Share draft accounts: Daft or differentiated?
November 30, 2009
“If it walks like a duck
and squawks like a duck…
…it’s a duck.”
– Ron Shevlin,
Senior Analyst
Aite Group
What should credit unions call checking accounts? It’s not a trick question. Hundreds of U.S. credit unions still use the technically accurate term “share draft” to refer to their checking accounts. But most experts in the credit union industry agree that this is a big mistake. They warn that consumers who already struggle to understand the basic concept of credit unions are likely to be confused and frustrated by such an obscure term.
Chuck Bruen, CEO First Entertainment Credit Union says the term “share draft” is as awful as it is unnecessary. “To me it is like fingers on a chalk board.”
Bruen, a self-professed credit union old-timer who says he knows all about the history of “share draft,” wonders why a credit union would ever try marketing something called a “share draft account.”
“First, whenever you use it you have to explain what it is,” Bruen explains. “And second, it sounds like something less negotiable than a check.”
“Credit union marketing folks only have a sliver of time to sell to members,” Bruen points out. “They should not waste that moment on misguided philosophical or legal positions.”
Bruen isn’t alone. Plenty of his credit union peers share his disdain for “share drafts.”
“They come looking for CHECKING. They want online BANKING, too. We have to speak their language,” says Joe Mecca, Marketing Communications Manager at Coastal Federal Credit Union.
“Consumers identify with ‘checking,’ so that’s what we use,” explains Eric Acree, EVP/Vantage Credit Union.
Reality Check: Ron Shevlin, a senior analyst with Aite sums up the sentiment shared by most financial marketers. “If it walks like a duck and squawks like a duck, it’s a duck.”
[Editor's Note: A paragraph that appeared here has been removed because the person quoted did not approve the use of a comment they made on Twitter for use in this story.]
“’Share draft’ differentiates credit unions in the same way a three-legged chair does from four-legged one — confusing and noticeably awkward,” says John Waupsh, CEO, FIRST ROI.
Mark Arnold, a consultant and author in the financial industry, agrees. “If consumers don’t know what ’share draft’ means, it can’t be a differentiator.”
“Find ways to be different other than with old terms,” Arnold advises.
“This is where the marketing needs to step up and put another confusing industry term in the historical time capsule,” recommends Randy Schultz, VP Marketing for Weber Marketing Group.
Loading ...For Discussion: Malinda Wood, Vice President of Marketing, UT Federal Credit Union in Knoxville, doesn’t use the term “share draft” at her organization, but sees “value in reinforcing ‘shares’ as ownership.”
- How else can credit unions communicate the concept of “ownership?”
- What real value or benefit is there to being a member with a “share?”
Further Reading: This fascinating article from 1977 reflects a time when it was illegal to pay interest on checking accounts. Credit unions were drawing bankers ire as they started offering “share drafts” despite never receiving authorization from Congress.
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Previous related stories from The Financial Brand:
- Is it time to rename ‘checking accounts?’
- Meltdown marketing: 3 things credit unions must do
- Data reveals truths about Gen Y’s financial habits
- Desert Schools FCU launches segmented checking campaign
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Filed Under: Marketing
Tags: checking accounts, share drafts
November 30th, 2009 at 10:19 am
Jeffry,
Thanks for this post and for opening up this historic time capsule. Many who have commented here against the term “share draft” were not around when we fought for the right to offer our “unique” brand of checking. I was. It was taboo to refer to them as checks – they originally had to be called drafts because they were payable through a bank – Evergreen Bank, for example – which is no longer around.
Payment systems at the corporate network helped us become more legitimate because the checks were now drawn on us. We shouldn’t forget that as the debate rages on about the future of the corporate network system.
But since I seem to be the lone lover of the old term in this debate – I will admit that to change the name today would be futile. We’ve lost the differentiator advantage – and that was not the name – it was how the product was structured. Interest bearing and no fees.
The original “share draft” was marketed as such – a checking account that kick’s the bank’s ass. It was hard to market because it almost seemed too good to be true. Some large companies, like Fred Meyer in the Northwest, originally would not accept them. Our State league had to step in and educate merchants. We fought hard for our rights to offer this unique share draft account- a financial cooperative’s version of checking – but it WASN’T like the bank’s checking account – that was the point.
Imagine if we had stayed disciplined in our approach – we would have a very powerful differentiator.
But Shevlin’s right — The more you walk like a duck and squawk like a duck – you look like a duck – aka bank.
November 30th, 2009 at 10:33 am
At the first credit union I worked at we called the accounts “share draft accounts” in our marketing materials. But, in reality people called them both share draft accounts and checking accounts. At my most recent credit union, they were definitely checking accounts. And, if you asked most of the employees if we offered a share draft account, I would guess that most would have no clue what that meant-except the old-timers.
The important question for credit unions isn’t whether they should call their accounts share draft or checking accounts, but what will the next account be called. How many checks are even written anymore? E-account? Electronic account? Virtual account? That is where the differentiation and innovations can be found going forward.
November 30th, 2009 at 10:39 am
I agree with Malinda…it’s funny, actually, I was a member of a credit union for six years before I went to work at (a different) one, and I don’t think I had any idea why I always had to have that $5 in my savings account. Having it explained to me was seriously a lightbulb-over-the-head moment.
Denise, you have a very good point — it’s possible that if credit unions had been all of one mind about the terminology, it might have stuck, although it’s hard to say.
