ING about to roll out Electric Orange checking
Posted by Trey Reeme on April 11th, 2006
“Trey, look at the BeancounterBlog,” Matt just called out.
Whoa. The post is called THE CHECKING ACCOUNT FROM HEAVEN, and here’s the essence of it:
ING Direct is about to launch Electric Orange, an electronic checking account that will pay 3.00% interest with no minimum balance or fees and offers a debit card instead of paper checkbooks, fund transfers between bank accounts, and bank-issued paper checks for payment purposes.
It looks like ING is essentially taking their online-only savings account, adding debit card access and billpay, and lowering the APY by 1%. They’ve created a very attractive product.
Credit unions, take notice. Online-only accounts might not be “leading edge” for much longer.
The account does have bill pay, send a paper check service, send an electronic check, and a mastercard debit card with acces to 32,000 atm’s free of charge, and there are no fees what so ever. It is the greatest checking account ever made if you ask me. Also, it pays over 5% if your balance is over 50k.
it doesn’t pay 3% like it says. Read the fine print – it’s structured as a no-interest checking account and a 3% savings account. at the begining of the month, everything is in the savings account. the first 5 transactions have the proper amount transferred from savings to checking. the 6th transfers the entire balance out of the 3% savings account. Basically – it’s 3% interest until your 6th use of the card every month – then it’s 0%
Wow.
Ok – what about bill payment services?
Perhaps CUs can look at how many of their members are active in making transfers into/out of ING, etc. (ACH data) – to see what potential they might have to retain deposits from current members with this type of product?
For 3% – let’s be honest – I might move MY checking!
V, You’re exactly right -
It takes a lot to get someone to switch checking providers. But if ING Electric Orange does include billpay, this will be for a time the most attractive checking account out there. I’m assuming billpayer is what the original post was talking about with:
“ING will issue ‘virtual checks’ by transferring funds between bank accounts (customers can also request that the bank issue paper checks for payment purposes)”.
Disclaimer: There’s a very good chance I’m completely wrong about billpayer. But I have a hunch that if this product is indeed coming (according to the Wall Street Journal, which I’m off to buy a copy of right now) billpay is part of the package, and they probably realize that it won’t fly well without it.
OK, back to switching costs: 3.00% is certainly high enough to cover mine. Like you (being a staunch CU advocate myself) I’m very tempted by that return. Just think how attractive it would be to a member.
You offer a great tip for individual credit unions to look internally at this data. I’d love to find industry-wide data on ING/HSBC/etc. transfers coming from credit union accounts.
This is another wake up call for credit unions that innovation is needed in the “me-too” race for checking account deposits. For example, the use of the word “free”. I don’t believe that credit unions as a whole can win the race to the highest rate due to the unique structure that ING has in place. Plus, how long can you sustain the highest rate position before someone knocks you out of first? It is time for credit unions to leverage their member owned structure and local presence while creating as much value to the membership as possible. Bring on the competition as it makes us all better.
V left a comment on another post pointing out: “[by offering online-only savings accounts] you will cannibalize your existing deposits, BUT will you attract enough in new deposits to make the product worthwhile.” I understand the concern that you both are expressing about getting into a rate war with a bank like ING.
Here’s a counter to those concerns: even if my credit union couldn’t get the yield up to the 3.00% range on a paperless checking account, if my CU offered 2.75% and ING offered 3.00% on a similar product, I’d stay loyal to my credit union.
Am I the average consumer? Definitely not. I’m not only much younger than the average CU member (something like 46 years old now, I think I’ve read before), I’m an early tech adopter who spends more time online in a waking day than I do offline. I hate paper checks, don’t carry cash, and trust online purchases much more than giving my debit card to a waiter at a restaurant.
My profile might represent 5% of a credit union’s membership. But I’m confident that someone fitting my profile is much more likely than that other 95% to spread the word about my credit union.
I think the potential strength of offering these types of products for a credit union resides more in the advocacy message it sends than in stacking up to the likes of ING/Citi/etc. To me it would demonstrate that “yes, we’re listening; we’re innovative; we want you to prosper!” Sure it might only be a big hit in 5% (Disclaimer: I’ve used no research in determining that number. I’m just typing this on the fly), but that 5% has a pretty loud voice that I’m afraid a lot of CUs aren’t hearing.
This goes hand-in-hand with what Doug says above about it being “time for credit unions to leverage their member owned structure and local presence while creating as much value to the membership as possible. Bring on the competition as it makes us all better.” RIGHT ON!
Final disclaimer (I’ve been having to make a lot of these lately): I’m no expert in “can CUs offer these types of online-only products?” I have no idea about the regulations, the ratios, whatever. I’m just trying to sound the alarm: these products and ideas are out there, and they’re gaining traction.
Always, always, always call me out, and thanks for such thought-provoking comments! I look forward to seeing the response to every post.
Interesting perspective -> “service matters”! – from a writer for The Wall Street Journal Sunday.
http://online.wsj.com/public/article/SB114575084789133434.html?mod=sunday_journal_primary_hs
joefitz seems to be out to libel the competition. I found the following at the bottom of ING Direct’s “fine print” when I started the open an account process:
Electric Orange Account:
Initial Deposit Requirement – There is none – you can open the account with any amount you wish.
Rate Information – The interest rate that your account will earn depends on the balance in the account each day. If your daily balance is less than $10,000.00, the interest rate paid on your entire account balance will be 2.96% with an annual percentage yield of 3.00%. If your daily balance is between $10,000.00 and $24,999.99, the interest rate paid on your entire account balance will be 2.96% with an annual percentage yield of 3.00%. If your daily balance is between $25,000.00 and $49,999.99, the interest rate paid on your entire account balance will be 2.96% with an annual percentage yield of 3.00%. If your daily balance is between $50,000.00 and $99,999.99, the interest rate paid on your entire account balance will be 4.94% with an annual percentage yield of 5.05%. If your daily balance is $100,000.00 or more, the interest rate paid on your entire account balance will be 5.18% with an annual percentage yield of 5.30%. These interest rates and annual percentage yields may change. At our discretion we may change the interest rate for any particular balance at any time.
Compounding and Crediting – Interest on your account will be compounded and credited on a monthly basis.
Balance Computation Method – We use the daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day.
Accrual of Interest on Non-Cash Deposits – For all types of non-cash deposits, interest will begin to accrue not later than the second business day following the banking day on which the funds were deposited.
Transaction Limitations – There is no limit on the number of deposits to or withdrawals from your Electric Orange account. Certain withdrawal transactions have dollar limits as follows:
Any one “Free Bill Pay” transaction or “Send Paper Checks” transaction (including expedited checks) cannot exceed $99,999.99. Total Card purchases (including cash back amounts) and cash advances made using an Electric Orange Card are limited to $25,000 per day. This does not include withdrawals from an ATM. Withdrawals from an ATM made using an Electric Orange Card are limited to $1,000 per day. “Send Electric Checks” (person-to-person transfers) transactions are limited to $5,000 per day.
Fees – If, at your request, we generate an expedited check as described in the Electric Orange Agreement (see “Send Paper Checks” section), we will charge you $15.00. If, at your request, we place a stop payment on a check that was created on your behalf through our Free Bill Pay Service or our Send Paper Checks Service, we will charge you $25.00. If, at your request, we expedite sending you an Electric Orange Card, we will charge you $25.00. If you use your EO card to make cash withdrawals or purchases in foreign currencies (“foreign transactions”) we may charge you up to 2.00% of the amount of each foreign transaction after it is converted to U.S. Dollars by MasterCard®.
Effect of Closing an Account – If you close your account before interest is credited, you will receive any accrued interest.
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