| By Jim Bruene on August 13, 2008 7:23 PM | Comments (4) |
In the year or so that they've been widely available, so-called reward checking, those high-yielding accounts that require a hefty number of debit card transactions (see note 1), have attracted quite a following.
But besides the number of blog posts and press mentions, we've had few other metrics upon which to gauge their success. Until now. In an email to me yesterday, the company behind many of the accounts, BancVue, laid out the total rewards checking results across its client base:
- 381 financial institutions live
- 610,000 reward checking accounts
- $5.5 billion on deposit in the accounts
- $9,000 average balance
- Opening more than 13,000 accounts per week (700,000 annual run rate)
- Average of more than $14 million in deposits per financial institution
- Average of 1,600 accounts per financial institution
Although $5 billion isn't even the rounding error across the entire $3-trillion U.S. retail deposit market, it's real money to the smaller banks and credit unions offering the program.
Notes:
1. Most accounts require 10 to 12 debit transactions per month in order to earn the high yield. For more info, see our previous coverage and Finovate Startup video here.
2. Upper-right graphic comes courtesy of First State Bank, Gainesville, TX.
It's worth pointing out that the average deposit balance for each account is $9,016.39. I think the word to describe that is "astronomical."
Another question: How much of Bancvue's $5.5 billion is new money? How many accounts are new customers?
I think the jury is still out on how profitable these accounts really are.
Pilcher,
I have to agree. Its an interesting offering, but does it really attract new accounts, which is the main point? Granted there may be a loyalty "benefit" here but that is literally impossible to calculate or attribute to a specific program like this.
looking at the numbers:
381 institutions opening 13,000+ accounts per week. That works out to roughly 34 new accounts/week per institution. Not really much to get excited about. Are these really NEW accounts or just new rewards checking accounts?
1600 rewards checking accounts makes since, since the qualification is strict (high balance, 10-12 debit transactions/month, the numbers are going to be lower. If every one of the 34 new accounts were in fact new to the institution, that is decent at 1700/year.
But I question if that is the case.
Some additional stats that would be interesting to learn is the average amount of debit card purchases customers make per month.
If customers make on average $1k debit card purchases a month and the banks make 1.5% from those purchases, that provides the bank with $15/mo in revenue. A 5% apy for a $9k balance will cost the bank about $37/mo. So the debit card usage is probably a big reason why these reward checking accounts can be profitable. But if the average debit card purchases are only $100/mo, it becomes much less profitable.