November 30th, 2009 at 10:47 am
Keep after it. I’m sure “share draft” will catch on soon. Just like when “credit unioning” took the country by storm:
http://www.youtube.com/watch?v=LWxP4eAfXZA
November 30th, 2009 at 10:49 am
As a CUSO offering Item Processing services to credit unions, Palmetto Cooperative Services still refers to credit union checking accounts as Share Drafts. We don’t see any reason to change this terminology because our market (credit unions) knows what Share Drafts are. However, their market (members) doesn’t. Therefore, it doesn’t make a lot of sense for credit unions to try to sell Share Drafts to members who are looking for Checking accounts. While we all need to do a better job educating the public about the credit union difference, forcing our vernacular down their throats is not the way to do it. For the record, I’m also perfectly OK with using “banking” as a verb for doing business with my credit union too.
November 30th, 2009 at 11:05 am
I think as more of the “old guard”, no offense, retires, this will become less and less of an issue. History has kept this term around even though most members don’t know they actually have a share draft account. I agree with Shevlin, if it walks like a duck and quacks like a duck…
November 30th, 2009 at 11:58 am
Brent, that was the best laugh I’ve had all day! I’m going to rebrand my area to Online Credit Unioning. Huzzah!
November 30th, 2009 at 12:08 pm
Here’s a suggestion: don’t call it either. Why not Spending Account? The name “Checking Account” implies its main purpose is writing checks, although for a growing segment this account is mainly for automatic drafts and debit card transactions.
November 30th, 2009 at 12:14 pm
I’ve always called it a checking account but have certainly heard the term “share draft” before. I do wish we had different terminology but tend to agree with Carla that it’s too late for share draft and we should focus on the future. Denise brings up an interesting point about not only different terms but also feature/benefit differentiation.
So what’s the next badass account that CUs can come up with?
November 30th, 2009 at 12:15 pm
How about “Cash” or “Money-That-You-Actually-Have-In-Real-Life?”
November 30th, 2009 at 12:15 pm
When talking about share draft accounts I (and many CU people I know) would reference that they are checking accounts at a credit union as the ’short’ explanation. I think it would be better to have the short explanation be focused on how checking at a credit union is better, not on term definition. So I vote with majority in saying farewell to share draft accounts and hello to checking credit union style!
November 30th, 2009 at 12:26 pm
Nice, Brent. I like “Money-That-You-Actually-Have-In-Real-Life” but I’d shorten it to $IRL. It’s more text-able.
November 30th, 2009 at 1:02 pm
I think Brents on to something….we could differentiate ourselves again by eschewing the checking account moniker for a new brand that focuses on an old Filene philosophy: Promoting Thrift!
November 30th, 2009 at 2:20 pm
Brent & Elaine, thanks for having my back!
November 30th, 2009 at 4:27 pm
Now that we’ve fixed that nomenclature, let’s mend “Credit Union” itself. I’m tired of a public that confuses Credit Union with “Credit Bureau” or “Labor Union.” My twenty year plan includes a re-christening to Cooperative Bank.
December 1st, 2009 at 8:07 am
@Bill- I hate to burst your bubble, but the term Cooperative Banks means something else. They were first chartered in the early 1800s, mostly in England and New England. They are cooperatives that operated under the FDIC: http://www.google.com/search?client=safari&rls=en&q=cooperative+bank&ie=UTF-8&oe=UTF-8
There is also some excellent discussion on “cooperative banks” vs. “credit unions” on Trey’s blog here: http://treyreeme.com/2008/07/22/all-credit-unions-should/
December 1st, 2009 at 8:39 am
Okay – it’s official…….The Cooperative Bank’s $IRL (money you have in real life) account replaces the Credit Union Share Draft account. I like it.
December 1st, 2009 at 9:45 am
@Bill – or…….how about (insert your credit union name here) Financial Cooperative?
Like Teachers Financial Cooperative….or The Golden 1 Financial Co-op?
or Red Canoe Financial Co-op?
December 1st, 2009 at 9:51 am
[...] « Share draft accounts: Daft or differentiated? [...]
December 1st, 2009 at 10:04 am
I really like “XYZ Financial Cooperative.” That solves a long-standing riddle that has plagued the credit union (errr, “financial cooperative”) industry.
From my logical perspective, I always struggled with the word “credit” in the names of credit unions. It seems to suggest a lending/credit focus, similar to the way a lot of Canadian credit unions unintentionally connote a focus on savings by calling themselves “XYZ Savings” (Coast Capital and Kootenay are two examples).
December 2nd, 2009 at 8:30 am
Ha, great topic. I think you can extend the question to savings account as well. We have spent some time debating this at Geezeo. Instead of a default product mix of checking (share draft) and savings – we think there should be three default accounts:
1. Billpay account – this links to a cash flow calendar – showing you if you have enough money to pay your bills. The goal is to not paying your fixed bills with the next account:
2. Spending account – this is you day to day and discretionary spending account (debit card).
3. Goals account(s) – people are not motivated to save for the sake of saving – there should be multiple goals accounts (similar to christmas clubs in the past). For example a family could have a holiday goal, vacation goal, and home remodeling goal account. Each account should have a target dollar amount and end date – visually users should see a meter letting them know if they are on track compared to their goal plan.
The billpay and spending account would replace the checking account. Given the popularity of debit cards people are more removed from their money (just look at the amount of overdraft fees). New regulation will limit that cash cow – so it is critical that credit unions help their customers change their bad financial behavior and get a better grasp on their finances. More satisfied customers will lead to larger share of wallet.
Also, it should be easy for members to transfer money between these accounts to protect against overdrafts – alerts with easy mobile transfer capabilities will be key.
December 2nd, 2009 at 3:05 pm
Hi Shawn. Thanks for your comment. I like the Geezo naming structure. It much more accurately reflects how consumers actually use- and relate to their money. People use their money to pay their bills first, buy some stuff second, and — if there’s any surplus leftover — they might be able to save a little.
December 9th, 2009 at 8:37 am
[...] free checking accounts from one another? I’m sorry, is it a checking account, share draft account, or a spending account? Is your checking account free-er than your neighboring credit union? [...]