About 8 months ago I’d had it with Chase and decided to move to a credit union, because I want to bank local. Having worked in FinTech and Banking for half my career, I knew I had a rough road ahead of me. I geared myself up and took the account switching plunge.
To kick things off, I opened a new account with a credit union I knew fairly well. I setup the checking and savings accounts I needed to move over the basics of my Chase relationship. Then I made a list of everything I needed to do in order to make the switch.
I began to slowly make headway on my list during lunch breaks or after our kids went to bed. We got our new credit union debit cards in the mail and my wife started using hers religiously. Shortly thereafter, I realized the interest rate we would be getting for the money we were moving over to the credit union wasn’t as high as I expected, so I started looking at other financial institutions offering a better interest rate. The switching process stalled out. I asked my wife to stop using her new card so that I didn’t have to keep moving money over from our Chase account to cover expenses. We’ve since moved everything back to Chase.
I don’t fault the credit union in the slightest for the experience I had. They had good rates. Their experience, I thought, was about the same as every other financial institution in the United States for switching accounts over. Wrong!
Some financial institutions have begun to use account switching tech to simplify this process. I had heard whisperings of such black magic about a year earlier, but had forgotten who was working on it. As I looked into the opportunity more, I found that a couple of companies had begun to put together solutions for this. I found what I perceived to be the very best company of the lot, and decided to join them.
What I’ve learned about account switching
In the world of account switching there are key battles you must win. For example, getting the direct deposit moved over is perhaps the greatest victory you can manage in this process. The war is won as you continue through the additional skirmishes for moving over payments, whole savings accounts, and additional products, but the direct deposit is key!
While I don’t think anyone has found the silver bullet on account switching, some are much closer than others. Consider Chime — the challenger bank that’s adding 150,000 customers a month — as an example. They’ve gone as far as to do the homework for their customers on how to switch off the major financial institutions and published a “how to” guide for their customers here. They make this available to new customers and strongly encourage them to make the switch. Others have gone as far as to leverage account switching platforms like the company I work for — ClickSWITCH — at customer sign up, sometimes even offering small incentives to account holders that switch over their direct deposit on the day they sign up for a new account, or new product.
Regardless of your approach, financial institutions and FinTechs alike must make getting account holders fully engaged a top priority. Javelin Group has shown that “proper onboarding can help boost checking account profitability by an average of $212 per customer annually,” and “active account holders are four times more likely than inactive account holders to identify their bank or credit union as their primary financial institution.”
If those numbers don’t convince you of the dire need we have to really engage new customers, consider the costs of an inactive account, then do some numbers on how many new accounts you open actually become active. To help understand the the opportunity here, one financial institution that recently joined ClickSWITCH has 40% of new account holders signing up for direct deposit as part of the sign up process!
Where is account switching headed?
I see a not too distant future where people can switch out their direct deposit, initiate funds transfers, and switch over their basic top of wallet and bill payments from one financial institution to the other — all in a matter of 10 minutes or less. The financial institutions that get there first will be sitting on very engaged account holders, which in turn will become more profitable.
If I were a gambling man, I’d guess that vision will be doable in the next 5 years, and that’s a conservative bet. I’m confident all the right tech exists in the market to accomplish this today, if we can just get all the pieces aligned. What do you feel the impact of an account switching platform could be on your financial institution? Where do you think we’ll be in 5 years?
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