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Direct Deposit Services: A Strategic Weapon for Community-Level Institutions
Don't believe anyone who tells you there are no new opportunities for banks to leverage ACH-based Direct Deposit Services. In New Tazewell,
Tennessee, First Claiborne Bank, a community-level institution with six branches and $140 million in assets, has proved otherwise.
A year ago, First Claiborne was facing stiff competition in their marketplace. Attracted by the competition's offer of a free checking account and
extended banking hours, some customers had switched banks. "We had to find a way to compete with free checking. We did: free checking AND Direct Deposit Service," remarked Tammy Flanagan, Executive Vice
President. After marshaling their forces behind a multi-level marketing campaign, the bank went out to do battle.
A Unique Package of Services
First Claiborne started at the top by targeting some of the largest employers in the county: a health-care facility and several manufacturing firms.
None of these businesses used Direct Deposit. The bank began their presentation by explaining how Direct Deposit of Payroll works and the numerous advantages to the employer in offering employees this
convenience-oriented payment option. Then, the bank unveiled their secret weapon: a comprehensive package of support services that would minimize any disruption in normal business. The bank offered the following:
- PC software that would enable the company to input the direct deposit information;
- Training for the payroll department personnel;
- The services of Gary "Flash" Brooks, the bank's 'techno-whiz', to install the software and test transmission;
- New account representatives to be on-site during the initial sign-up phase to explain the features and benefits of Direct Deposit and present
each employee with a customized take-along package (which included information on Direct Deposit along with Claiborne's other banking services); and
- A personal banker to visit the employer each month for a customer support call to the payroll department and to meet with any new employees, as
well as old employees interested in starting direct deposit.
Stellar Results
First Claiborne was successful beyond its wildest dreams. All five organizations established new payroll accounts at the bank. All the employers
decided to start by making Direct Deposit optional. So, the bank's conversion team rolled up its sleeves and started up the mountain of opportunity that lay ahead.
The bank provided fresh coffee and donuts to create a welcoming setting.
At the manufacturing companies, five employees at a time were pulled "off the line" and given a one-on-one opportunity to ask questions, sign-up for the Direct Deposit service, and open a new 'Better-than-Free Checking' account at Claiborne.
The bank had been careful to prepare employers for a small initial sign-up rate, especially in the case of blue-collar workers. The outcome,
however, amazed both the employers and the bank. For most companies, the initial sign-up rates ranged from 20%-40%. As of this point in time, nine months later, the usage rates average around 60%.
The specific results of two employers highlighted the impact one-on-one vs. group employee sessions can have on initial sign-up rates. Group
meetings conducted for one organization's base of 1400 employees resulted in a sign-up rate of 48%. In contrast, at one manufacturing firm with 150 employees, the one-on-one sessions produced an initial sign-up rate
of 60%. Currently, 82% of all those blue-collar employees now use Direct Deposit.
What It Takes
In undertaking a comprehensive campaign for ACH-based services, banks must be prepared to focus the efforts of marketing, business development, new
accounts, customer service and operations personnel. To achieve good results, it takes careful planning, training, an organized individual to co-ordinate various activities and the allocation of sufficient support
resources. Basically, First Claiborne took the key business mission of every successful community-level institution, 'we will go the extra mile for our customers', and applied it to ACH-based payment services.
The Next Campaign
In the near future, the bank intends to offer ACH-based Payment Collection Services to companies that bill customers on a monthly basis. By
implementing Direct Deposit first, the bank expects to increase consumer receptivity to automatic bill payment. The employees who signed-up for Claiborne's Direct Deposit service for payroll would be the same
consumers targeted for the new service. In trying (and finding added-convenience in) Direct Deposit, consumers lower their level of resistance to new electronic payment services.
How Does the Story End?
The successful outcome of First Claiborne's marketing campaign has virtually nullified the value of their
competitor's extended banking hours. With Direct Deposit, employees know that their paychecks are already deposited in their bank of choice by opening of business. Equally important, every payday, the employees
remember which bank makes this wonderful thing happen! No question remains. ACH-based Services can offer key advantages to every participant -- except to the institutions that don't pro-actively offer them
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