What is the Value of a Member Account?

This week my wife received a mail promotion from BB&T bank inviting her to open a checking account.

If she chose their Elite Gold product with either a $35,000 deposit or direct deposits totaling at least $3,000 per month, than they will pay a bonus of $600 into the account.

The only time limit is she must leave the deposit for 75 days or have the direct deposit(s) established in the same time frame.

Acquisition Cost and Future Value

Paying cash to incentivize new account relationships is not a new strategy. USAA regularly solicits my credit card business with a $200 cash offer.

But the amount of $600 seemed to be unusually high. Why?

I don’t know the answer. Is there a new awareness of the value of a consumer’s payment account in a low interest environment? Or is this an effort to preempt Fintech deposit acquisitions? Does the amount reflect a targeted marketing strategy for a specific demographic, such as retirees? Or is it just paying the present value of a long term customer relationship for the bank? Is the $600 based on documented acquisition costs from other marketing efforts, which it will now amortize over the estimated life of the relationship?

The Value of Members

What the offer should remind credit unions is the value of their checking account relationships, especially those with direct deposit. There is unrecorded but real value, from those members whose loyalty often goes back decades. These core deposit relationships underwrite much of the rest of the credit union’s activity.

If you have a 10,000 member credit union half of whom have checking accounts with direct deposit, according to BB&T that is $300,000 of real value to the market. Or to be more analytical, what is the prospect of BB&T’s ability to earn more than 1.7% ($600/$35,000) if the average relationship from this marketing remains with the bank for at least one year?

Even more fundamental, should credit unions still require a membership fee?