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Are Banks in Danger of Losing the Checking Account?

I’ve had this belief for a number of years that at some point in the future something would come along to dramatically change the way consumers handle their money – specifically the money placed into a checking account.

It wasn’t the ATM or debit card that caused me to think this way.

It was Merrill Lynch’s 1977 introduction of the CMA, or Cash Management Account, that stuck in my mind.


The CMA account included an FDIC-insured checking account where Merrill customers’ money would be kept when it wasn’t invested in the market.  There was even a debit card to access their money.

This was made possible by one bank that had partnered with Merrill to make the CMA happen – Bank One.

At the time, the vast majority of bankers didn’t see this as threatening their monopoly hold on the checking account.

Fast forward to 2013 and a similar event has occurred.

It goes by the name Simple.

Only this time it’s not an established, well-known company that’s offering a banking experience that includes a checking account.  It’s a new tech startup that’s, again, partnered with a single bank to provide an FDIC-insured checking account.

Once again I find myself wondering if bankers are worried about Simple.

Going back to 1980, I still remember my first encounter with futurists.  It was John Naisbitt’s coining of the word “megatrends” accompanying his list of future trends.  A book soon followed.

As a bank marketer, I spent the next three decades reading books and articles by futurists like Faith Popcorn.

Aside from their predictions, what really intrigued me about these people was the methodology they employed to make their predictions.

They never claimed to be seers, crystal ball gazers, fortune tellers, mediums, oracles, prophets, psychics, or clairvoyant.  They arrived at their predictions by way of hard work.

These futurists and their trained staffs spent their time reading, listening, and watching, all the while clipping, cutting, filing, and taking copious notes.  What they were doing was collecting bits and pieces of intelligence about almost everything – looking for patterns in an assortment of disjointed bits of data.

This hard work is the wizard behind the curtain.

Upon learning their techniques, I’ve found myself doing much the same over the years – but not to the same extent.

But as I constantly remind my spouse, look for patterns and remember what you hear, see, and read.  The future doesn’t simply fall out of the sky without warning.  It unfolds slowly but surely in bits and pieces over a period of time.  It arrives after leaving a trail of hints.  These hints are found in newspaper and magazine articles, on TV shows, radio commentary, word-of-mouth, blogs, new laws, and on and on.

This is why I believe the time is rapidly approaching when the checking account is no longer the domain of the nation’s banks and credit unions.  At some point in the near future, these institutions will lose their last remaining franchise.

Yet, I get the feeling that no one seems to sense this or be worried about it.

As an example, I recently read the article, “Retail Banking Trends And Predictions For 2013,” posted January 9, 2013, on The Financial Brand website.  You can read it here.

At this point I must say these predictions were not the product of The Financial Brand staff – they accumulated them from others making the predictions.  TFB collected and presented them in a very readable, informative article.

What surprised me is the term “checking account” was never mentioned once in the entire article.  There was a near mention under the brief subhead about “New Changes, New Competitors.”  It was a brief mention of “prepaid cards.”

Reading this article and finding no mention of checking accounts is what I call a “data point.”  I store it in my mind along with all the other data I’ve encountered about checking accounts and what’s happening to them.  I see it as one more indication that bankers are oblivious as to what is about to happen as it relates to the checking account.

One mention of “prepaid cards?”

It’s as if Bluebird is unimportant to the nation’s bankers.

Or what about SNAP?

Better known as Food Stamps, the government’s Supplemental Nutrition Assistance Program serving millions of Americans relies exclusively on a reloadable debit card.  For many of these consumers, this is their checking account.

It’s possible the SNAP program is generating more new customers each month than banks opening new checking accounts.

Or what about this item I encountered last week while having tea and a scone at my local coffee shop?  While appearing as an article, it was found in the special advertising section of the local neighborhood newspaper.  It’s about prepaid debit cards and how they are a desirable alternative to the checking account.

Clicking on the image so you can read the brief article, you’ll find that the term “checking account” appears three times.

It makes me wonder how many people read articles like these.  And of those who do, how many visit a website and eventually alter their feelings about a checking account versus a reloadable debit card.

By the way, have you noticed that you are spending less time using cash these days?  The money you receive gets automatically posted to an account via direct deposit.  And it’s used in chunks to pay bills and buy the things you need via automatic debit, online bill pay, a debit card, and today, a variety of mobile phone apps.

If you owe someone money these days, it’s easy to pay them using PayPal.

About the only time many of us see cash these days is in the ubiquitous tip jars at neighborhood coffee shops and some restaurants.

Consider this yet another data point.

It would be interesting if someone took the time to identify all of the relevant data points and created a timeline that demonstrates how we are moving closer to the time when the traditional checking account becomes less important to a majority of consumers – replaced by mobile technology or the reloadable debit card or something yet created.

Top of mind, here are some of the data points that I’ve collected over time:

  • Friday afternoon rush to the branch to get cash for the weekend
  • Deployment of ATMs
  • Debit cards
  • Merrill Lynch’s CMA
  • Discount brokers
  • Growth of non-bank entities
  • Internet
  • Check21
  • Rapid growth of payday loan industry
  • Online banking including online statements
  • Cash back at merchant POS
  • Remote deposit
  • Walmart Money Centers
  • Mobile communications
  • SNAP program
  • Simple
  • Bluebird
  • Mint
  • Bitcoin
  • The Fed’s zero interest rate policy
  • Social Security checks replaced by direct deposit
  • England to eliminate paper checks by 2018

Unwelcome new and higher fees are the latest data point getting much of the media attention these days.

Collectively, all these activities comprise an accelerated timeline pointing to the time when the traditional checking account will either be replaced by some new technology or become the domain of one or two major banks for the purposes of FDIC insurance only.

Personally, I don’t see this as an “if” situation…I see it as a “when” situation.

What really baffles me is that I don’t sense any concern from the consumer banking industry or the nation’s bankers and bank marketers.

Perhaps they are simply too close to the situation to sense what is happening.  This might be an excellent example of the frog in the boiling water metaphor.

TagsATMautomatic debitbank marketerBank OnebanksBitcoinblogsBluebirdCash Management Accountchecking accountclairvoyantCMAcompetitorscredit unionscrystal ball gazersdebit carddirect depositFaith PopcornFDIC insuranceFDIC-insured checking accountfood stampsfortune tellersfrog in boiling water metaphorlfuturistsJohn Naisbittlocal coffee shopmagazine articlesmediumsmegatrendsMerrill LynchMintmobile phone appsnew lawsnewspaper articlesonline bill payoraclespay billspredictionsprepaid cardsprophetspsychicsradio commentaryreloadable debit cardSimpleSNAPSocial Security checksThe Financial BrandTV showsWalmart Money Centersword-of-mouth