DriveUp Savings

I received an e-mail today from a CU professional who is interested in DriveUp Savings, but worried that the rate match portion of the innovation might be considered unrealistic or that it would detract value from the rest of the institutions savings products becuase of the rate. It’s a very valid question and argument. Having “lived” in this product for several months now, here’s what I came up with:

• [THE CU MISSION]
  This product targets the moderate means consumer. Most often, institutions require a high opening deposit to “play” in the high savings rates game. For this target group, even a $1,000 opening balance is difficult to produce. This product allows the member to
  • Obtain a high rate
  • Develop a savings habit that systematically builds a savings balance
  • Enables the CU to market to the member as they near the loan/savings maturity to offer them more “advanced” savings accounts (at this point, a $1,000 certificate might be of interest to the member since they now have that amount in all likelihood).      

• [RECOUPING COSTS/ACCOUNT RENTENTION]
  Loans will stay on the books longer. Members are less prone to Auto Loan Recapture (ALR) and refinance offers from other FIs because they would lose that savings rate if they closed the loan. It would be much easier to take the $50 offer from the other FI if my savings rate was a miniscule 0.25%APY rather than 8%APY. Since you are earning interest on loans longer, you can return some of that value to the member for the desirable behavior.      

• [ACCOUNT ACQUISITION]
  If you were comparing two FI’s offers and the rates are the same (or very close), would you take the one that also enabled you to save at 8% or the one that gave you a .25%APY Savings account? Even more important, which one would you tell your friends about or blog about (Net Promoter Score anyone)?      

• [PUBLIC RELATIONS]
  No media source will do any piece on another low-rate savings product. However, they might do a piece on an institution who makes it a mission to return value to member-owners through a high-rate savings program that teaches financial savvy while integrating itself into the lifestyle of their consumer.      

• [RETURN SALES]
  I equate this to the “same store sales” measure that the restaurant and retail industries use for determining the ongoing value of their stores. CUs who have implemented this program and those similar to it report that their members are coming back for other smaller loans that aren’t auto loans or have savings programs tied to them. My thought here is that these members were banking elsewhere but came to the CU for their loan because they wanted the savings offer. It gave the CU the chance to earn the member’s future business through streamlined applications and superior service.      

• [INDRECT LENDING]
  If your CU is involved in indirect lending, this product serves two critical functions.
  • 1.) It gives you something to market to the member who originates their loan at the dealership and potentially increase wallet share with that new member
  • 2.) It gives the member less incentive to be redirected to another FI while they are at a dealership