NetBanker 2.0

Holiday gift ideas from my bank?

Who'd have guessed banks would become a popular source of holiday gifts, other than good old-fashioned greenbacks of course?

Now that niche audiences can be targeted with online promotions during the holidays, many financial institutions are marketing financial products packaged as gifts. Prepaid Visa/MasterCards are the hottest item, but there's also potential in other areas. 

Gift cards
The second most popular gift item this year, after apparel, is expected to be prepaid cash cards. While the majority of the $20+ billion purchased will be direct from retailers, hundreds of banks and credit unions, such as Boeing Employees Credit Union (BECU) have joined the fray (see email below). If marketed right, financial institutions could gain a significant share of total sales. See our previous post here about integrating gift cards into online banking for more information.

Credit reports
Equifax is taking advantage of the giving season to market credit reports and/or FICO score gift certificates. The cost is $20 for a three-bureau credit report, $15 for the FICO score and explanation, or $30 for both (see email below). An even better gift would be a year of credit monitoring.

Investment accounts
For years, ShareBuilder has marketed "the gift of stock" during the holidays. This year, many of its partners, such as National City Bank, are offering a $50 gift card as a bonus for new accounts (see screenshot below). That way grandma and grandpa can give junior something that's good for him, an investment account for the future AND something he'll actually like, $50 to spend at the mall.

Piggy bank 2.0
For the younger set, ING Direct has for a year been selling The Savings Machine, a toy bank/calculator/ATM machine. And judging from the note on its website,* it's proving to be a popular Deal of the Month with a lower $17.95 price tag which includes free shipping (see inset). Several years ago, ING Direct reported nearly a million dollars in sales from its online merchandise store <shop.ingdirect.com>, an inexpensive way to get its name on the street.

*Note by the "Savings Machine" product page today: All orders placed from 4 Dec to 11 Dec will be shipped out the week of 11 Dec due to the large amount of backorders.

More free credit monitoring

One day after SunTrust announced free credit monitoring for checking customers (see FMW May 8), PayPal launched a similar service for its 50+ million U.S. account holders (see landing page below for details). Both services use Equifax to power alerts based on credit bureau info.

However, SunTrust includes one free look at the customer's credit report. PayPal users would have to pay for that, or sign up separately at <annualcreditreport.com> to see their report free of charge.

While SunTrust bends over backwards trying to upsell users into a more comprehensive fee-based option, PayPal takes the high road, at least initially, simply redirecting users to an Equifax sign-up form devoid of sales pitches (click on screenshot below for closeup).

However, we expect the upsell offers will be along shortly. We'll keep you posted. As a previous Equifax credit-monitoring customer, we've witnessed the company's aggressive email marketing schedule.

--JB

SunTrust introduces "really free" credit monitoring

SunTrust launched a new checking account acquisition strategy built around free credit-report monitoring (see personal homepage right). And this is not a low-budget identity-theft "insurance" policy (see PNC Bank, FMW Feb. 3 and Washington Mutual, FMW, Nov. 7, 2005), but full-blown Equifax Credit Watch Silver costing $6.95/mo or $50/year at the Equifax website.

Credit Watch Silver includes:

• Weekly credit-report inquiry and balance-change alerts
• One initial Equifax credit report.
• $2500 in identity fraud insurance with $250 deductible

How it works
SunTrust is offering the free monitoring on most of its checking accounts, including its standard $9/mo account that is fee-free with a $1500 minimum balance. The free offer is not available to "free checking" or "senior checking" customers. However, they can buy it for a discounted rate of $3.45/mo or $35/year, a substantial discount from the regular price of $6.95/mo.

Of course, customers will have to wade through relatively gentle up-sell pitches for Equifax Credit Watch Gold, which will cost customers $6.95/mo or $70/yr, about one-third less than the list price of $11.95/mo or $100/yr; or Gold with 3-in-1 Monitoring for another $30/yr. Also, customers that want to extend the Equifax Silver coverage to both members of a joint account will have to pony up an additional $35/yr.

Credit Watch Gold includes:

• Daily credit-report inquiry and balance-change alerts
• Unlimited Equifax credit reports
• $20,000 in identity-fraud coverage with zero deductible

Checking account customers must enroll for the free service at a co-branded Equifax website. It's a jury-rigged sign-up process that requires the use of an offer code that includes the customer's 13-digit SunTrust checking account number.

New customers must first open a checking account, then enroll at Equifax at least two days later. SunTrust offers online account opening, but there is no link to an online option from the credit monitoring landing page (click on inset for a closeup).

Analysis
This is an excellent value for SunTrust checking customers and could potentially have little out-of-pocket cost for the bank. The bank's costs depend on four factors:

1. 1. How many checking customers take time to enroll for the free service
2. How many of the enrollees elect to accept credit-monitoring upgrades
3. How many enrollees opt to buy additional credit-report viewing during the course of the year
4. How often a fraud situation involving a SunTrust account is thwarted due to the service

The only real problem with the program is that it is not integrated with online banking. The separate enrollment and sign-on make it a hassle to use (of course, this holds down the bank's costs). We expect other banks to offer similar programs during the next 12 to 18 months.

--JB

Credit report marketers are faster than Google!

In thousands of searches using Google and other search engines, I've succeeded in stumping them a few times, receiving no results on my search expression.

However, today I saw something I'd never witnessed before. A Google search for "VantageScore," the new joint credit score from Experian, TransUnion, and Equifax (FMW March 14) returned the following (click on the inset for a closeup):

• Zero mentions of the term
• Two ads placed against a search term that returned zero documents (click on inset for closeup).

But I guess it had to happen: savvy credit report marketers are moving faster than Google's spider to lay claim to a new term.

--JB

New credit score creates more FUD

FUD (fear, uncertainty, and doubt) is a strong motivator, especially when it has something to do with your personal financial situation.

As much as financial institutions strive to maintain the perception of safety and soundness, they often benefit from the concerns and resulting risk-averse behavior of their customers.

Case in point: credit reports and identity theft protection. Sure, it's relatively simple to request a credit report every six months to make sure the credit bureaus have accurate info on file under your name. The problem with this approach: it takes time, you must pass rigorous authentication tests each time, you have to remember to do it proactively, and once you successfully access your report, you have to figure out what it all means.

One of the more confusing aspects of the credit report world is the various credit scores available. Each of the three major credit bureaus offer a proprietary score, but the most common one, used by 75% of mortgage originators, is from Fair Isaac, whose FICO score is almost a household word.

The new VantageScore is designed to simplify the confusing credit score landscape. Released today, it's a joint effort from the three major credit bureaus, Experian, TransUnion, and Equifax, who worked together to create a single score incorporating information in all three databases. The new product will be marketed by a separate entity, VantageScore Solutions LLC, <vantagescore.com> a joint venture from the three companies (click on inset for a closer look).

Rather than the 800-point scale in use today, the VantageScore will use a more common academic letter-grade scale as follows:

900-990 A
801-900 B
701-800 C
601-700 D
501-600 F

Analysis
While it should help bring more clarity to the credit score in the long term, the immediate effect is more confusion with a new name, additional marketing campaigns, and a new grading scale. This should be good for financial institutions that can use the raised awareness and heightened concerns to sell their own credit-monitoring services, which can be a solid source of monthly fee revenue.

We'll be taking a close look at the market during the next six weeks as we research and author an update to our 2002 analysis of the credit report-monitoring opportunity (refer to Online Banking Report #83/84).

--JB