Why Do Banks Try To Get You To Open New Accounts So Much?

I work in a bank and I understand the plight of the bank's branch manager. They have a performance rating and one category is in terms of new accounts, They earn points with a new account that's why sometimes they plead with friends to have their children open bank accounts. However, our marketing officer in the branch is forbidden to offer new accounts when dealing with regular clients because that is somewhat a nagging style. We only offer new accounts when the client is in the branch and in an informal chat with the bank staff.

 

Most of the banks have a provision to have minimum balance in your account, you cannot withdraw that balance. If you want that money, you will have to close account. The the bank is able to attract more customers and have them open new accounts, the bank will be able to collect good amount. For example, if the minimum balance is $10 and 100 people open a new account, the bank will be able to collect $1000. Banks are always looking for the ways to collect money.

 

The fact remains that each bank has different products on its catalogue of offers. Some people open multiple bank accounts to take advantage of these products which are unique to every bank. Therefore, their research, development and marketing department is always on the lookout for more exciting products with new accounts to make the client have the under one roof experience. This would increase their loyalty and deposits to one bank. It sort of discourages diversification.

 

Another reason why banks may want their customers to open more accounts is because they'll be making more transaction fees off of you. There's a high likelihood that if you open accounts for different reasons, you'll be depositing and withdrawing cash from said accounts and each time you withdraw some of your funds, pay for something, etc, the bank makes some money. This why you should have only two accounts — a checking account and a savings account (as your money can earn a little interest).

 

The more accounts that are held at a bank the more the opportunity of it been able to collect fees and have money to lend so that it may be able to obtain interest income, thats how they make revenue. In my country, if you have money in the bank and you don't make a deposit within a certain time the deduct a fee from the money you have saved. The banks take your money, give u a minute amount of interest for the money which technically you have lent them, they in turn lend you back your money and charge you an enormous interest on it. They also charge you a fee to withdraw you own money.

 

Not only do banks need to fill a quota but they are competing with prepaid cards. I know tons of people who got sick of having their money stolen either by identity thieves or exasperated fees. So they keep their money at home and they simply put their money on a card to pay bills. So they're hurting because they no longer have the monopoly on people's money. Then there are also different fees for a second bank account or a business account that will make them more money if it gets a lot of transactions. So while it's aggressive, they are just trying to make more money.

 

Each branch manager has a target and he must meet that target. The reason why banks want more and more accounts is because they want more customers, just like any other business. If you have an account in some bank, you'll at least put some money into the account, which will be leveraged by the bank to loan out more money. So, for the bank its a win-win situation.

 

In our country there is cut-throat competition in banking sector, especially among private banks. They offer many user friendly services free of cost. I also receive a lot of calls, SMS and emails daily. It’s like they are after my life to open an account.

But I think it is not a healthy trend anyway. Having a lot of non-operational account would only land them up in trouble in future. They are doing this only to meet their monthly target and earn incentive. There is a zero balance scheme launched by our Prime Minister in order to cover everybody in banking(especially targeting people from remote areas) and it was a big success. But most of the accounts opened are non-operational now.

 

From what I know about the internal bank policies, bank branches are monitored for their so called quota not only for the amount of deposit and loans but also for the number of accounts. To increase the number, it is either a particular bank branch gets new accounts from new depositors or they get new accounts from existing depositors. It is a usual practice that friends and relatives of the branch manager have multiple accounts just to increase the number. But in fairness to the bank, a person with 2 bank accounts have the tendency to save more than the person with only 1 bank account.

 

The bank's branch managers are under pressure to get as many depositor as possible and to have as much Average Daily Balance of deposit as they can. I can understand why branch managers themselves would go out of their way to drop by on offices to try to convince the Finance head or the owner to open an account with them. They would even offer free online payment an posting of government mandatory contributions. Once they have you on the list of depositors, they are, in turn, growing their list of potential borrowers, trust fund investors, insurance buyers, or credit card holder.

 

I am not really all that familiar with banks or anything like that, but if I had to guess I would say that it has something to do with having constant traffic and money moving around, showing that they are active which means that they probably get money easier and things like that. I could very well be wrong though.