In the past, bank promotions meant sign-up bonuses for opening a checking account with minimum opening deposit — a relatively noncommittal agreement in exchange for some extra cash. Things have been shifting in the banking world as consumers are getting clever and banks even smarter. There is a trend growing among banks, which targets customers to use digital banking in exchange for incentives — and comes with some pretty sneaky motives.
Reasons for encouraging the switch
Why are banks so willing to go the extra mile and pay up the extra cash to get new and even existing customers to use digital banking? Santander Bank, which offers customers up to $240 every year for their Extra20 Checking Account, was created as a way “customers can receive an incentive each month simply for continuing to do what they’ve been doing anyway.”
Although these altruistic motives underline a desire to better understand what the consumers are looking for from their banks, there is another reason why banks are encouraging the use of digital services.
Of course digital banking comes with the advantage of not having to make the visit to the branch, but there are added benefits for the banks as well — lower costs.
When it comes to how much banks are paying on average for each type of transaction, the Javelin Strategy and Research discovered mobile banking came in at the lowest with $0.10 per transaction, while online banking came in as a close second at $0.19 per transaction. On the other hand, in-person transactions cost the bank a whopping $4.25.
Banks have invested a significant amount of money and time in setting up digital services and it will only pay off if more people make use of it. It will also save banks more money in the future, as online and mobile activities simply cost less.
Increasing switching cost
In an effort to strengthen customer loyalty, some banks are making it harder for customers to leave. Banks realize that as the customer’s life and habits become strongly embedded and intertwined into their checking accounts, it becomes exceedingly hard to break up with them — even if it means having to pay higher monthly fees or dealing with unfair fees.
Once you have all of your direct deposits and online bills set up, it becomes exceedingly cumbersome to change banks — a headache for many, but a benefit for banks. When you sign up for a new bank account, be sure to do your research first, as you may find it difficult to make the switch later.
Bank deals and promotions aimed at digital banking
To entice customers to get with the digital banking trend (and sign up for a checking or savings account), many banks offer deals and promotions. Just today, Citizens Financial Group, Inc. announced new Bank Better enhancements that will expand mobile banking functionality for Citizens Bank and Charter One customers. In addition, they simultaneously announced a sweepstakes promising to award those using their mobile deposit with a chance to win up to $500.
They’re not alone, as many other banks have shown their zeal to increase digital banking usage among customers. Currently, Citibank is offering up to $100 in cash bonuses when banking customers enroll in and sign up for things like online bill pay, mobile check deposit and outgoing Popmoney transfers, while U.S. Bank will deposit $25 into your account when you pay five bills with online or mobile bill pay each month in May, June and July.
For some long-term benefits, you can turn to Santander Bank, which offers up to $240 every year when you open a new Extra20 Checking Account, and set up a qualifying Direct Deposit and pay bills online.