The Austin, Texas, credit union commissioned research in the fall of 2019 that suggested one-too-many bank fees were the clincher that motivated customers to move from one financial institution to another. It wanted to attract more core deposits and lower its cost of funds.
But before it could welcome what it hoped would be an influx of new customers, Amplify had to spruce up its online account opening and funding process.
The story with many financial institutions that have
Instead, its two-year journey to eradicate all banking fees — not just overdraft charges — is a technical endeavor as well as a marketing push, and meant sacrificing some of the cachet of being the
In the fall of 2020, Amplify proposed going fee free in its 2021 business plan. To the company’s knowledge, it is the first traditional financial institution (excluding challenger banks) that has eliminated all banking fees, including those for consumer and business account maintenance, out-of-network ATM transactions, wire transfers and overdrafts. Business Checking, for instance, previously cost $10 per month if the balance fell below $5,000, while overdrafts and insufficient funds triggered $30 charges. There were previously three checking accounts, two of which carried fees.
“We could have turned off fees in our core banking system relatively easily and launched fee free much sooner, and we were tempted to do that,” said
David Schiff, head of retail and consumer banking at the consulting firm West Monroe, says that Amplify’s holistic perspective that may have slowed down the process but could accelerate returns.
“Banks are recognizing that they need to be more dynamic to really grow,” he said. “If you want to make this a proactive change instead of a reactive
Armijo said that Amplify considers itself a digital-first credit union. It has five branches in the Austin area, but only two, the locations with drive-throughs, have been open during the pandemic, leaving in-person service very limited.
“What we couldn’t do was get people excited and then require them to go to a physical location,” said Armijo.
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Amplify did not want new customers who were attracted by the no-fee proposition to encounter an outdated online account-opening experience, so it improved the process — while keeping its existing provider, MeridianLink — in two main ways.
For one, it streamlined the application by making the language more consumer-friendly; tailoring the questions to either new or existing members; adding a checklist of items needed to complete the process, such as identification; and dropping questions that collected information the company didn’t need, such as length of employment. Second, it layered on risk mitigation services from LexisNexis so the process could flow more smoothly. Previously, Amplify was heavily reliant on its employees manually conducting reviews in the background.
Another improvement Amplify wanted to make for new customers was to offer the option of verifying accounts using Plaid’s instant authentication system, rather than relying solely on micro deposits, which could take two to three days to be confirmed.
“It is a clunky process and not the first impression we want to give to a new member we’d like to serve primarily online,” said Armijo.
This is another example of where Amplify decided to take it slow. “We have a philosophy that we don’t treat future members better than current members,” said Armijo. Implementing Plaid’s instant authentication into the new account opening flow would have been simple enough because it only required coordination among a few vendors. But Amplify wanted to replicate the experience for all members who used online banking, and getting slotted into more vendor calendars took time.
Amplify also changed its thinking around limits during this overhaul.
“We’d long been frustrated by the fact that the technology behind services like mobile check deposit and external transfers in online banking didn’t allow for more personalization,” said Armijo. Instead of dictating flat amounts that applied across the entire membership base for mobile check deposit and external transfer, Amplify now sets such limits based on individual behavior, taking combined balances, monthly deposits and more into account.
Amplify proclaimed its official launch on February 22, 2022 to be its “Fee-Free Day,” but had quietly been turning off fees during the preceding quarter. The company was also careful during the preceding year to not introduce new fees — for example, when it changed vendors for statements.
The real marketing push started in March. Amplify has combined high- and low-tech methods, including digital ads, billboards and event sponsorships where someone from Amplify can communicate that the credit union did away with all banking fees, not just overdraft charges. It has tweaked messaging to be more explicit about this point.
“The way I phrase it to people is, ‘It is now impossible for any depositor of any balance with any behavior to incur any kind of fee ever,’ ” said Armijo.
During the period between Feb. 2 and June 30, Amplify found that prospective members were almost twice as likely to start an application as before the fee-free launch. Aside from a 10-day period after launch, where applications surged and approvals dropped, approval rates each month are 25% to 35% better than pre-launch. New accounts are holding average balances three times the target of $5,000 at minimum. At the same time, in three of the four full months since the fee-free launch, charge-offs from overdrafts are lower than the corresponding month in 2021.
Armijo recalls another motivation to go fee-free: the knowledge that a very small percentage of members accounted for the lion’s share of overdraft fees, racking up hundreds or thousands of dollars in a month.
“That galvanized us when things got hard,” she said. “Our CEO said, ‘This is a one-way door. Are you sure you want to walk through it?’ Because you don't get to say charging fees is wrong, then find your financial projections are off base and start charging fees again.”
