No Interest on Checking – An Idea Whose Time Has Come

Interest expense is the third largest expense for banking institutions, and interest on checking is a major contributor. Luckily, the science of behavioral economics for financial services have shown us the way to reduce interest expense for banking institutions, and at the same time, reward banking customers with a high market return instead of a negligible interest rate on checking accounts.

Checking accounts have inverse relasticity, as measured by the Deposits Dynamics program. This means that the interest rate on checking accounts plays no role in the decision of the customer to put money in the account. Checking accounts are transient accounts, where customers deposit money on the way to paying bills or to invest with a brokerage firms.

The latest trend in banking is non-interest-bearing checking account, called performance checking, where customers receive the Scientifically Predictable investment projection if they maintain a minimum balance established by the institution. The scientifically Predictable investment projection shows the customer which five ETFs are highly likely to outperform the market with extremely high level of confidence.

Thus, instead of earning 5 basis points interest on their checking-account balance, the customer can earn great return from the equity market with low risk and high confidence. For example, in the 12 months ending August 13, 2024, ?the Scientifically Predictable Top-Five-ETFs portfolio returned an average of 31.09% vs. 21.65% for the S&P 500 - an alpha of 9.44%. ?

This innovative breakthrough in banking offers a win/win scenario. Banking institutions reduce their interest expense substantially and increase their liquidity, which banking consumer can outperforms the market and produce alpha with piece of mind and high confidence. All this is possible due to the behavioral economics breakthrough published? in the latest scientific paper.

In summary it is time for banks and credit unions to adapt to new and innovative behavioral economics principles that provide everyone with benefits and abundance. We have seen many cases of industries that were too late to adapt to the latest scientific advancements and are now present only at the Smithsonian.