Consumers expect free checking services
Completely free checking accounts peaked in 2007 when over 80% of the top fifty financial institutions offered a free checking product. While the number of financial institutions offering totally free checking accounts has dwindled over the years, almost all financial institutions offer a free checking account when customers have direct deposit or maintain a low balance.
This raises the question of how can you recondition consumers to pay for a service they currently expect for free?
Aspiration’s inventive approach
The online fintech, Aspiration, is answering this by combining an eco-first, charitable persona with optional checking fees. Customers can choose a monthly fee ranging from $0 to $20.00, and 10% of the chosen monthly fee is automatically going to charity. Aspiration implores customers to “Pay What is Fair.” So, if customers chose a $10.00 monthly fee, Aspiration’s fee revenue is $9.00 per month and $1.00 will go to charity.
Besides the basic account that allows customers to pick the monthly fee, Aspiration also offers Aspiration Plus. A subscription to Aspiration Plus comes with a sharply designed debit card made from recycled ocean plastic, up to 1.00% on a savings account, 10% cash back with select merchants, carbon offset on all gas purchased, and one free foreign ATM transaction per statement cycle.
Does this model have the potential to add to your bottom line?
The most interesting feature of Aspiration Plus is the $7.00 monthly fee, or $69 annually if pre-paid. Including the monthly fee for Aspiration Plus, the bank can generate $17.00 monthly per account if customers choose a $10.00 monthly fee for the basic Aspiration account and add a subscription to Aspiration Plus.
This concept could be a solution for the number of larger financial institutions looking for new ways to generate more revenue from the services they provide. They should no longer count on making most of their revenue from punitive fee charged to consumers, especially in a time when many consumers experience financial hardship due to the pandemic.
Imagine a large regional bank offering a checking account with a $10.00 monthly fee, and 50% of the proceeds go to local charities that combat homelessness, child hunger, or climate change. A large regional bank can have upwards of 1 million customers, and if these customers all paid a $10.00 monthly fee, this would result in $10 million in fee revenue per month, with 50% going to charity and 50% going to the bank’s bottom line. This seems like a win-win situation for both the financial institution and the local charity, with consumers feeling good about their contribution.
A concept for more than checking accounts
Checking accounts are just one example where this concept could work. A similar strategy could be applied to online bill payments, person-to-person payments, or mobile remote deposit capture. Financial institutions need to become more inventive, and it will be interesting to see if anyone follows Aspiration’s lead.