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Brett King

Brett King - Moven

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Bye-bye Checking and Current Account

29 May 2012  |  4369 views  |  4

I've been recently debating with bankers and credit union executives on the core banking proposition they offer to new prospects. One of the realizations that led me to this was some recent research released by Aite Group around the 'debanked' generation (Feb, 2012). In March 2011, I released a YouTube Video discussing the same segment of customers (as yet unnamed), and suggested that prepaid debit cards, mobile wallets and mobile payments would be extremely disruptive to the nature of basic day-to-day banking. All evidence points to the fact that this shift is already underway.

Is it more than nomenclature?

One of the key problems banks face, particularly in the US, is that the core bank account is designed around an assumed behavior that, while normal in the 80s and 90s, now is largely an anachronism. The 'checking' account in the US, is essentially built around the assumption that writing a check is still a core behavior for most banking customers. However, for the "debanked" generation and the Y-Gen, writing a check is not normal behavior, in fact, in most cases Y-Gen consumers have never written a check in their life. Looking at check usage in the US is prescriptive:

  • Check usage has been in decline in the US since 2003 at the average rate of 6.1% annually (Source: Federal Reserve)
  • Check use in retail has declined from 77.1% in 1995, down to just 4.3% in 2010 (Source: NACHA)
  • Check volume has declined from 38 Billion in 2003 to an estimated 21.5 Billion in 2012 (Source: Federal Reserve)
  • Celent predicts the decline in use of checks is actually speeding up and will top 20% annual reduction shortly
  • At that rate by 2018 personal check use in the US will be less than 3% of all non-cash payments

Thus, if you're trying to attract new customers and you're leading with 'checking' you have a fundamental problem. Promote a checking account to a digital native or a Y-Gen and they'll immediately assess the account as unsuitable, not for them. That's an account my "Dad' used when he was younger, but it's not for me.

It matters nought that you offer those checks for 'free', because if I'm never going to write a check in my life, or if I fundamentally prefer to do my banking and payments electronically via web or mobile, then a "checking account" is totally and utterly irrelevant.

Why would I ever bank with a bank that offered a checking account?

Isn't it about time we changed the name of the account?

So let's start with the basics. If you're offering accounts to newly banked consumers, or to the next generation of customers now entering college and the workforce, you should forget 'checking' or 'current' account nomenclature entirely. Feel free to offer checks as an option, but it's not what banking is about any longer.

Call a bank account a checking or current account and you are describing the utility or operation of the account, and for many prospects that simply doesn't make any sense or hold any affinity to the way they behave as respects day-to-day banking and payments. You'd be better off calling the account a debit card account, day-to-day banking or just a bank account. The split between current and savings accounts is even redundant, especially in a zero interest rate environment. Just offer one basic bank account, with a debit card, internet and mobile banking as standard.

This is the new benchmark in basic banking.

Forget checks. Forget the current and savings account split. Just give me a bank account.

What about "Savings Accounts" then?

Savings accounts still have a role to play. Increasingly, however, we'll need to simply enable a savings 'bucket' with the option of fixed deposit or monthly savings plan for a better interest rate, or enable customers to label the account for a specific purpose or goal. In this case, Savings denotes a function or the utility the bank is providing attached to the money and is appropriate. Checking and Current don't hold the same value from a utility perspective.

Basic banking behavior is changing. Our attachment to our money is stronger than ever, however. So connect me with my money, but understand my behavior. The bank account you're trying to sell me should fit my behavior today, not the behavior of customers you had in the 1980s.

It's time to change the way we brand basic day-to-day bank accounts.

Free Checking means nought if I don't write checks TagsPaymentsRetail banking

Comments: (6)

Tim Tyler - Misys - London | 29 May, 2012, 17:28

I wonder if we get caught up in nomenclature far more than non-bankers do?

A bank ought to research its target demographic and name/brand its account appropriately. Once the brand has been applied, what you mention just become generic terms for a type of account anyway. That generic term is still useful though, in bringing some broad sense of classification to the account.

The problem that we would have in naming the type of account to completely reflect its purpose is that we would end up with somewhat ridiculous portmanteaux.

Would you like to open a debitcardonlinemobileinterestfreeoverdraftnochargeswhilstincreditwithnochequebook account?

