Big changes coming from banks in 2010

This post comes from James Limbach at partner site ConsumerAffairs.com.

Banks are adjusting to a new environment, one with stricter regulations, fewer opportunities for big risks and heavy public sentiment against them.

In that light, Mintel Comperemedia, a provider of direct-marketing intelligence, is forecasting five major changes for banks in 2010.

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"Based on evidence from recent direct marketing, I see waves of change ready to wash through the banking industry," said Susan Wolfe, vice president of financial services at Mintel. "From the fall of free checking to the rise of comprehensive banking rewards programs, banks seem poised to make 2010 a year of innovations. The biggest challenge will be finding new opportunities for revenue."

The end of free checking. It's been a marketing mantra, but this year, the cry of "free checking" will start to fade. In 2009, fewer than half of checking direct-mail offers promoted free checking, down from three-quarters in 2007-08. "With pending regulations on overdraft fees, banks risk losing a major revenue source," Wolfe said. "Charging fees on checking is one way to recoup income." Some banks may implement monthly fees, while others will let customers decide which perks are worth paying for, similar to the Build to Order checking account from BBVA Compass.

Bigger rewards programs. With the decline of free checking, Mintel expects an increase in rewards checking and, more specifically, rewards banking. As financial institutions look for ways to appeal to new clients and make current customers more loyal and profitable, they'll start offering rewards for more than just debit-card use. Capital One, for example, introduced reward checking in late 2009, linking to its credit card rewards program so customers can earn points faster.

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Programs designed to increase deposits. Another way banks will try to increase revenue in 2010 is by creating automatic account-builder products that boost deposits. Industry leaders Bank of America and Wachovia already feature innovative savings programs -- Keep the Change and Way2Save -- and Capital One has just launched SmartCents checking. Deposit-building accounts get customers invested in multiple products, while helping banks secure more deposits.

More aggressive debit card marketing. Mintel has seen direct mail decline across financial-services categories, but debit card volume remains strong at nearly 67 million offers in 2009. "I expect we'll see more aggressive debit card marketing this year because banks are using debit fees to increase revenue," Wolfe said. "Direct mail may not increase, but I expect to see more cash incentives and other perks that encourage debit card usage."

Cash incentives increase and expand. Cash incentives are a hot direct-marketing tactic for checking accounts, appearing in most offers. In 2010, cash incentives will grow even more enticing. Mintel has already seen $200 and higher from Capital One and KeyBank. The company expects banks to start using cash incentives for other types of deposit accounts, too.

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