Western peers such as Bank of America and Wachovia with the launch
of SmartChange, an automatic savings programme that rounds up
‘loose change’ into a linked savings account, becoming the first
bank in Asia to roll out such a service. Dan Jones
reports.
OCBC Bank has launched a new savings scheme based largely on Bank
of America’s highly successful Keep the Change programme, as the
Singapore bank looks to tap into consumer trends in a market that
has now entered its second recession of the decade. The SmartChange
programme rewards customers for using OCBC credit or debit cards by
rounding up every purchase to the nearest dollar and passing the
difference to an OCBC savings account.
A spokesperson for OCBC told RBI that the service “is
actually quite different to the Bank of America programme”, but the
schemes share a number of similarities.
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Smart features
As an introductory feature, OCBC is to match the savings accrued
on a dollar-for dollar basis for the first three months following
sign up, capped at a total of S$188 ($125), and 4.88 percent of
savings thereafter.
Under the terms of the Keep the Change programme, Bank of
America also matches consumers’ savings for the first three months,
before subsequently lowering its contribution to five percent a
year.
Such programmes could become more widespread given that
Singapore is likely to be followed into recession by a number of
Western markets and emerging economies. Two banks debuted major
change-transfer schemes following the launch of Keep the Change:
the UK’s Lloyds TSB rolled out its own Save the Change initiative
in October 2007, while Wachovia unveiled its Way2Save initiative in
the US in January 2008.
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By GlobalDataEncouraging saving
Keep the Change, launched back in October 2005, has been
promoted as a way of encouraging Americans to increase their
savings from a historically low base. In May 2008, Bank of America
announced that Keep the Change had produced more than $1 billion in
savings since its launch.
The bank has more than eight million participants in the
programme. Wachovia says it has 1.1 million accounts tied to its
Way2Save campaign, with $439 million in deposits as of 30
September.
In its third-quarter results published in November, in which
OCBC reported a net profit of S$1.45 billion for the nine months to
30 September, the bank reported credit card fees and commissions of
S$14 million, roughly flat on a quarterly basis. Customer deposits
rose by 11 percent year-on-year to stand at S$95 billion as of 30
September.
Furthermore, the bank saw “significantly higher net inflows of
customer deposits” after the fall of Lehman Brothers and the
subsequent market panic in mid-September. Savings deposits rose 18
percent to S$15.1 billion while current account deposits rose by 36
percent to S$15.8 billion. The group’s loan to deposit ratio,
however, has crept up to 84.4 percent, compared with 77.6 percent
in September 2007.
Speaking about SmartChange, the spokesperson said that “there
are no real targets or numbers to think about at this point”, but
Singapore, which has a household savings rate well in excess of
those in the US and the UK, is likely to prove receptive to the
initiative.
“The main purpose of offering SmartChange is to give our
customers the chance to accrue real savings rather than getting
rewards from the usual credit card programme,” said the
spokesperson.
The bank says it is the first in Asia to launch such a
scheme.
Wide-reaching scheme
Unlike the Bank of America, Wachovia and Lloyds TSB programmes,
the OCBC’s SmartChange initiative extends to credit card users, who
will also receive a 0.4 percent rebate on their purchases in
addition to the basic SmartChange benefits should they forgo the
existing OCBC$ Rewards scheme.
The wide-reaching scheme also permits the excess change to be
channelled through third-party OCBC accounts, a feature it has in
common with Lloyds TSB’s Save the Change programme.
OCBC believes that this will be of particular benefit to those
with OCBC Children Development Accounts, whose savings will be more
than doubled once an existing dollar-for-dollar matching programme
from the government is taken into account.
