfcu_achieversAnd if think you're safe because your customers can't access this credit union special, think again. For $5, you can join Lockheed's Achievers Club, which qualifies you for credit union membership. You can join both in a single phone call.

— JB

 

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Making Saving a (Grocery) Game

By Jim Bruene Posted on
Categories: Advertising & Promotion, Deposits, Checking, Savings, CDs

Grocerygame_logoLast year the savings rate in the U.S. dropped to 1.3% of disposable income (personal income less taxes), slightly lower than 2003’s 1.4%, and the lowest since the depression (1934). This is far below the 10% or higher level that most personal finance experts recommend. The last time the U.S. as a whole saved 10% was 1984, and that was no anomaly. In the 15-year period from 1971 to 1985, the U.S. saving rate dipped below 9% on only one occasion (8.7% in 1977). Even without considering inflation, the total amount saved during 2003 and 2004, $113 billion/year, was the lowest total since 1974. (Source: U.S. Commerce Dept: Bureau of Economic Analysis)

Banks are in a great position to help improve this situation by making savings easier and more interesting. Online services can be used to automate saving and provide continual detailed feedback. In next month’s Online Banking Report (#120), we’ll outline a number of techniques.

One of the more novel approaches is to help coupon-clippers organize their assault on the grocery store by automating the process with online tools, tips, and links. Then as your customers chalk up savings at the grocery store, encourage them to deposit all or part of the windfall in a bank savings account. The growing balance will provide positive feedback for the disciplined approach to shopping.

Grocery_game_listFor inspiration, take a look at one of the more established coupon services called The Grocery Game. The Southern California-based online service provides a weekly list of advertised and unadvertised grocery specials married to a database of recently published coupons. The end result is an editable list of major grocery bargains priced at a 40% to 70% discount from retail (click on inset to see a sample).

The company’s stated goal is to save a family of four $1000 off their grocery bill during the first 12 weeks. Cost is $10 every eight weeks, after a $1 four-week trial.

The Grocery Game says it has 30,000 users in 43 states. Other sites with similar services include, Cairo, ShopLocal, Puget Sound Grocery Guide (Seattle), and Coupon Queen (Cleveland).

Financial Institution Opportunities
Banks could leverage The Grocery Game in several ways:

  • By simply linking directly to the service
  • By explaining the strategy with articles and advice, but not producing weekly shopping lists
  • By partnering with The Grocery Game or others to produce a co-branded or private-branded version at the bank’s website
  • By creating a simpler version in-house: After the initial programming, we estimate it would take only a few hours per week to enter the data from the grocery circulars and match it with items from the coupon database

But unlike The Grocery Game, which has no ongoing tracking mechanism, banks would want to program an area for user’s to document their grocery savings, and designate a portion of the grocery savings be deposited into a bank savings account. 

To encourage continued participation in "The Savings Game," customers could be rewarded with, what else, free groceries, when they hit savings milestones. Or rewards could be more interesting such as meals out or household items, something that would appeal to the coupon-clipping demographic.

For more info on The Grocery Game:

—JB

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3% High Yield Savings Account

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs

Zions_bankrate_3offerToday's hot savings rate online is 3% or more. Many of the higher rates are from direct banks operating primarily online such as ING Direct, Bank of Internet, or Virtual Bank.

But increasingly, traditional brick and mortar financial institutions are experimenting with higher rate offerings. One of the most visible is Emigrant Direct, which has spent a small fortune this year advertising its high-rate offerings (see previous article). We also noticed Zions joining the game with this 3.3% offer to customers searching for a $10,000 savings account in California via BankRate.com (click on inset for more details). Zions also makes the account available to any customer visiting its website.

What's a bank to do?
If you are feeling pressured to step up to the 3% rate level online, you can do it with a special product that doesn't require repricing your entire savings account base.

Here are a few ways to try to separate your high-rate online account from regular savings accounts:

  • Give the account a separate name, such as Zions Bank's Internet Money Market Account
  • Require that it be opened online
  • Require that it be funded via ACH or wire transfer from another institution (aka new money)
  • Offer to match any rate found online, users would submit the URL of the competing offer in the application
  • Only promote it via special landing pages accessible through promotional advertisements, but not linked directly to your regular site
  • Require a promo code on the signup form

More 3% offers
Download this file shown below to see an analysis of the 3% offers from MyBankingDirect (NY Community Bank), ING Direct, Emigrant Direct, MetLife Bank and Western Financial. The first three earned grades of A, while MetLife and Western scored only Cs.

Download tour_of_banks_with_3apy.pdf

 

 

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Capital One’s Savings Accounts

By Jim Bruene Posted on
Categories: Capital One, Deposits, Checking, Savings, CDs

Capital_one_savingsWith the success of ING Direct and other direct banks, there has been a lot more attention given to selling savings accounts and certificates online.

One of the new players to watch is Capital One. They are beginning to apply their marketing skills, honed in the brutal credit card market, to deposit products.

Cap_one_google_ad_1Googling "online banking" today, we noticed Capital One in first position on the right-hand sponsored links area (see inset).

Clicking through you are delivered to a page that markets deposit products much more aggressively than most banks (see screenshot below). Capital One leads with a chart showing its rate compared to the national average (see inset above).   

The bank offers five different savings products on the main page, each with its own distinct Open Account button:

  • 3.15% High Yield Savings Account (the lead product at the top)
  • 4.03% No Regrets CDs (allows purchasers to bump-up their rate)
  • 3.25% Money Market Accounts
  • 4.50% Certificates of Deposit
  • 4.29% IRA CDs

Analysis
The relatively high rates (APYs) are a big part of the appeal. But there is more to it than just price.

Capital One does a great job of laying out the options, including:

Capital_one_savings_pageClick on this thumbnail for a look at the main savings page at Capital One.

—JB

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