‘Rewards Checking’: Bancvue’s ‘ubiquitous differentiator’
June 4, 2008
“Aren’t you ready
for real differentiation?”
Financial institutions across the country are duking it out over high-interest checking accounts, the ones paying upwards of 6.25%.
These high-interest checking accounts were a differentiator for a brief while when they first came out. Today, there are multiple financial institutions offering the exact same account in every city in America.
Take Portland, where at least three different community credit unions are slugging it out. There’s Rewards Checking from Rivermark. There’s Remarkable Checking from Oregon Community. There’s Fusion Checking from Advantis.
Which one to pick? “Hmmm, I’ll go with this one. They’ve got the best rate.”
Fusion Checking was the latest to enter the market, so that’s probably why they had come in with a higher return.
All these accounts are identical in every way except the rate. They all offer a high interest rate and free ATM refunds, with no monthly fees. They all require 10-12 debit transactions, and you must access online banking and receive electronic bill payments every month.
There are minor variations with only slightly different requirements, such those that require direct deposit. Oregon Community offers a derivative it calls FreeTunes Checking, where you can get four free iTunes downloads each month in lieu of earning interest. At least that’s a little something different.
Reality Check: Trying to create differentiation around any financial product or service is tough. Once anything is successful, everyone will be doing it.
![](http://thefinancialbrand.com/wp-content/uploads/2008/05/bancvue-website.jpg "Bancvue website \")
There’s one company behind this widespread high-interest checking phenomenon: Bancvue. They are the folks that first introduced Rewards Checking (as it’s commonly called), and they’ve been marketing it very aggressively. Earlier this year, Netbanker reported that there were over 400 Bancvue accounts, and that Bancvue adds 30 customers every month.
Bancvue’s website is a slick Flash tour that does a fantastic job selling the Rewards Checking solution. There’s language all over the place touting how Rewards Checking can “truly differentiate you from the competition,” and asking questions like “Aren’t you ready for real differentiation?”
The company’s “distinctive” claims were very true in the beginning — before everyone had Rewards Checking — but probably not anymore.
The folks at Bancvue shouldn’t take this the wrong way. Bancvue isn’t to blame. They’re doing exactly what anyone else would do in their shoes. They have a hot product and they are selling it to everyone who will buy it. But is it the best thing for their bank and credit union customers?
Key Questions:
- What would have happened if Bancvue had offered exclusivity in certain markets, as Currency did with Young & Free?
- Reverse-engineering a Rewards Checking account seems pretty straightforward, so what value does Bancvue provide? Wouldn’t an intelligent CFO be able to crunch the backend numbers to make them work?
Bottom Line:
- It’s not “differentiating” when everyone is doing it.
- If your financial institution deploys a Bancvue-style product, please, do yourself a favor and don’t use the generic name, Rewards Checking. There’s already way too many of those. Just Google it and you’ll see.
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Previous related stories from The Financial Brand:
- Dividends: a huge differentiator for credit unions
- “Better sameness” vs. true differentiation
- Differentiation: The Key to Branding
- Banks: Less differentiated than a bar of soap
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Filed Under: Differentiation
Tags: Bancvue, Deposits, Rewards Checking
June 4th, 2008 at 9:12 am
Your bottom line is right on. It isn’t differentiating when everyone is doing it. And it seems to be the ongoing quest — to find something that does differentiate you. But does a single product do it? I wouldn’t necessarily buy a car if it was the only product with power windows, but others may. When that feature is available everywhere else then it looses its original stance.
Maybe differentiation has to be some common point that is different but pervades most products. Maybe it is a different process. It seems most products are just an evolution of something before it or it is so new it just takes a long time to come into the mainstream.
June 4th, 2008 at 9:18 am
It’s worth pointing out that with these accounts, if you fail to meet your monthly requirements, the account is still free, you just don’t get ATM rebates nor earn interest. One person Twittered that the fact that a certain percentage of people will fail to make these requirements is what makes Rewards Checking doable.
June 4th, 2008 at 10:59 am
DISCLAIMER: I am not here to defend, or speak for, Bancvue. Just commenting based on my understanding of what they’re doing or trying to do.
First off, yes, it isn’t differentiating when “everyone is doing it”. But “everyone” ISN’T doing it. The reality is that when you offer a widely-used consumer product, achieving that degree of differentiation is nearly impossible. But I would contend that it IS differentiation if it places you in one bucket versus another (ie, high-yield product provider).
The problem, then, with so many of the implementations isn’t the Bancvue product, it’s the fact that many of the banks deploying simply tack it on to their existing set of products, and give branch and call center reps little guidance for helping customers understand if it’s right for them.
As for “what makes Rewards Checking doable”, there are at least two other factors (beyond forfeiting ATM rebates and high interest) that make the account attractive to banks: 1) lower cost to serve by right-channeling transactions out of higher cost channels, and 2) interchange fees on debit card transactions. The CUs and comm. banks that have implemented the product can certainly speak with more data and experience on this than I can, but my understanding is that profitability of the product does not rely on customers not meeting the requirements.
June 4th, 2008 at 12:26 pm
@Ron
Good point about “right-channeling.”
Can you explain interchange fees and how that makes money, especially when you’re rebating ATM fees? I don’t know enough about how that works.
The question financial institutions are facing about Rewards Checking isn’t one of differentiation anymore. It’s a question of competitive survival. They are asking themselves, “Do I *have to* offer this now, just to stay in the game?”
As consumers, we should all love this. It’s great for us.
June 4th, 2008 at 7:23 pm
As you mention in your post, credit unions are capable of engineering their own solution in the rewards checking space. Done right this can offer more value back to the membership as you are not paying a third party to deliver the solution. Plus, more flexibility on making your own rewards checking unique and delivering what makes sense for your membership. This is what we have done at FORUM. Ron, is correct that profitability of the product is not dependant on members not meeting the requirements. Driving debit card usage with a signature at retailers is the key.
June 18th, 2008 at 12:40 am
FirstROI and Bancvue are now enabling — nay, they’re almost on the verge of encouraging — consumers to shop for the best rate with the release of their new site, CheckingFinder.
You can read NetBanker’s article about it here.
June 18th, 2008 at 7:43 am
Is it possible that consumers willing to open these checking account are going to turn into “rate shoppers” and end up grabbing the highest national rate available (http://www.money-rates.com/rewardschecking.htm) instead of worrying about a “local” bank or credit union offering this product??
January 12th, 2009 at 5:13 pm
Now they have CheckingFinder.com. I’ve been using it to check reward checking %’s near my zip.
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