Better Than Free Checking

Paid options can appeal to members if they’re bundled with personalized rewards.

Financial institutions have historically focused on lifecycle marketing to target and offer financial products to customers. This model remains dominant within the credit card sector. For example, FIs typically graduate card members who start with a youngadult or student product into a no frills low-rate card and then into a rich, spend-centric reward product. However, the consumer landscape has dramatically shifted in recent years and a number of new post-recession trends have emerged, including:

  • There is a slow rise in economic optimism coupled with consumer deleveraging.
  • Generation Y the largest segment in the market faces a series of unprecedented hurdles.
  • The landscape and consumer sentiment quickly shifts in response to unforeseen events, such as the Target breach.

These trends might lead more credit card issuers to examine the market from a generational marketing approach in conjunction with a lifecycle approach. Both lifecycle stage as well as peer group influences current and potential card members. Within thisframework, issuers would be wise to leverage appropriate marketing tactics that include the development of products, communication strategies, and technological solutions that cater to the representative generation. Below are today’s largestgenerational segments along with their related qualities and needs.

Considerations In Generational Marketing

The following are some considerations for developing marketing strategies by generational segment.

Gen Y

  • Leverage online/mobile communication strategies given this generation’s communication preferences.
  • Provide products that help with financial stability debit/prepaid/secured cards to help them work through early life financial pain points; many millennials are driven to obtain and then properly manage a credit line.
  • Consider offering tools that help with security mobile wallets, text alerts and engage them in social media platforms. Invest in a robust credit education strategy given this generation’s need for financial education, research,and comparison.

Gen X

  • Gen X members expect a low barrier to entry. They want quick loan applications and decisions, which offers an opportunity for prescreened or prepopulated forms.
  • This segment is not adverse to technology. It has high adoption rates to new technologies and spending power behind it.
  • Gen X is highly trusting of credit cards members were raised on them but still look to use debit products as well. This group finds simplicity in products and rewards attractive given predisposition to use.
  • Gen X tends to look for enticing value propositions within an active lifestyle. Credit unions should potentially look to build out rewards programs that focus on everyday spending such as bonus structure, earn categories, etc.

Baby Boomers

  • Consider creating and leveraging a relationship-based product that adds to the value of the overall relationship with the institution as this group defaults to making relationship-based decisions.
  • Focus on acquisition channels that rely on previous relationships; branch-sourced and direct mail sourced accounts are still highly effective.
  • Don’t disregard high-value rewards because this generation is not afraid to use cards for large ticket purchases and will seek the appropriate value for that behavior.

Benefit And Forward Path

A credit union will benefit by employing an effective marketing and communication plan based on these generational segments. Using Gen Y as an example, your credit union has the opportunity to form a lifelong and meaningful relationship. With a Boomer,your credit union can maintain a stable, mutually beneficial relationship. Implementing a well-rounded acquisition, communication and product strategy will capture relationships in all segments. These relationships crate a solid foundation to buildenhanced member relationships.

Credit unions have the option of developing these channels in-house or outsourcing to a partner who can facilitate and manage the process. When considering your options, it would be wise to vet all available options to fully understand the implications.Outsourcing allows a credit union to take advantage of economies of scale to better target these segments and effectively service members. With the right partner, an institution’s credit card program can thrive and the institution can allocateits internal resources to other core projects.

About The Author
Elan Financial Services is the leading credit card provider in the industry and offers partners the availability of immediate access to a suite of products that competes with national issuers, technology solutions that cater to audiences across the spectrum, and free access to a marketing engine that helps generate accounts. Elan’s unique platforms help its partner institutions reach all segmentations.


Elan is America’s largest agent credit card provider. For more than 47 years, Elan has delivered exceptional card products and service to more than 350 credit unions. For more information, call (800) 223.7000 or visit

In the weeks and months leading up to Bank Transfer Day, free checking became the financial institutionequivalent of open sesame for new relationships ? effective, yet not foolproof. Many institutions embrace free checking a strategy they need to stay competitive ? but free products may not always be the best option for every member or a fiscally feasible option for every credit union.

Pen Air Federal Credit Union ($1.2B, Pensacola, FL) offers a free checking product. But the credit union also developed two new products ? a free rewards program basedon relationship and a paid checking product that offers customizable benefits ? that work together to drive engagement, cross-sell opportunities, and cost reduction. The message is that there’s a better option than one-size-fits all.

The Premier Relationship Rewards program launched in May 2011 to address Pen Air’s need for a rewards program, but avoid the costs that had plagued transactionbased reward systems at other financial institutions.

The cost of these kind of programs had caused many other institutions to give up rewards entirely, but we wanted to go about it a little differently, says Patricia Veal, the credit union’s vice president of marketing.Pen Air worked with St. Petersburg-based PSCU to assign a reward points value for each of their products and services offered, streamlining the options and making them more cost-effective.

To quality for Premier, members just need a savings account, a checking account, a debit card, and eStatements,all of which are available at no cost, says Veal. They get free access to both mobile and regular remote deposit capture and earn an initial one-time reward of 500 points. Additional points are earned as more services are used and adopted, from 25 points a month for bill pay or eStatements to one time bonuses of 500-2500 points for large loan products.

In addition to originations, the Premier program also assisted with recapture efforts, making a significant impact in the loan portfolio. As of 1Q 12, the credit union has achieved an annual loan growth of 1.71%.

This Premier option helped us convince members to bring in that credit card, loan, or line of credit and refinance that mortgage, says Veal. We are not just competing ona rate level anymore. The member is getting something extra beyond that.

To date, Pen Air has achieved roughly 50% penetration in checking accounts among its more than 100,000 members and roughly 20% of those members opt for the Premier relationship. Nowthe credit union wants to improve both figures.

Our long-term goal is 100% checking account penetration and to get all of those members fully engaged, says Veal. Pen Air recently began pursuing a complimentary paid checking strategy that would help boost Premier accounts, create additionalmember benefits, and drive enough revenue through fees to negate any accompanying costs.

A partnership with a second organization, Affinion Loyalty Group, let the credit union select from a series of prepackaged benefits across multiple retailers and organizations.The resulting product was branded a You Choose It account.

The paid packages give the members extra value and services they want but are options that a credit union couldn’t normally provide.Members can select between travel-related benefits, shopping discounts, a credit report and alert option, a fraud insurance and protection package, or a healthcare and prescription-based option.

We picked the programs we knew members would have the most interest in, but none of this is locked in stone, Veal says. If we determine that some options are dragging behind the rest, we can revamp those.

The Premier program and the paid checking rewards program are two separate entities, but they do play off each other. Any member can sign up for any You Choose It benefit for $3 each a month, but if they are in the Premier program, theypay just $2 a month for each.

You Choose It is currently in the soft launch phase as the credit union smoothes out any potential IT, training, or vendor reporting kinks, yet 120 members have already signed up for the service.

Pen Air will begin initial marketing for You Choose It mid-summer to coincide with back-to-school promotions and other seasonal promotions. Despite its extra cost, Veal says she expects it to be quite popular.

Our checking accounts have become more marketable because members see many others options and benefits beyond just the free ones, she says.

May 9, 2014

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