When most financial institutions think about designing consumer checking accounts, they usually check out what their competitors are offering. Then in most cases, they match or come close to matching account features and pricing. The result is a homogenized and commoditized product that isn’t relevant enough to a consumer’s lifestyle to convince them there is value worth paying for.
However, there are companies outside of the banking industry that have forged powerful, appealing lifestyle-based value propositions in the products and services they provide. And the value propositions of these products and services are applicable to designing and building consumer checking accounts that can compete on a superior level, engage consumers more broadly with a great user experience and generate significant fee income.
Let’s start with Costco (and include their competitive brethren Sam’s Club and BJ’s Wholesale Club). These warehouse clubs collectively have more than 125 million customers who each pay $50 to $100 per year just for the opportunity to do business with them. So what’s so compelling that consumers will pay just to be able to shop here? Clearly it’s the potential to save money when they have to spend it on everyday items and other needed purchases. Costco and others have proven that consumers are very willing to pay to save, as long as the anticipated savings exceeds the upfront fee for the opportunity to do so.
Next, how does Verizon fit in? They (and other major mobile phone carriers) know how important the cell phone is to consumers and how they wince at the thought of not having an operable mobile phone at their immediate reach. These companies have connected with this mobile phone lifestyle by ensuring a non-working phone is only a temporary situation. How? They provide phone insurance to more than 60 million consumers who each pay $5 to $12 per month to have it. Verizon and other mobile providers have verified that consumers love their phones so much, they will pay to make sure they don’t go more than a few hours without having a replacement phone at their fingertips.
And what about the membership in auto clubs known as AAA? Although AAA has recently expanded offerings to merchant discounts and AAA auto repair stores, the core service in the minds of consumers is roadside assistance. AAA has tapped into the desire for peace of mind on the part of the consumer who doesn’t want to get stranded somewhere with a car they can’t drive. AAA has demonstrated that this personal security and safety benefit resonates with consumers as they have more than 50 million people that each pay $60 to $160 per year to be a member.
By now, you should be seeing a pattern emerge. These are just three examples of non-banking companies with product and service-based value propositions that connect well with customers — millions and millions of people willing to pay fees for these products and services.
So what’s that got to do with a consumer checking account? Well, unless you’ve cracked the code on a unique checking account that resonates so well with the majority of consumers that they happily pay fees for basic banking services, then finding other benefits worthy of a fee should be at the top of your to-do list for strategic and financial reasons.
And the beautiful thing about studying these non-banking companies is that these kind of benefits can fit very neatly and naturally into a checking product, complementing your traditional banking benefits.
Plus, banks can deliver these types of benefits (and others) conveniently online and through mobile apps, which are clearly the ways consumers want their benefits and value-adds delivered these days. Mobile and online delivery is a necessity for consumers in today’s banking industry. So as you try to figure out how to make your consumer checking accounts different, more connected to your customers’ and members’ needs and relevant enough that they will actually pay for them, look at companies like Costco, Verizon, AAA and others outside the banking industry that consistently prove that consumers are willing to pay more when you offer them what they really want. Don’t stay locked into traditional banking benefits that consumers won’t gladly pay for. Look for opportunities to provide these types of benefits, with enhanced products and services that can generate the fee income and product differentiation financial institutions so desperately need.