Several credit unions are focusing attention on promoting their share draft accounts. They view the share draft account as the institutional gatekeeper- that is members are more likely to sign up for other products and services if they actively use their share draft account.
When designing a product and the associated marketing campaign, there are key questions to address. According to VP Strategic Market Analyst Brian Johnson from Arizona State Savings & Credit Union ($959M in Glendale, AZ) members want to know:
Does the checking account require a minimum balance?
Where are the branches?
Where are the ATMs? Are they surcharge-free?
Does an account include a free box of checks at account opening?
Are online banking and bill pay free services, or what are the pricing guidelines?
With that in mind, some innovative credit unions have designed customized product and marketing campaigns to not only increase members’ product awareness, but also to increase the penetration levels and the share draft average balances.
Providing Incentives to Members & Staff
Digital Federal Credit Union ($3.0B in Marlborough, MA)
Digital FCU offers three share draft accounts with varying degrees of member benefits: free checking (no minimum balance), dividend checking ($2,500 minimum balance) and premier checking ($10,000 minimum balance). The latter two pay dividends, and the premier checking account is structured to offer four tiers- the top tier being $100,000-plus. To encourage members to sign up for direct deposit, Digital FCU will reimburse direct deposit members up to $5 per month in ATM surcharges for withdrawals outside of the network.
To promote employee buy-in, Digital FCU executives have made the share draft account a component of the “Success Sharing Goal” framework for each of the last 11 years according to VP Marketing Tim Garner. “Our Success Sharing program involves the setting of five to six growth goals at the beginning of the year and breaking them into six steps each with a stretch goal,” said Garner. “Each level is tied to a percentage of salary. If we exceed level six in all of the goals by December 31, each employee receives a 15 percent bonus of their annual salary.” As a result, Digital FCU had a 60.8 share draft penetration rate and 12.7 percent share growth as of December 31, 2005.
Schools Financial Credit Union ($1.2B in Sacramento, CA)
Schools Financial CU saw an increase in its share draft penetration levels a few years ago after the credit union offered free checking and later free bill pay without direct deposit requirements. “We continue to offer regular sweepstakes to encourage members to sign up for bill pay as well as to persuade them to actively use the service, said VP Marketing Nathan Schmidt. Members can win prizes that range from gift cards to a plasma television. “When we run these sweepstakes, it encourages members to use their share draft accounts,” said Schmidt. Schmidt advises against simply giving away free prizes to reward a specific member action, such as opening a bill pay account. “It could be money out of the door unless the credit union has a great tracking and cross-selling model.” Schools Financial documented a 52.4 percent share draft penetration rate and 13.8 percent share growth as of December 31, 2005.
Tying Checking to a Broader Relationship
Anheuser-Busch Employees’ Credit Union ($703M in St. Louis, MO)
To promote product usage, Anheuser-Busch Employees’ CU implemented a five level relationship-based pricing model that is based on aggregate loan and share balances. If members have a $50,000 relationship with the credit union, they receive free checks and a free debit card. Alternatively, they receive a 50 percent discount on check orders if the relationship is between $25,000 and $50,000 and a 30 percent discount if the relationship is between $10,000 and $25,000. There are other rewards given to members at the various levels.
Anheuser-Busch Employees’ CU has also focused on its online channel to better suit its members’ needs. “We believe the share draft account is an integral part of the member relationship and we have developed our online services to improve that experience,” said Pier Alsup, senior vice president of marketing. Members receive access to free bill pay and e-statements if they have at least a level two relationship ($500 minimum) with the credit union. Otherwise there is a minimal monthly fee. “We have too many unprofitable accounts, and we want to encourage members to participate in the cooperative,” said CFO Larry Hoffman.
Anheuser-Busch Employees’ CU measured that if members only have a regular savings account without checking, they will have on average 3.2 accounts. But if they have a share draft account, the number of accounts increases to 4.6. Perhaps the gatekeeper mentality holds true.
Learn more about successful strategies for increasing share draft penetration and generating share growth in the recording, Growing Your Checks and Balances: Successful Share Draft Strategies, sponsored by The Callahan Center for Credit Union Leadership.