Page 97 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes

Case Study Bank of America

nnovation in services is rare. In financial services, the last big breakthrough was
online banking, nearly a decade ago. In October, 2005, Bank of America (BAC) brought
Iout a radically different product that broke the paradigm. It’s called Keep the Change.
The concept solves a critical banking problem — how to get consumers to open new
accounts. The product works like this: Every time you buy something with a BofA Visa
debit card, the bank rounds up your purchase to the nearest dollar and transfers the
difference from your checking into your savings account. It also matches 100% of transfers
for the first three months, and 5% of the annual total, up to US $250 a year. Since the launch,
2.5 million customers have signed up for Keep the Change. Over 700,000 have opened new
checking accounts and 1 million have signed on for new savings accounts.

How did Bank of America create Keep the Change? In the spring of 2004, it hired an
innovation and design research firm in Palo Alto, Calif., to help conceive of and conduct
ethnographic research on boomer-age women with children. The goal was to discover
how to get this consumer segment to open new checking and savings accounts.
For the next two months, a team of five BofA researchers and four researchers from a West
Coast consulting firm visited Atlanta, Baltimore, and San Francisco. They observed a
dozen families and interviewed people on the streets. They watched people at home as
they paid and balanced their checkbooks. They tagged along with mothers as they shopped
at Costco, dined at Johnny Rockets, and made deposits in drive-through tellers.
Ray Chinn, senior V.P. for new product introduction, along with Faith Tucker, another
BofA senior V.P., saw two themes emerge from the research. In Atlanta, the team met a
mother who always rounded up her checkbook entries to an even dollar because it was
quicker. People also rounded up their financial transactions because it was more convenient.
The second realization: Many boomer women with children couldn’t save. For some, it
was a lack of money. For others, it was a matter of not being able to control their impulse
buying.
In the summer of 2004, Chinn and Tucker put together a team of product managers,
finance experts, software engineers, and operations gurus and held 20 brainstorming
sessions. The team generated 80 product concepts, boiled them down to 12, and
overwhelmingly favoured one: rounding up the financial transactions of consumers and
transferring the difference to their savings.
The team created a Web-based cartoon that showed a woman buying a cup of coffee in a
store for US $1.50. Then it displayed the rounding up and putting the 50 cents into a
savings account. Tucker and Chinn tested out the cartoon and concept in an online survey
of 1,600 consumers. The result? Sky-high scores on uniqueness. In December, 2004, Diane
Morais, Chinn’s and Tucker’s boss, pitched the idea to the bank’s consumer division and
got the green light. The first challenge was a name. A woman in a focus group suggested
Keep the Change. That stuck.
Three features were added to the original concept: (1) a summary of the rounded-up
transactions in a consumer’s checking and saving accounts, (2) a fail-safe feature that
automatically prevented a transfer from pushing a customer’s account into overdraft, and
(3) a promotion to match the rounded-up transfers to savings up to US $250 a year.
Contd...

92 LOVELY PROFESSIONAL UNIVERSITY