A different approach to “Free-and-a-Gift” checking programs delivers better results

For a few years now, we’ve believed that “Free-and-a-Gift” checking acquisition programs actually cost community banks in the long run. The focus on “Free” devalues the community bank brand and consumes the marketing focus while the high churn rate of newly acquired accounts overstates program ROI.

The various off-the-shelf checking programs that employ the “Free-and-a-Gift” strategy do generate new accounts and drive an increase in fee income. (Although performance on both measures has declined significantly over the past few years.) However:

  • They generate accounts, not new household relationships
  • The checking account balances are low
  • The low (0.2% average) response rates make them unsustainable in many smaller, community bank markets
  • The average year-one attrition rate of new accounts (30% average) is high
  • The program ROI is often overstated, and
  • The focus on “Free” devalues the quality of service and expertise that the community bank can deliver

Over the past two years, we’ve developed and tested a new approach, one that targets a relationship with a new household, emphasizes the benefits of working with a local community bank, and leverages direct and social media.

Results have been outstanding: