Likely you have received a mailing like this one from some bank recently. Why would Chase pay $600 to get you to switch from your Financial Institution? Clearly it is because Chase knows the value of a checking and savings account based on internal valuation models. What would your institution pay for a new savings or checking account? How would you know?
Kohl Analytics Group’s data shows that the average credit union earns about $90 a year for a regular checking and savings account. This is before any funds transfer credit that should be used to correctly identify what it would cost to replace a checking account with borrowings. Without an alternative cost credit, this suggests that to break even the new checking account would need to stay active for over six years. Since the cost to replace these types of accounts with borrowings (A.k.a., funds transfer credit) is currently in the 4% range, a new checking and savings account will likely cover the $600 bribe in less than two years. Now, if you include the funding credit and amortize that bribe (acquisition cost) over the average account life of 6 years, the new account is profitable day one.
Sure, Chase gets “cherry picked” by some new customers, but they have tracked past campaigns like this and know what the staying rate is. They also know the actual contribution of those customers based on their behavior such as where they use their debit card and how much interchange income they generate. Do you know this about your customers? Why wouldn’t you want to?
Kohl Analytics can help level the playing field to big outfits like Chase that have extensive analytics by providing similar tools at a fraction of the cost and effort. This is one reason Kohl’s clients are so much more successful than the average financial institution. We would like to help your organization achieve the same success.