“Interconnectedness” is the word that officials of U.S. Bank use these days to describe product portfolios designed to better serve customers’ needs — and multiply the number of services customers use.
The key reason: A multiservice consumer client represents three times the revenue, on average, of someone who only uses one service from the bank, according to Gunjan Kedia, president of the #5 bank, during its 2024 investor day in mid-September.
Earlier in the month, U.S. Bank opened a waiting list for a pair of new products designed to complement each other: the new U.S. Bank Smartly Savings account and the linked U.S. Bank Smartly Visa Signature Card. The new products represent major additions to the company’s Bank Smartly checking account, introduced in 2022, and the Smartly Rewards program, which was enhanced in late 2023. (The initial checking product currently has a 3.9 out of 5 on NerdWallet and a 3.9 out of 5 on Bankrate.)
“We’re being more intentional with the notion of ‘interconnectedness’,” said Arijit Roy, head of consumer and business banking products, during the investor day presentation.
Thus far, the bank has relied chiefly on media exposure to build interest in the products and won’t spend a great deal on promotion until election season is over — too much noise. The day the waitlist opened the bank did post on LinkedIn and Roy told analysts that within 48 hours, the list had jumped to 10,000 people.
The Bank Smartly deposit products are intended to help the bank grow funding at competitive but manageable rate levels. The checking product has contributed, with other strategies including the bank’s streamlined branch system and its beefed-up digital presence, to a 4.4% year over year growth in deposits in its consumer and business banking segment, as of the second quarter. The bank’s analyst presentation contrasted that growth with the average of 11 peer institutions — approximations of the same part of their organizations — which dropped 2.9% in the same period, according to the bank’s calculations.
Derik Farrar, SVP and head of personal deposits, says in an interview that he likes to call the joint offer of the savings account and the Visa card “the peanut butter and chocolate combination of save and spend, because most Americans spend money every day. We want more of them to save money every day. We feel this is a great combination to help people do that pretty easily and seamlessly.”
Pricing to Pull in More Deposits and Build Card Volume
A key target for U.S. Bank’s new combo is the young affluent customer, people who are beginning to make money but who don’t have huge deposits yet. As their business builds, cashback and deposit interest rates can both improve.
The Bank Smartly Visa card is a credit card that offers up to 4% cashback on every purchase. The cashback percentage varies with the consumer’s deposit account balances. (If a customer only opens the Smartly Visa, they earn 2% cashback.)
Here’s how the percentage changes with balances. The prerequisite is holding both the savings and card accounts. Then the consumer’s average daily combined balances held in U.S. Bank deposits, trust accounts, and investment accounts is considered.
- Total balances of $5,000-$49,000 earns 2.5% cashback.
- $50,000-$99,000 earns 3% cashback.
- $100,000 or more earns the max, 4% total cashback on all purchases.
The cashback amount is not capped.
The bank says the top level is the highest level of cashback rewards in the market. But the rewards are paid in points, which in turn can be redeemed as cashback. The conversion of points to cashback is highest when paid into a U.S. Bank deposit account, such as Bank Smartly Savings.
Within 48 hours of this LinkedIn post 10,000 people joined U.S. Bank’s waiting list, according to bank officials.
The savings account can earn up to 4.1% APY (as of 9/25/2024). To earn the “interest rate bumps,” as the bank calls them, the consumer or at least a joint account holder must hold a Bank Smartly Checking account or a U.S. Bank Safe Debit checkless account (featuring no overdraft fees) as well. Eligibility for bumps hinges on maintaining various levels of daily balances in the savings account as well as a qualifying combined average monthly balance in deposit, trust and investment accounts.
The lowest level paid is 2.5% when the customer has both the Smartly card and deposits. The highest is 4.1%, for Bank Smartly accounts with daily balances of $100,000 or more and qualifying combined average monthly balances of $100,000. (See the bank’s detailed table, a PDF, for a complete explanation.)
Farrar says the bank will make adjustments in time to the new program’s savings rate to reflect the Federal Reserve’s recent half-percentage-point cut in the Fed funds rate, but not immediately. A recent report by Keefe, Bruyette & Woods noted that the company maintains “better-than-peer” repricing on the deposit front.
Read more: Why Cardholders Are Ditching Miles and Points in Favor of Cashback
Looking for New Relationships as Well as Expanding Current Ones
The new effort has two potential hooks, the credit card and the savings account. Of the two, Farrar thinks that over time the cashback card will tend to bring in more new customers. He notes that consumers typically have more credit cards than checking accounts or savings accounts.
“So that’s a natural entry point for a lot of new-to-the-bank clients, because you can just pick up the card and start using it,” Farrar explains. “It will be a great door for us to use to introduce our other services.” Among the expanded rewards in the Bank Smartly program are selections of special cashback deals by merchant, brand or category that rotate every 45 days. Discounts on home equity and auto loans are also available.
Overall, the build-out of the Bank Smartly program reflects U.S. Bank’s effort to attract more younger, affluent consumers with attractive spins on everyday banking. Farrar says the bank wants to bring in people whose deposit relationships will grow as their finances mature.
These affluent consumers are more focused on return on deposits these days than they had been, as a group, Farrar believes. Even as the Fed begins cutting rates again, he says customers that have a decent amount of savings have been reawakened to the idea of returns on savings accounts.
“For the better part of the last 20 years, rates just haven’t mattered that much,” says Farrar. “In the world we’re in now, rates matter.”
However, Farrar adds that the bank doesn’t see its Bank Smartly lineup competing with direct banks. He says that battle is completely rate- driven.
“It’s not an area where we want to spend a lot of time or energy competing,” he says, “because we offer a full-service selection.”
Read more: For Younger Consumers, Payments Is Banking. Why That’s Trouble for Traditional Institutions
Bank Smartly and the Bigger Picture at U.S. Bank
The widening Bank Smartly products dovetail with other strategies in a couple of ways.
U.S. Bank has been striving to widen its reach digitally even as it has reduced the number of branches in its network over the last few years. Among the capabilities added is digital opening and management of CDs, playing into the bank’s push to support relationships where it does not have branches. The possibility of an acquisition in the Southeast to expand its footprint has been percolating for some time, but KBW’s report indicates that current regulatory attitudes toward big bank mergers are among the factors that will push this off.
“When you think about the half of the country that we’re not in, we structured things the way we did so you don’t need a bank branch in Miami or Raleigh (N.C.) to get value out of our savings and spending products,” says Farrar.
The emphasis on youth also includes the free Greenlight product for parents who use the bank’s mobile banking app. The third-party product helps parents train kids in using payment and savings products. The bank estimates that one out of four consumer customers have younger children who can use the service. The intention is that when they turn 18 they can become full-fledged U.S. Bank customers.
What comes next for Bank Smartly? Farrar says the company has done research on the young affluent market’s needs in home finance, as well as in the investment area. Stay tuned.