Amid growing speculation that overregulation will force U.S. financial institutions to discontinue debit card rewards programs and free checking, a recent report from the Aite Group predicts a bright future for high-yield checking accounts.

Based on checking account performance data provided by BancVue, Aite Group’s report—Financial High Coup: Why High-Yield Checking Accounts Trump Free Checking—concluded that, in comparison to free checking accounts, high-yield checking accounts were more effective in acquiring accounts, producing interchange revenue, and delivering profits, even in this changing rate environment.

BancVue provided blind data on checking account performance for 120 of its community bank and credit union clients for the two-year period ending April 2011. To avoid any bias in the selection of financial institutions, Aite Group, an independent research and advisory firm focused on the financial services industry, randomly selected 125 BancVue account holder ID numbers.

“Despite the needless damage the Durbin Amendment has done to our industry, Aite Group’s thorough analysis confirmed what we already believed to be true,” said Gabe Krajicek, Chief Executive Officer of BancVue, “specifically, that high-yield checking accounts remain an indispensable component of a community financial institution’s product array.”

Beyond strongly suggesting that high-yield checking accounts, trump free checking, Aite Group’s research also concluded that:

• Reduced debit interchange will not have a materially negative impact on high-yield accounts,
• High-yield checking accounts have a vital place in the product portfolios of community banks and credit unions
• Active product design is critical for maintaining profitability, and
• Other revenue sources associated with high-yield checking accounts will accelerate.

 “The profitability of REWARDChecking accounts from May 2009 through April 2011 didn’t come solely from account growth due to higher-than-average rates,” said Ron Shevlin, senior analyst with Aite Group and author of the report. “Profitability was also driven by cost savings resulting from steering customers to lower cost channels, and from the revenue generated from debit interchange. All of this points to the need for active product design regarding fees, rates, and behavioral incentives regarding channel and debit card use.”

Austin-based BancVue relies on research, new product development, and continuous refinement of existing products to stay ahead of regulations and shifting consumer sentiment. The firm introduced its REALChecking^® system, which includes REWARDChecking, seven years ago. More recently, BancVue rolled out Kasasa^®, a national brand of superior products that gives community financial institutions the marketing scale they need to compete with the megabanks. Since its launch in August 2009, Kasasa has delivered unprecedented results for participating banks and credit unions.