Or would you rather a Platinum Current Account?

Ps/I have to add that I have always considered "checking" to be an erroneous term for a bank account (without even getting started on the spelling!): a "current" account is for now, a "checking" account for the past.

Brett King - Moven - New York | 29 May, 2012, 17:39

Tim,

If we use that logic then why not just simply a "bank account"? What does 'current' even mean? Isn't it redundant?

BK

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 30 May, 2012, 19:45

In the brave new world where Apple, Facebook, Google, PayPal, Square and scores of other non-banks are apparently threatening to disintermediate banks, I'd have thought that 'bank account' itself is an outdated term and that 'Non Bank Account' is the product that better captures the zeitgeist. Just joking...

Everyone understands what 'checking account' means. So, IMHO, it is a waste of marketing dollars for banks to rebrand 'checking account' to 'bank account' or some such thing. Besides, notwithstanding what analysts and statistics say about the declining use of checks - BTW, I find this spelling far more phonetic than the contrived alternative - we see fairly contradictory trends on the ground:

  1. Even Internet-only accounts now offer check books e.g. ING Direct USA.
  2. Mobile RDC for offsite deposit of checks is perhaps the only 'killer app' in mobile banking in the US today.
  3. To set up a bank account for direct credit via EFT, the Indian regulator asks for a canceled check to prove account ownership. Paradoxical as this might sound, I trust the regulator to know what it is doing. Among other accomplishments, it has established an ePayment system called NEFT in India, which has been hailed as one of its kind by BIS in its recent report on global retail payments innovations. In any case, banks have no choice but to comply with the regulator's edict, paradoxical or not.

Just as analysts have been predicting the death of cash for over five decades, I expect their predictions about checks to last at least half as long. Until then, 'checking account' is quite fine.

A Finextra member | 31 May, 2012, 09:45

I don't understand what a 'checking account' is?  What is 'checking'?  I check my account periodically!  (OK, I know it's really chequing)..

It always confuses when when a US ATM asks me which account to get money from - 'checking' or 'saving'?  I have neither.  I just want an 'account'.

Why confuse it with current, bank, premium, or debit/credit.

I have one account with each entity(bank, building society, paypal, google, wonga etc. I don't want more, as it simply means more and more plastic, charges, statements to 'check' and hassle.  I expect it to offer me some savings interest when I am in credit, and be a credit account when I am 'overdrawn', and feed a wallet, and allow online payments.  It might offer me free travel insurance and other pseudo benefits, according to my type of account or what I pay to maintain it.

I think banks are still silo'd to be able to do this, and others are stepping in.

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 31 May, 2012, 16:44

To add to @Finextra Member, there's one more hassle of having multiple accounts: Forgetting to declare a couple of them in your income tax return, only to be reminded by the taxman to cough up tax and penalty on the interest income accrued in them. Not a first world problem, probably, but can be a hassle in high interest economies like India.

By their very nature of having different withdrawal frequencies and lock in periods, money in different accounts is weighted differently for capital adequacy purposes. Therefore, even if banks' internal silos crumbled, I am not sure if they can offer @Finextra Member's dream account under the current regulatory framework. Besides, I'm sure bankers created different types of accounts only because people expressed different financial needs. I for one am perfectly comfortable about sweeping any surplus funds from my current / checking account into a separate savings account periodically. So might many others.

For several reasons - all genuine and compliant with its TOS - I have three different accounts with PayPal, so I don't know who are these nonbanks who are 'stepping in' to offer all-in-one-and-one-in-all type of accounts.

Brett King - Moven - New York | 31 May, 2012, 17:27

All,

I appreciate the sentiment expressed in support of the poor old checking/cheque/current account, but the very fact that there is so much confusion around the difference between a current account and a savings account, for instance, is in itself proof of why the nomenclature is a bad idea.

Right now if you want to onboard new customers you'll have to EDUCATE them first before they can discern the difference between these accounts. That is all the proof you need that this is a bad idea.

I'm not saying get rid of cheque accounts. I'm saying call an account an account and savings ... savings. But checking or cheque or current requires you to explain - that means unnecessary complications, friction and complexity. 

We should be making our customer's lives simpler should we not?

BK

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Brett King

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Moven

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