A switch in time: you can attract big deposits by making it convenient for prospects to transfer their accounts to your financial institution. Banks today are using a variety of approaches to accomplish this goal.

What's New with Switch Kits?

Editor's Note: In this article, we sample some of the different programs that banks today are using to encourage prospects to switch accounts to their financial institutions. One bank opted for a traditional printed switch kit; the second developed an online kit; the third created an intensive program that included the designation of an "account transition coordinator" to oversee switch progress.

When MidSouth Bank, Murfreesboro, Tenn., opened its doors in January 2004, it had special needs. As a de novo institution, it was looking for customers--lots of them--to switch their accounts from the area's 12 existing banks.

Making it a snap for customers to transfer accounts was critical to the bank's success. MidSouth quickly concluded that a traditional switch kit was not going do a sufficient job. Instead, the bank opted for what it terms "a switch kit on steroids."

The bank's solution was not so much a package of forms (as is typical for a switch kit) as it was a process: With the assistance of BLF Marketing, Clarksville, Tenn., the institution came up with the name "Easy Move" for the program. MidSouth assembled a package of forms and assigned one person to work with customers as an "account transition coordinator." By this May, a total of 189 new customers representing more than $10 million in deposit balances had completed the Easy Move process.

MidSouth took this route because it realized that it was the high-balance customers--precisely the group that the bank needed who were the most resistant to the idea of switching their accounts to a new bank. Stable, high-value customers often have many automatic deposits and debits made from their checking accounts. Each deposit or debit has to be switched separately--using different forms from different companies that follow divergent processes. Customers who try to switch by themselves face an intimidating nightmare of paperwork.

"The main reason that people don't move is that there is so much work involved," says Abby Moore, who is the bank's account transition coordinator.

The process is designed to make it easy on the customer. "Our product is much more than just a switch kit," says Bruce Plummer, vice president of marketing.

Here's how the program works:

Customers who want to switch to MidSouth physically come to the bank. They bring copies of their old bank statement or bills drafted from the old account. In many cases, they can simply sign a series of forms, and the bank will take care of everything else. Once the process is started, the coordinator stays in personal contact with the customers, notifying them on the progress of various deposits or debits being switched which can take as long as two monthly billing cycles to complete. Sometimes a billing company will require a personal visit or a telephone call directly from the customer, but Moore makes the procedure less burdensome by providing the customer with contact information and a checklist.

Since deposits and debits might not be switched to the new bank during the same cycle, customers are often concerned about incurring overdraft fees during the changeover. MidSouth responds to their fears by honoring all drafts during the transition, with no overdraft fees or service charges. "Once they start the transition, they don't have to bother with depositing money in the old account," says Moore. "That gives the customer a feeling of comfort."

To sweeten the pot even more, the bank pays $25 for each new checking account ($50 if there is a savings or money market account included), plus premium rates on certain new certificates of deposits of $10,000 or more. Plummer says the cash incentives are "helpful but not a deal breaker."

The service's biggest obstacle is getting the cooperation of the companies that make the automatic drafts--telephone, electric, water/sewer, cable television. "The number one problem is getting individual companies to respond in a timely mariner," says Moore.

After a few forms got lost in the mail, Moore started using UPS for forms and letters that needed to be mailed. With this service, she has a tracking number so she knows exactly when the item was delivered.

Another headache is insurance drafts. Some of her customers have had insurance policies for years and have always had the premiums drafted. The customers may no longer know the policy number or even if the insurance company still exists under the same name. Sometimes tracking down this information in order to find the right company/department to send the information can be time-consuming and exhausting, Moore says.

Since the bank does not have control over third parties, Moore tries to compensate by being proactive and watching the progress of the transition carefully. "Sometimes it is difficult for the customer to understand exactly how the process works, especially if they receive a late charge or something similar.... If I know a bill should draft by the tenth of the month, I will call the company to try to find out why it hasn't."

