Why Bank Checking Revenue is Not Growing: Part II

Checking revenue is not growing at banks because transactions by consumers are shifting to payment methods generating little or no revenue for the bank checking account.  Payments increasingly settle as debit ACH to bank checking accounts, or reflect funds transferred outside the checking account to retail or prepaid cards for purchase benefits, discounts or rewards. The checking account gets none of the interchange revenue, and also loses the related liquidity or other service revenue being stolen by “upstream” providers. In-store purchases historically were where bank debit has been strongest, but it is now under great attack by alternatives that established themselves online. 

This is illustrated in a American Banker’s slide show where settling in-store with Amazon's Fire is just one of  9 of Amazon’s Disruptive Payment Products.   Debit use in-store grew greatly in the last decade, driving the highest service revenue for checking accounts in history.  But the shifting payment patterns are moving profitable transactions even in-store from checking debit to alternatives.

How do you fight bank to grow transactions?  Win more transactions by offering “payments” features in your checking accounts these other non-bank competitors provide.  What are the key features to quickly win transactions back?

1)      Provide spending control with no overdraft fees ever with a checking account, not even return check charges.

2)      Let the customer to manage card-compromise risk in shopping online or in-store by having a separate debit “companion” card to move funds to and from, just like consumers do with PayPal or many prepaid cards.

3)      Offer simple, automated liquidity choices for the customer just like BillMeLater.

Such strategies grow revenue 30% by winning back transactions you are losing, and does not cannibalize any of your existing revenues.  Just as those banks that are offering the PaySound^® No Overdraft Fee Ever Checking Plan and Companion Card.