Banks and Credit Unions Stand to Gain $110 Billion by Helping Customers Build Credit Scores
Banks and Credit Unions Stand to Gain $110 Billion by Helping Customers Build Credit Scores
Recent research conducted by Cornerstone Advisors highlights a significant opportunity for banks and credit unions to improve both their bottom line and the financial well-being of their customers. The study estimates that financial institutions could recover an eye-popping $110 billion in deposits while also generating over $1.5 billion in interchange fees by offering services focused on improving customer credit scores.
This report stimulated interest by identifying how financial institutions might integrate credit reporting capabilities into their checking and payment accounts. The report, titled "Credit Score Management: The $110 Billion Deposit and Payments Magnet," was commissioned by Bloom Credit and reveals promising insights that could transform market strategies for financial service providers.
Understanding Customer Needs
The study focuses on consumers with subprime or near-prime credit scores (580 to 670), particularly individuals aged 21 to 44. It found that 6 out of 10 consumers in this demographic ranked the ability to improve their credit score as the most attractive feature of a checking account. Specifically, those surveyed preferred checking accounts that report rent and utility payments to credit bureaus—actions that could significantly influence their creditworthiness.
"Helping consumers to establish their creditworthiness by demonstrating responsible payment behavior is a huge opportunity for banks and credit unions," notes Ron Shevlin, chief research officer at Cornerstone Advisors and co-author of the report. This implies that many traditional banking practices may overlook key behaviors that contribute to building credit, such as timely payment of recurring bills.
Survey Insights Reveal Strong Interest
The study highlighted compelling statistics:
- - 73% of subprime and near-prime consumers would consider switching to a new checking account if it reported their rent and utility payments to credit bureaus.
- - 79% indicated they would utilize a non-primary checking account more frequently for bill payments if it offered credit reporting.
- - Additionally, 68% would be inclined to redirect their direct deposit to a non-primary account if it helped them build credit.
- - 70% said they would have utilized a free credit-building service if their bank had offered it after denying a loan or credit card application.
These insights paint a clear picture of consumer demand for checking accounts that not only serve as payment tools but also help improve their credit scores.
A Business Case for Financial Institutions
Christian Widhalm, CEO of Bloom Credit, reinforces the argument by stating that a checking account with integrated credit reporting can lead to better access to credit products and affordable options for consumers. This differentiation can foster stronger relationships between financial institutions and their clients.
The report also outlines strategic recommendations for financial institutions to seize this opportunity. As customer expectations evolve, banks and credit unions must adapt by offering innovative solutions that address real consumer needs.
Conclusion
The research presents a solid rationale for banks and credit unions to transform their offerings, adapting to the changing landscape. Integrating credit reporting into checking accounts not only stands to attract significant deposits but also provides a pathway for consumers to enhance their financial health through improved credit scores. Financial institutions that maneuver to capitalize on this gap in the market could see unparalleled growth and customer loyalty in the coming years.
For further details, the full research report can be accessed through Cornerstone Advisors’ website: Download Report.
About Cornerstone Advisors
With over two decades of experience, Cornerstone Advisors specializes in innovative strategies and data-driven solutions designed for banks, credit unions, and fintech companies to thrive in a complex financial landscape.
About Bloom Credit
Bloom Credit focuses on providing financial data infrastructure. Their innovative platform enables businesses to better serve consumer needs by improving access to validated financial data.
Topics Financial Services & Investing）
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