Despite what your mother told you growing up, words can hurt you – worse than sticks and stones.
Banking is confusing, nerve-wracking and boring – all at the same time – for consumers. We don’t help ourselves. Simply google ‘confusing banking jargon examples,’ and you’ll come up with 1.24 million gems like, “Jargon busting: Do financial firms deliberately confuse customers?”
Consumers don’t understand bank lingo, so if you position a bank product differently, the market reaction to that product changes. For example, offering a 1.5%, 12-month $3,000 CD does not resonate as well as, “Get $45 when opening a savings account with [Your Financial Institution] with a minimum deposit of $3,000.” It’s exactly the same benefit to the customer, but the mention of hard cash dollars is easier to comprehend in real-life terms.
Here is a prime example: With Citi’s Checking Account, you get $500 for opening a checking account offering 0% interest. To earn the $500, the consumer must deposit $15,000 for at least two months and if the consumer withdraws the $15,000 for two months, they have to pay a $25 per month account fee. Therefore, Citi is either 1) paying the customer the equivalent of 2.7% APY for the first year if you assume the customer deposits and leaves $15,000 all year or 2) Citi is paying a 1% APY if the customer deposits $15,000 for only two months and then pays a $25 fee per month for the next 10 months because the balance dropped below $15,000. After the first year, the customer gets a nominal, if any, return on this account. A 0.75% APY account is much better for the customer over the near term than this offer, yet most people are attracted to this offer compared to the 0.75% account offer.
Discover recognizes this and puts the dollars earned in an interest calculator right on its website. USAA has a similar tool that asks a few questions about why you’re saving and whether you want to make additional deposits here. It even offers to open the CD right below the dollar amount. This is a great digital experience for the consumer and activates them at the point of excitement!
And if that example is not enough to convince you that the big banks just use messaging to convince the customer that their offering is better, Santander even says its $225 cash bonus is considered interest!
Typically, big banks don’t have the best rates compared to community banks and credit unions, but they have learned how to position accounts to resonate better with consumers. Adapting marketing tactics that make more sense to consumers in the form of cash-back rewards or upfront incentives and creating a frictionless journey, combined with competitive – and often superior – rates for consumers can make your local financial institution a no-brainer for consumers! Plus, the campaign can be set up in a way that doesn’t strain the bottom line. Seems like a no-brainer for your institution, too! Vetter can do this for you and help get the message out. Learn more today!