Building Relationships One Checking Account At A Time

A single checking account with automatically applied tiered benefits helps San Francisco Federal Credit Union reach 1,000 new account holders.

With seven branches stretching from Golden Gate Avenue southward to El Camino Real near San Mateo, San Francisco Federal Credit Union ($938.5M, San Francisco, CA) faces some of the nation’s most intense competition for checking, deposits, and loans.

In 2014, senior leaders at the 34,000-member credit union knew they needed to enhance their simple checking product. Other financial institutions were offering reimbursements for some or all foreign ATM fees. SFCU had four legacy checking accounts with various incentives including a $10 monthly cap on ATM reimbursements, free simple checking, and checking dividends.


data as of 12.31.14

  • HQ: San Francisco, CA
  • ASSETS: $938.5M
  • MEMBERS: 34,000
  • BRANCHES: 7 (including one electronic branch)
  • 12-MO SHARE GROWTH: 8.53%
  • 12-MO LOAN GROWTH: 9%
  • ROA: 0.41%

Credit unions have held the upper hand over large banks since the first Bank Transfer Day backlash in 2011 that forced Bay-area icon Bank of America to back off plans for new debit card and other fees. Free checking has become a mainstay at most credit unions since the introduction of the Durbin Amendment, and this environment has helped SFCU evolve products and pricing models to build deeper relationships across checking account holders, depositors, and borrowers.

As SFCU prepared for its 60th anniversary in 2014, Jude Gogan, senior vice president and chief operating officer, worked with her marketing counterpart to design a new checking product. They were close to finalizing it with CEO Steven Stapp when they realized they weren’t happy with the fundamental approach of launching another product.

We decided to go back to the basics with a plain Jane checking account Gogan explains. ATM reimbursements seem to be the biggest thing for checking accounts, so rather than creating a product and having to change that product again, we decided why not change the relationship?

A Change To The Relationship

What emerged on Nov. 1 was a more comprehensive, three-tier Relationship Rewards program tied to members’ deposits, certificates, IRAs, and loan balances. Each tier requires a higher minimum daily balance Avenue ($100), Park ($5,000), and Bridge ($10,000) and is linked to a host of options for free services and three levels of ATM reimbursements one, three, or five per month instead of a $10 cap.

Rather than creating a product and having to change that product again, we decided why not change the relationship?

More than 1,000 members have signed up for the new account since November Gogan says.

The move to Relationship Rewards was a natural follow on to SFCU’s new vision statement, adopted in 2014.

Our goal is to make our members’ financial lives easy she said. In a nutshell, this is about as easy as you can get.

Tiered pricing wasn’t new to the credit union. The first step came two years ago with a new approach to its three money market accounts. The credit union had offered three interest rates based on dollar thresholds, with the highest threshold being $7,500.

In the old days, if members had to make a withdrawal, they would have to close that account and go back to another account with a lower rate until they were ready to move back Gogan says. We took that away. If you go below that tier level, you get the lower interest rate, and when you put money back in, you get the higher interest rate.

The next natural step was applying the tiered philosophy to membership savings accounts.

As a new member, you only need to open one savings account Gogan says. As you build that, you’ll start earning money market rates when you reach that threshold.

She says the approach also simplified the job for front-line staff.

When you’re talking about cross-sales and getting the member in the right product and the right financial services, it’s easy to explain to the member: You don’t have to think about your balances. We’re going to take care of that for you.’

Simplifying the credit union’s three checking accounts was next. It increased the threshold for the top tier Bridge, signifying the Golden Gate Bridge from $7,500 to $10,000. This was an easy decision, Gogan says, because SFFCU also wanted to link rewards to loan balances as well as deposits.

We wanted to give those benefits to people who might only be borrowers with us for car loans or real estate loans, but unless they had the same deposit with us, they weren’t getting these benefits Gogan says.

Rewards For Loyal Members

It was also time to take a long, hard look at fees; when they were being waived and why. Gogan says they knew some hard costs related to fees, but not all of the decisions were based on the credit union’s costs. For example, the credit union provides BALANCE, a financial education and consumer credit counseling service, to all tiers for no fee.

We used to require no minimum balance, but we charged a fee if the balance fell under $100 Gogan says. Since our goal is to move you into products that earn interest, it made sense to set the entry level tier at $100.

Other rewards available to all tiers include: access to 29,000+ surcharge-free ATMs and 5,000 branches nationwide through CO-OP, shared branch transactions, personal auto shopper, enterprise car buying, AutoSMART vehicle quotes, RepairPal auto repairs, and ADD insurance.

Gogan says the team also took an inventory of all of the other services the credit union provides, whether or not it charged a fee. It was a long list.

For example, the second and top tiers with $5,000 and $10,000 thresholds, respectively also include free travelers checks, third-party teller checks, telephone account inquiries, and one free box of image checks per year.

Bridge account holders get even more rewards: mailed paper statements, account history printouts, duplicate statements, immigration and naturalization service letters, same-day payroll/government check cashing, photocopy of transaction documents, verification of deposit, incoming wire transfers, and excess personal withdrawals from savings and health savings accounts.

In the past, members only recognized these benefits when they needed a service that required a fee waiver Gogan says. No one knew what that meant for them other than the fee on the checking account would be waived. It was never really out there for a member to know what benefits came with this nice deposit.

Keep It Simple

To promote Relationship Rewards, SFCU posted an easy-to-read checklist on its website, and it’s monthly account statements show benefits and fee waivers available for each tier.

Every month, members can see where they are and what rewards they’re qualified for Gogan says.

As far as lessons learned, Gogan says it was all about full staff training.

SFCU’s share growth was 25.46% in the fourth quarter of 2014, compared to 8.67% on average at credit unions with $500 million to $1 billion in assets, but Gogan says the rewards program represented only part of the increase. The credit union also launched a successful CD promotion with competitive rates and kicked off a direct deposit program for interns and youth accounts as part of the city’s financial empowerment program.

Although SFCU is actively promoting the rewards program to members, it is not forcing anyone to migrate from legacy accounts. Those accounts will likely stay in place through late 2015 or early 2016, Gogan says.

As far as lessons learned, Gogan says it was all about full staff training.

You can’t do it too early, and you don’t want to do it too late Gogan says. We did focus groups and role playing exercises for our front-line staff. It’s hard to fit it in in the work day, but you can’t do too much training.

Source for all data: Callahan Associates Peer-to-Peer Analytics

March 9, 2015

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