If you are reading this article, we assume you would know the intense discussion that revolved around the newly launched KrisFlyer UOB Account.
For those of you who are unsure about what we are talking about, we recommend for you to read this now-viral article from MileLion. The article, among other articles including a well-written one on MoneySmart, has prompted a quick response from UOB. You can read UOB response here for a view from both sides.
The Funny Thing Is That The KrisFlyer UOB Account Is Actually Quite An Innovative Product
Most online discussions have revolved around the view that the KrisFlyer UOB Account is a poorly designed product that offers no real value to consumers. We don’t fully agree on that analysis.
Just to be clear, we don’t think it’s a great product either, though we believe it’s at least innovative. We would much rather put our savings in other accounts such as the OCBC 360 and the BOC SmartSaver in order to earn higher interest, and to earn our miles separately through miles credit cards such as the American Express KrisFlyer card and the CitiPremier Miles Card.
That said, we do believe there are merits to the product and that some segments of the Singapore market such as university students could derive some value from it.
For starters, it’s the only debit card in Singapore that actually gives miles in return for spending. Most other debit cards only give rebates and other frivolous discounts that aren’t impactful enough for people to even care about it. That’s why most financial websites including us rather focus our attention on the value that credit cards provide, instead of wasting time writing about debit cards.
The miles you get for the spending made on the debit card from the KrisFlyer UOB Account isn’t fixed, since this depends on your average account balance. If you have at least $3,000 in the account, you can earn 1.4 KrisFlyer miles for every $1 spent. The conversion increases if you have between $100,000 to $350,000 (3.4 miles per $1) and $350,000 or more (5.4 miles per $1).
1.4 KrisFlyer miles for every $1 spend is a good rate even when compared to other well known miles cards such as the CitiPremier Miles Card (1.2 miles per $1), the American Express KrisFlyer Ascend Card (1.2 miles per $1) or the UOB PRVI Miles Visa Card (1.4 miles per $1).
Yes, there are conditions in play that annoys consumers. That said, most banking products also have conditions though OCBC is trying to make a play to stop this.
One of the main conditions that is seriously pissing people off is the fact that you cannot earn bonus KrisFlyer miles beyond 5% of your monthly average balance.
For example, if your average monthly balance is $15,000, then you can only earn 750 (15,000 X 5%) bonus miles each month. When calculated backwards, that means you wouldn’t want to spend more than $536 (750/1.4) on the card to earn your miles. Any amount spent beyond that will only earn you 0.4 miles per $1 spend. #pointless.
However, the card is still useful because it’s the only debit card that you can apply for which earns miles in Singapore, and which doesn’t require you to have any minimum income.
For example, if you were a university student who can’t apply for credit cards yet because you are not working, the KrisFlyer UOB Account would be a logical option to opt for if you already have decent savings (i.e. about $15,000), and spend just a few hundred dollars each month. The account allows you to start earning KrisFlyer miles from spending that you may already be making each month without getting anything in return.
Another pet peeve that many people have is the fact that the KrisFlyer UOB Account gives no interest. This seems to be getting people worked up since the general principle we hold on to is that saving accounts should pay interest on deposits. Argument such as how savings accounts like the OCBC 360 and the BOC SmartSaver can earn you more than 2% per annum of interest are mooted as better options.
Yet when you think harder about it, these arguments fail to hold because most of these savings accounts that provide high interest only work for people who are already working and earning an income that qualifies them to apply for a miles credit card. If you are a student with no income, these savings accounts do not work for you.
The default interest rates on most other savings accounts will be 0.05%. Based on a $15,000 deposit, you get about $7.50 of interest each year. We are not sure about you but at that kind of interest, we much rather get the miles instead.
What UOB Did Wrong
Having devoted an extensive write up to defend (probably the only website to do so thus far), to some extent, the KrisFlyer UOB Account, let us now turn our attention on what UOB did wrong which created the negative PR they didn’t expect to receive.
For a start, instead of positioning the product such that it’s aimed towards millennials, which is who they claim they were targeting anyway, the key marketing message they seemed to be (trying) to drive home was that the card/account allows you to earn a stunning 5.4 miles per $1 spent.
That was the headline message that caught many people’s immediate attention and till now, is still the main message that UOB is trumping.
If you don’t already know, the 5.4 miles earned per $1 spend is only applicable if you happen to have an average monthly balance of at least $350,000. That’s right, $350,000!
We are not sure about you, but we are pretty sure 99% of our friends do not have that kind of money lying around in a savings account. And we are pretty sure most of your “millennial” friends don’t have that kind of money either.
Look, if UOB really wants to reward its richest (and most important) clients by giving them a stunning 5.4 miles per $1 spend, by all means, go ahead. That’s okay. The rest of the population are not losing out anyway because we still get our 1.4 miles per $1 spend anyway.
The reason behind the backlash UOB received was the wrong focus it played on by talking up the 5.4 miles per $1 spend, which as consumers quickly found out, only applies if you happen to have $350,000 lying around…which most Singaporeans don’t.
The marketing lesson to be learnt here is to never play up a financial product only for consumers to realise that it benefits only an exclusive group of people, that being the super rich.
This in turn distracted people from the fact that all things considered, the KrisFlyer UOB Account is actually a reasonable product when you compare it against other debit cards in the market.
UOB biggest mistake in their communication efforts was in attempting to get the KrisFlyer UOB Account to come across as a superior product to other miles credit cards in the market (Hint: It’s not!) while keeping its terms and conditions conveniently in size 4 font on its marketing materials which was then picked on by people online. This is a shame because it now looks like the backlash have taken away the focus on what could have been an innovative (and reasonable product) of its own.
What are your thoughts on the KrisFlyer UOB Account? Share it with us on Facebook as we would love to hear your views.