Making the Checking Relationship Profitable Again

By Mike Branton
Originally posted on October 14, 2013

In April, I addressed the financial state of consumer checking. In summary, about 40 percent of consumer checking accounts are so “shallow” that they don’t generate enough income (net interest income and fees) to cover the estimated annual costs to maintain and service the account. Plus, this 40 percent only contributes 2.7 percent of all checking-related revenue and 1.4 percent of total relationship dollars. 

Here are a few more numbers to define these shallow, single service, low balance, no/low fee relationships:

  • Only 3 percent have a loan
  • The average checking account balance is $812
  • The average relationship deposits (other than checking) and loans total amount is $236
  • The average annual fees are $55 ($45 from overdrafts)

These shallow accounts occur with all checking account types — free, interest and relationship accounts with the overwhelming majority of these account types being free ones.

So at a time when financial institutions, especially community ones, need more core profitability from their retail products and services than ever before, what has to be done to deepen the relationship of checking customers?

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