It is a well documented fact that men will not stop and ask for directions. Nature compensates for this fact and is the reason why it takes millions of sperm to find an egg (despite that fact that the egg is the relative size of South Dakota). Under the microscope, you can see hundreds of sperm head off in different directions, unable to let their sperm-Fego's roll down the window and ask for guidance. In similar fashion, many bank liability managers do not stop and ask what products could enhance profitability, thinking they know the way already.
That is unfortunate, because many banks aren't getting the most out of their deposit offerings. Take the "Cross Platform" account bundle. There are commercial banks, there are retail banks and then there are both. However, banks that focus on both retail and commercial rarely combine both sections of the bank. The retail group doesn't even let commercial groups into meetings.
While cross platform bundles come in a variety of shapes and sizes, the thought is that the bank attracts small or mid-sized businesses, while also grabbing the owners and key employees. By combining accounts, the customer is able to gain a higher paying and more cohesive banking relationship, while the bank gains a more profitable account.
The cross platform bundle usually starts with a primary checking account for the business. This account is then combined with a business money market, business savings, line of credit and a host of retail checking and savings accounts. The target balance requirement of $105k can be spread out over the entire relationship, so balances from the business can help the retail accounts earn a higher rate of interest. A maintenance fee of $25 is waived if balances are over $15k. The account also takes advantage of a technique called "barbell tiering," which puts a big gap between the lower and upper rate tiers. This suggested cross-platform package is effective when balances below $10k earn 0.11% APY, balances above $10k earn 0.23%, balances above $25k earn 0.41%, balances above $50k earn 0.85% and balances above $100k earn 1.27%. The fractional pricing structure is created to look advantageous next to the competition, while providing an incentive to group higher profit accounts together. Sweep, debit, credit, online banking, investment services and other accessories should be included in the package. Doing so will optimize tiering, pricing and elegance (or an alternative 6 pre-authorized transaction limit should be placed on the account with a $15 Reg D fee). Other fees are largely waived. The advantage is that by combining accounts, both retail and business accounts are captured. The tier and account structure gives small business owners the incentive to extend personal accounts to employees and family, so that each account holder can receive higher rates of interest and lower fees than if they opened up separate ones.
Only a handful of banks currently offer a cross platform package (JP Morgan, Key Bank, National City and BB&T are the major ones), so community banks still have time to gain a marketing advantage. The real profitability of this package is driven either by higher than normal balances left in the account and/or by better cross-sell opportunities.
Getting directions is never easy, but taking the time to look closely at combining the power of retail and commercial accounts can deliver better earnings down the road.