On this Veteran’s Day our love and support goes out to all those Americans that have sacrificed or are sacrificing in order to protect this great land of ours. While many banks have a military, public service or “Hero Account” (which is what we call it here at CenterState), more retail banks should. Not only is it a supportive thing to do, but it is also good business.
While deposit accounts that target military or public service employees differ, it is usually a free checking account that targets a particular retail customer segment. From a data analytic standpoint, the great part is that we can do a direct comparison in order to see the value of serving those that serve us. Our Hero account, for example, has no monthly fee, no per check charge, no minimum balance, free bill pay, electronic statements, free debit card, competitive interest rates (plus 2 free CD rate increases or “bumps”) and a free gift.
Holders of our Hero Account here at CenterState carry an average balance of about $4,039k which is almost twice the balances as our free checking, civilian population version at $2,052. This factor alone makes this account type profitable for banks. In addition, fee income is about 30% more, largely driven by greater transaction activity. Best of all, interest rate sensitivity tends to be less on the Hero Account, meaning that these accounts gain in value as rates rise.
The net combination is that the average Hero Account provides about 38% greater profit compared to the basic free checking account. The larger deposit balances and better performance characteristics put a hero-type account on par with regular checking. In fact, USAA Bank has largely built their entire business model around this customer segment.
If you don’t already have one, we are big fans of the Hero Account. Just like bankers have always been great fans of the men and women, past, present and future, that have fought for us and have served this great country. Today, we way thank you.
Submitted by Chris Nichols on November 12, 2013