Bank of America Customers Can Keep the Change
Thirty-odd years after Merrill Lynch launched its Cash Management Account (CMA) to sweep uninvested account balances into an interest-earning money market, Bank of America has come up with its own take on a sweep account. It has launched a savings program around its debit card that rewards clients for their purchases by helping them save and then matching their savings up to $250 a year.
Customers who sign up for Keep the Changewill have debit card purchases rounded up to the next dollar and the difference deposited electronically in their savings account. Merrill received a patent on its CMA, one of the first business process patents, and Bank of America is seeking a patent on Keep the Change, according to Tara Burke, a bank spokeswoman.
When a Keep the Changecustomer purchases a coffee with a debit card, the difference between the $2.85 cost and $3.00 – or 15 cents – would be transferred electronically to the customer’s savings account. In addition, Bank of America will match 100 percent of the Keep the Changetransfers for the first three months. After that the bank will contribute five percent a year. The bank’s maximum match is $250 annually, and there is no guarantee that it will continue this rather generous matching program.
Ariana-Michele Moore, senior banking analyst at Celent, was rather underwhelmed by the program. Customers use debit cards for regularly budgeted purchases already, while luxury items and holiday travel are often charged on credit cards. So their accounts are debited for the exact purchase price immediately.
However, Keep the Changestrikes me as one of the all too few cases of a financial firm using technology to offer a product that mimics the way customers live in the real world. People use tricks like change jars, rounding up their checks so they have more money than appears, and automatic deductions from their checking accounts to savings plans to save their money invisibly. Meanwhile financial planners offer clients detailed and off-putting questionnaires (How much do you spend each year on movies? How much on popcorn?) and personal financial planning software appears to have been written by extremely dull accountants with far too much time on their hands, as it in turn mimics the detailed and rational approach of financial planners.
For Bank of America, Keep the Changeis a way to encourage customers to move from checks to debit cards, a superb public relations initiative (what’s nicer than a bank that gives you money?) an incentive to open or maintain a savings account at the bank, and a reason for customers to get in touch with the bank, sign up for the program, and make themselves available for cross-sell or up-sell.
Moore said that American Express has a program similar to Keep the Change. Called One from American Express. With each card purchases, American Express will contribute funds directly into a cardholder’s High-Yield Savings Account at American Express Bank. The bank will match 1 percent of the expenditures and the variable interest rate is now 3.5 percent. Customers can add cash to the account at any time.
Over the years Merrill has been a leader in using technology to serve customers. In research for some stories several years ago, I came across a credit card for small business owners that takes their employees’ air frequent flyer miles and accumulates them to the owner’s account. As I recall, Citibank’s Walter Wriston some time ago remarked that he had seen the future of banking and it was Donald Regan’s Merrill Lynch.
