Here's how banks can reinvigorate deposit growth with incentives
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US banks are enhancing their checking accounts with incentives, like streaming service subscriptions, to stand out as more consumers put their money into savings and money market accounts, per The Wall Street Journal.
Citigroup, for example, is piloting a checking account feature that gives customers a $200 annual rebate if they use their Citigold debit card to pay for services from select retail partners - which customers could put toward an annual subscription to Amazon Prime, Hulu, Spotify, or others.
Here's what it means: Banks are using incentives as a means of driving volume amid slowing customer deposits.
- Effective incentives could help banks temper demand for higher interest rates without actually increasing rates. Major banks, like JPMorgan Chase, are seeing a slowdown in deposit growth as consumers seek higher yield accounts. But most of those banks aren't able to pay higher interest rates, and that's allowed digital upstarts to edge in. To battle back, big banks are seeking to incentivize deposits through perks. For instance, Citi is using its incentives to attract a higher-income customer base: The Citigold account requires holders to have $200,000 across deposit, retirement, or investment accounts.
- Big banks have spent billions to retain customers by enhancing digital banking, but those offerings are becoming increasingly similar - incentives could be a new way for firms to differentiate. Major players in other industries have used a similar model to draw and retain customers: Sprint and Verizon offer plans that come with subscriptions to Hulu or Netflix, for instance. These offers could have real consumer appeal: 44% of respondents to Business Insider Intelligence's 5G Survey, fielded to 771 US Early Tech Adopters, indicated that including streaming subscriptions could prompt them to consider switching to 5G fixed wireless access services, for example.
- Streaming incentives could appeal to a widespread customer segment. Streaming services have broad appeal: 64% of US households have access to either Netflix, Hulu, or Amazon Prime Video, and more than 85% of US millennials now subscribe to at least one streaming video on demand (SVOD) service, with more than half taking at least two, per Parks Associates. Rewards like this could be critical in attracting younger customers in particular, who are more likely to shop around for the best value in a bank: 9% of consumers under 40 switched their primary bank accounts last year, more than double the rate for US consumers overall, which was 4%, according to J.D. Power.
The bigger picture: Offering popular incentives could help banks retain customers and drive deposits, but it will only be a winning strategy if done in tandem with digital banking improvements.
Banks should continue to prioritize their mobile banking app features, while enhancing their checking account offerings. Banks should not only offer subscription incentives with their accounts, but also enable consumers to manage all of their digital subscriptions through their mobile banking apps.
Such a feature is in demand but not commonly offered yet: 59% of mobile banking users who responded to Business Insider Intelligence's Mobile Banking Competitive Edge Study (Enterprise only) said the ability to cancel subscription digital media services within their mobile banking app is "very" or "extremely" valuable, but none of the largest 20 US banks surveyed support the capability.
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