The secret to customer retention is hiding in plain sight: tax refunds

After several years of a growth-at-all-costs mindset, it’s time for product and business leaders in fintech to shift strategies.

Tax season presents an unrivaled opportunity to not only diversify your product and service offerings, boost deposits, but also unlock new liquidity at a pivotal moment in your customers' financial lives. It's about as close to a silver bullet as it gets when considering what to add to your product roadmap to increase customer LTV, and we'll break down why.

Tax refunds are a 300 billion dollar deposit opportunity

Every year, more than 100 million Americans file taxes, according to the IRS. Last year, nearly 86 million received refunds, with the average being $3,167. That’s a significant sum and often the largest single deposit an American will receive annually. Not only that, but taxpayers often spend upwards of $100 on tax software that’s disconnected from the rest of their financial ecosystem, forcing them to tediously export and import documents and information.

The default behavior for Americans is to simply deposit their refund into their primary financial institution. This is not good news for the majority of fintechs and regional banks as reporting last quarter indicated that the largest banks keep getting bigger and capturing an increasing percentage of industry profits.

Tax companies are also capturing a piece of the pie

The leading tax software providers are offering checking and savings accounts with incentives for taxpayers to deposit their refunds with them. H&R Block reported quadruple growth in YoY deposits on their banking platform.

This means that most often when someone files their taxes, their deposit is either going into their primary financial accounts (strengthening that relationship) or they're incentivized to move their deposit into an account associated with the leading tax software providers.

Fintechs are losing out

In other words, all other financial apps are losing out on this opportunity to capture one of the single biggest paydays for their customers and win back business, deepen relationships, and re-engage lapsed customers.

One neobank last year captured up to 97% of deposits with users who filed their taxes with april within their app.

Unlock liquidity, personalize offers

The IRS reports that 90% of taxpayers receive their refund within 3 weeks. That's 3 additional weeks on top of the year they've been overpaying in taxes - by offering refund advance loans, financial brands can provide their customers with access to some of their expected tax refund money much sooner.?

Unlocking this liquidity not only provides much needed financial relief in one of the most strapped moments of the year (post-holidays), but allows you to provide personalized credit offers alongside refund advances when customers consent to share their data with you.

Happy taxpayers = happier customers

Beyond any single monetization technique, tax filing presents an opportunity to provide a valuable service when it’s needed most. Customer loyalty is the greatest asset any business can have and the key to long-term growth for fintechs, credit unions, and banks. You can learn more about embedding april's Filer product on our website here.