In a world of changing customer tastes, incumbents have to keep their financial services menu fresh in order to ensure that their customers stay loyal and bring their friends (“You must try this budget management tool. It’s simply divine”). This is especially the case with retail banking, a crowded space that is populated not only with traditional banks but with a slew of alternative banking solutions such as online banks, digital wallets, and peer-to-peer payment apps, all of whom are clamoring for bank customers' attention by making it oh so easy to bank and pay on the go.
TCF Bank, a national bank holding company based in Wayzata, MN, wanted to devise a centralized platform that would make it simple for customers to manage their money. It wasn’t a matter of being threatened by upstarts - TCF has approximately $21.3 billion in total assets and 376 branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona, South Dakota and Indiana which provide commercial and retail banking services.
Rather, TCF listened to its customers, who felt that they were sometimes forced to look elsewhere - say retailers - to access and transfer money quickly and efficiently. TCF's answer to this problem was ZEO.
ZEO is a suite of financial services, which include cash checking, savings account, money transfer, bill payment, and money order. Like Greendot and Card.com which make the card the hero (and not the bank account), a salient feature of ZEO is in fact its prepaid debit card. However, you don’t need the prepaid card in order to take advantage of ZEO's other services. If you sign up for ZEO, you can do everything else in the suite without needing to get the card.
ZEO is a convenient one-stop shop for customer money-management, but it's also a bold statement. Two unique product attributes indicate that with ZEO, TCF is distancing itself from traditional vertical integration (owning the entire value chain) towards a model which facilitates multiple service providers collaborating on a single value chain.
ZEO doesn't own the customer
In a bold move, TCF doesn't require ZEO holders to bank with TCF. With ZEO's debit card, for example, after a one-time $4 purchase fee, an additional $4 monthly fee, and at least $25 deposited onto the card, customers - from the unbanked to those who bank elsewhere - are good to go.
"A strong, stable retail bank is an important component of our business strategy,” says Geoff Thomas, Managing Director of Customer Segments and Alternative Channels for TCF. “ZEO helps us maximize our retail branch footprint and increase revenue from this real estate … Core deposit growth in the retail bank, like we’re receiving with ZEO, helps to fund lending growth.”
However, Thomas is convinced that ZEO’s critical transactional products will be a catalyst for cross-selling TCF’s other money management services.
ZEO is about collaboration
A partnership with money transfer leader Western Union means that ZEO users can transfer money and pay bills in the flashiest of flashes. At the outset, this partnership seems puzzling, since Western Union competes with banks to provide money transfer services.
However, Thomas concedes that as far as TCF is concerned, Western Union is still the most effective way to send money internationally. “Our customers are getting these services elsewhere,” Thomas admits. Thanks to this collaboration with Western Union, “ZEO ensures [that customers] can complete all of their transactions at a branch in a simple, quick way.”
For unbanked individuals, TCF's inclusion of Western Union in the ZEO package has significant benefits. With ZEO, the unbanked can manage and access their money in the safety and security of a bank without needing a bank account, and have the option of consulting with banking experts to boot.
Yes, ZEO is very much about millennials
It should come as no surprise that ZEO targets millennials. After all, millennials are increasingly turning towards non-bank solutions to manage their money. To TCF’s credit, ZEO shows that the financial institution is adapting to millennial expectations.
“More than half of our total transaction accounts are opened by millennials,” says Thomas. “They grew up in the ‘gift card era’ and they are very comfortable using prepaid cards, in some cases, preferring them to traditional banking accounts.”
Though alternative banking services abound and general purpose reloadable cards are becoming mainstream, ZEO is proving itself to be a worthwhile investment for TCF. According to Thomas, the market has responded favorably towards ZEO. For existing customers, the service has certainly been a boon: “Many of our customers share that it now is easier with ZEO because they can conduct all of their banking transactions in one location with the expertise of a banker.”
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