H&R Block is banking on a new service called Spruce to offer its tax clients banking options at tax time.
Last month, Block teamed up with Meta Financial’s MetaBank to introduce Spruce, which gives clients a spending account, a debit card, and a mobile app, along with a connected savings account that lets customers budget for specific goals (
Tax prep chains are beginning to re-enter the banking business as a way to diversify their offerings to clients. This week, Block’s rival, Liberty Tax, introduced its own mobile banking service and app, DeepBlue Debit (
Block is aiming its service at clients who don’t have bank accounts and need them for their tax refunds.
“Spruce is all about building an entirely new platform that is really focused on serving the two-thirds of Americans who are finding themselves in a financially unhealthy position,” H&R Block chief financial services officer Les Whiting told Accounting Today. “We have tax professionals spending 12 million hours selling our existing tax-time financial products and talking to customers about their intimate financial [details]. I’m not sure there is anything more personal than dealing with your taxes and all the things that happen throughout your life, whether that’s a new job, getting married, getting divorced. All of these things really create intimate financial conversations where we get a deep understanding of our customers. Many of these customers are struggling with good financial health across the four spectrums of spending, saving, borrowing and planning.”
H&R Block plans to add more features to the service to help customers manage their money better. “Our roadmap as we think about future product and delivery will really be based on building features and capabilities, listening very closely to our customers now that we have the app out to augment that with those 12 million hours of conversations and constant iterative feedback,” said Whiting.
Block has been testing out the features and branding of the service with users before rolling it out, and it plans to leverage the technology during tax season, especially when customers decide where to deposit their refunds.
"That’s really where Spruce fits in for those customers," said Whiting. "The majority of them receive a tax refund. It is an opportunity for them to have that refund deposited into a new account that does a number of things. One, it’s an opportunity to jumpstart that path to maybe being a bit better with money. Often, many of these customers come in and, in their minds, they probably have a lot of that money spent, getting caught up on some bills, various things they need to do. But what we think that Spruce offers is the ability to get access to a low- to no-fee banking product that has a whole bunch of tools built around savings recommendations.”
Customers will be offered the option of depositing their tax refunds in a Spruce bank account. A personalized refund recommendation tool called Leaf takes customers through interactive conversations.
“We take a lot of the data from that customer’s tax return,” said Whiting. “We augment that with a really easy user experience. Leaf is an automated process that helps us make a recommendation for where that customer should utilize that refund and then set up some very specific savings goals for when they want to see that money. We do a lot of really interesting things around making it easy to use, showing graphs and various things that add a little bit of interest and intrigue. It’s OK to have a little bit of fun with managing your finances. It shouldn’t all be just painful, which is often the case with a lot of the legacy technology from the banks. We spent a ton of time and effort around making Spruce really simple to use for anyone.”
Block will be competing with many other players in the banking industry that offer their own mobile technology and accounts where they can deposit their refunds.
“The reality is we know that customers have a lot of choices out there, and they have many different bank accounts and many different financial products in their wallet,” said Whiting. “Competition these days, for many, is often just a thumb click away. It’s not necessarily walking across the street anymore. It's about a click away in the App Store. We recognize that, but we love our ability to be front and center in the consumer’s mind while they're thinking, ‘What am I going to do with this tax refund? And this is an opportunity to maybe do something a little different than what I did last year.’”
This tax season is shaping up to be an especially difficult one for many taxpayers and tax professionals who need to deal with the changing rules around Child Tax Credits and Economic Impact Payments, along with backlogs and understaffing at the IRS, and expiring provisions like the Employee Retention Credit.
“These last several years have been incredibly difficult for taxes for everybody in the industry,” said Whiting. “It’s really important that customers get help in getting the returns filed on time, electronically. That is one of the reasons why you’re seeing our primary place where we're introducing Spruce this year is in our DIY products for those customers who are choosing to do their taxes themselves online. Many of those customers also use some added services that we have where they want a tax pro review. An actual tax professional will review that return for them online just to make sure that they’ve maximized everything they put on it, and then Spruce is an option for where they will direct that tax refund.”
The Spruce account comes with a mobile wallet that can be used while customers wait for the physical debit card to arrive in the mail. The account lets customers set savings goals and includes a cashback rewards feature, along with alerts about their spending and purchases.
Like many banks, Block is also going to encourage Spruce customers to get their paychecks directly deposited in their account. “They get a couple of immediate benefits by doing that,” said Whiting. “One is they’re going to get the advantage of having their paycheck paid two days early, and that's a feature that some of the challenger banks have, and frankly everybody should have access to this.”
Another feature is overdraft protection. “We provide what we call ‘courtesy coverage,’ which is no-fee overdraft protection,” said Whiting. “So for those customers that just happen to, despite all the tools where we try to help them understand where they are in their spending, if they're at an ATM, or if they’re in-store making a purchase, if that Netflix bill comes through and you’re a couple dollars short, we’ve got your back. We’ll clear that transaction. We’ll allow you to go overdraft up to $20. It costs absolutely nothing. And more importantly, if there ever is a situation in some weird edge case where your account does go overdraft, maybe even beyond the $20, we don’t even have an overdraft fee, so you will never see us charge our customers what I would characterize anywhere from pesky to outrageous overdraft fees that today far too many banks charge.”
One advantage that most banks have is a network of ATMs. H&R Block won’t be setting up ATM kiosks at its stores, but the company is offering access to the Allpoint ATM network.
“We don’t have ATMs in our stores today, but what we have done is provide our customers access to the largest fee-free ATM network in North America,” said Whiting. “Our customers will have access to over 55,000 ATMs where they can get access to cash with no fee — no fee from us, and no fee from the ATM operator. That’s a huge advantage.”
