Tuesday, April 17, 2012

An opportunity for retail banks

I recently opened a savings account for my seven-year-old son at a local retail bank. I'd give the experience a score of three on a scale of one to ten.

My goal was to start building his financial literacy and help him understand what money is all about and how banks work.

Apparently, I wasn't the only parent with this idea. Our neighbors walked in a few minutes after us with their young daughter and the same idea in mind. (They were turned away because they forget to bring ID and the girl's SSN.) And another banker was enrolling another young saver while my son was getting signed up.

A few observations about what did happen:

- The banker kept us on the far side of the desk and refused to let us look at his screen. I would have liked my son to see all the information that he had to enter. The banker claimed we were not allowed to watch - something to do with money laundering or catching terrorists.

- I was asked if I have any accounts at the bank, and when I said 'No' there was no follow-up.

- On the positive side, the banker did show us the machine that printed our new ATM card.

What a truly world-class experience might look like:

+ The banker introduces himself to my son by name, and gives my son his card. "Anytime you have any questions, you can call me on this number."

+ The banker engages my son directly, and welcomes him to the bank. "First, before we sign you up, let's take a quick tour of the bank so you can see what we do here." We get a tour of the vault, of the cash-counting machines behind the counter, etc.

+ The banker gives my son a short book, designed for his age range. The book explains with simple diagrams and examples how a bank works.

+ The banker gives my son a worksheet on goal-setting. "Is there something in particular that you'd like to save up for? Do you know how much it will cost? When would you like to buy it? Let's figure out how much you need to save each month to be able to have enough by then."

+ My son gets invited to a class on financial literacy for kids ages 7-9 that will be held at the bank two weeks from now.

+ "Before you leave, I'd like to introduce you to the manager of this branch, who always likes to say a few words to young savers."

Those are a few ideas off the top of my head. That would be an experience I'd tell friends about.

Now, the bank is almost certain to lose money on this account we just opened with a total of eleven dollars as a first deposit. (No minimum balance for kids under 18.)

So why bother to create an extraordinary experience? Because the type of parent who wants to open a savings account for a child represents, more often than not, the potential to be a lucrative customer. And creating an extraordinary experience for the child would probably cost less than the comparable acquisition cost of that customer.

To my knowledge, no retail bank in New York City owns this space, as the go-to bank if you want to open an account for a child.

1 comment:

  1. I think given the economics of the business your expectations are a bit over the top. A bit like naive customers who want free checking, free checks, free customer service, and no, the 1-800 should not be answered by someone in India..all for keeping a 300 dollar balance.

    I am sure you would have received the world class treatment had you gone to a bank's private banking division with a couple of million dollars to start your son's account.


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