MidSouth received survey results from 119 customers who had started the Easy Move process, and discovered that 62 percent either agreed or strongly agreed that the availability of the service influenced their decision to move to the bank. One woman customer commented on the survey that the service she had received was excellent and that the coordinator seemed to be doing whatever she could to make the transition smooth for her. "She was also very patient with my kids (ages five and under at the time), one of whom spit on one of the lobby side tables."

Now that's a bank that goes the extra mile to facilitate a switch!

Simple and Traditional

Institution: Union Bank, Mena, Ariz.

Assets: $145 million

After attending an ABAMN seminar, Linda Rowe, marketing officer at Union Bank Mena, saw an example of a switch kit that had been created at another financial institution. "We felt it was an excellent tool and decided to create our own," she says.

In the past, customers who wanted to switch accounts to Union Bank had to physically come to the new-account department and complete the paperwork, which was sometimes "a long and tedious process." By developing a kit, Rowe hoped to make it easier for people to make the move.

Rowe developed the kit by herself this April after consulting with the bank's ad agency to ensure that the design was consistent with the bank's product brochures, debit card applications and so forth. Her major piece of advice to other marketers is "Involve your new-accounts personnel in preparing the forms that request information. The input I received from these people was invaluable in determining what information we needed to obtain."

The kit is simplicity it, self. It consists of a folder containing three documents: (1) A new account customer information sheet; (2) Authorization to change direct deposits; and (3) Authorization to change automatic payments.

She distributed kits to call officers, who were in the process of targeting specific customers that the bank knew had their business elsewhere. "The officers like the kit because it is simple to explain, and they can bring it back to the bank after the potential customer has completed the forms," she says. "Once the new-accounts clerk has the paperwork ready, the calling officer can either take the paperwork out to the customer to be signed, or we call and have (the customers) stop by the bank at their convenience."

Rowe says the kit has created a tool "that can be used to overcome objections about direct deposits and automatic payments being so difficult to change."

The Online Option

Institution: Legacy Bank, Pittsfield, Mass.

Assets: $632 million

In the past, the bank had all the forms needed for a prospect to switch banks, but the materials lacked branding and were not organized into a convenient package that could be handed out as a unit, according to Liz Bissell, assistant vice president for marketing.

Last summer, when the bank launched a new-account acquisition direct mail piece, Legacy decided that it needed a switch kit to hand to potential customers. "The major goal was to overcome a customer's mental stumbling block to switching," says Bissell. The mere fact that the bank has a kit helps the potential customer to feel that the process will be manageable, she notes.

One employee each from marketing, branch office, branch administration and operations worked together to assembly the kit. The finished product is housed online. A potential customer can print out a hard copy when needed. Also, branch employees can print a copy and help customers to complete it.

The kit contains five elements: (1) An overview page, with branding and graphics, outlining the steps involved in switching. (2) New-account owner information--and types of accounts desired. (3) Account closing letter for the customer's existing bank. (4) Direct deposit request, to switch or begin payroll direct deposit. (5) Automatic payment cancellation letter, to help switch payments being taken automatically out of an old bank account to the new bank account.

Marketers thinking of developing a kit should take advantage of the research done by other banks, Bissell rays. Since all kits generally contain similar information, you can build on to existing kits--adding your own branding and marketing approach, she adds.

What lessons did Legacy learn from its own kit development? Although it saved printing costs by creating the kit online, the bank discovered that it was not easy to create a form that could be filled out by users online. Instead, users have to undergo a two-step process to submit the forms: First, they have to print out the forms and, second, they have to fill in the needed information by hand. A possible drawback is that dial-up customers may find the download time a little slow because of the graphics contained in the materials.

Since the kit only exists online, it is a little "out-of-sight, out-of mind." Bissell says it is sometimes a challenge for bank employees to remember that the kit is available--and that they have an opportunity to print it out and assist customers in completing the forms.

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Walt Albaro senior associate editor of ABA Bank Marketing magazine.