Direct deposit can help a bank reduce costs, attract new customers, and help retain their base of account holders.  Direct deposits are simply much cheaper for banks to process compare to paper checks and transactions. 

There are a number of efficiencies found in processing direct deposit payments that include no banking personnel needed to physically handle a check since the direct deposit is processed via electronic delivery, reduced error rate that often occurs with manual actions by both the banking customer and bank employee, and reduced costs associated with bounced checks.

Along with reduced costs for the bank with direct deposit, which of course means higher margins for their checking accounts and greater profits, banks frequently use direct deposit services in conjunction with other checking account promotions to market their bank and attract new customers.  Direct deposit is frequently packaged by banks with other perks to attract new customers by marketing the add on services such as direct deposit and online banking or by providing financial incentives with these services to entice customer to switch banks.

Banks have also experienced some benefit with direct deposit services in retaining a higher percentage of their checking account customers over time.  Direct deposit, along with a number of other added benefits banks will tie in with their checking accounts, often leads to stronger banking relationships between the client and the bank.  A more durable relationship results in less customer turnover and ultimately, a more profitable banking relationship for the bank. 

Whether or not account features that require action by the customer such as breaking and then reestablishing a new direct deposit banking relationship at another bank will lead to a longer banking relationship because the customer finds switching banks a hassle, is a hotly contested issue.

Direct deposit, and most all electronic banking features, are money saving tools for the banking industry.  The money saved can be a two way street for the customer and the bank leading to increased profits for the bank and improved or less costly bank fees and services for the customer.

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