In Low-Interest Climate, Banks Spend Cash To Lure Customers

by Jan Cottingham  on Monday, Aug. 5, 2013 12:00 am  

That last circumstance, however, plays little role in banks’ efforts to attract deposits, most bankers interviewed by Arkansas Business said. “I don’t think that there’s a direct correlation to it,” said Phillip Jett, IberiaBank’s market president for central Arkansas.

“I think that what you’re finding and what you’re seeing is the need to increase households and increase clients,” he said. “That is the main driver behind this promotion. Basically, it is just another hook to gain the attention of a prospective household or client.”

And once that customer is hooked, she’s likely to remain a customer.

“We find in our industry that there’s a strong, strong tendency that if you have your operating checking account with a bank, that’s who you’re going to go to first for your other needs,” Jett said.

Schrage, though, said that banks do want to have more cash available. “By building cash reserves now when interest rates are low, they’ll have that much more cash to capitalize on when interest rates increase in the future,” he said. “Since rates are near zero right now, there’s really only one direction in which they can go.”

Whatever the motivation behind the offers, they’re often successful. “People don’t normally change banks unless they have a real problem, so [a cash offer] gives someone a little incentive to move over,” Ardoin said.

IberiaBank has joined the crowd. Although it doesn’t have such a promotion underway currently, it recently offered $50 for its Freedom Checking, as long as the customer was new to the bank, authorized a direct deposit and followed the other rules.

“We have seen a direct correlation of the amount of the offer to the response rate — the higher the offer, the higher the response rate,” Ardoin said.

Other banks, however, don’t have much use for such offers. Regions Bank, based in Birmingham, Ala., is a regional bank with about 90 locations in Arkansas. It has what spokesman Mel Campbell called a more “holistic” approach.

Roger Weldon, Regions’ consumer banking executive for Arkansas, said Regions seeks to ensure customer loyalty by providing value and the best way to provide value is to help customers improve their financial lives. The bank seeks to evaluate its clients individually, he said, adding that the needs of a 26-year-old customer are far different from those of a 46-year-old.

Regions bankers seek to make “good, solid recommendations that are not transactional recommendations, that are relationship-based,” Weldon said.

And in the end, banking is about relationships, Jett said. Banks that retain customers nurture those ties. “These types of campaigns are only as good as the follow-up that the bankers do,” Jett said.

 

 

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