Yesterday, I was teaching in Columbia’s flagship Columbia Senior Executive Program (which we call CSEP for short). We were discussing how difficult it can be to prevent competitive imitation of innovations in financial services, and one of the participants gave a great example. Turns out that he and his colleagues observed the success Bank of America has had with its “keep the change” program. For those of you that don’t know it, keep the change is an innovative idea—if you charge say $1.75 on your debit card, the bank will round up the purchase to $2.00 and put the change in your savings account, providing an easy way to set aside some money. I’m told they got the idea by looking at the way people account for debit card deducations – rather than write down and reconcile accounts to the last penny, they round them up and sort it out at the end of the month. For more info on the program, you can check it out here:
http://www.bankofamerica.com/promos/jump/ktc/. It’s done very well for Bank of America, encouraging new accounts and more loyal accounts.
This struck the participants’ bank (which happened to be based in Singapore) as a really good idea. So good, in fact, that they introduced it in their own environment where it has been a spectacular success.