It’s Service, Not Sales

The other day, a co-worker and I were discussing our opinions on the shifting focus onto sales in the banking industry. We both felt that the industry seems to care less and less about servicing the customer. My co-worker, who is a trainer for branch staff, gave me an example from one of her training sessions.

A trainee was lamenting about how annuities sucked. She said they were very difficult to sell because very few customers had that much in an account. The chances of a customer having $10,000 available to open one were miniscule.

My trainer friend asked her what was the first car she got at 16. The trainee looked confused, but answered with something like a late model Honda Civic. My friend then said, asking your typical customer to open an annuity is like you being able to go out and buy a BMW 700 series at age 16.

She went on to say that you can’t expect a DDA customer to pull $10,000 out of thin air. You have to take the time to build a financial relationship with your customers. You always hear that you have to sell sticky products to your customers. Typically, this is direct deposit, online banking, bill pay and e-statements.

After listening to my friend, I no longer feel that these are sticky products. If all you have is a DDA relationship, the customer could easily go across the street to a competitor. Believe me; it’s really not that hard to change your direct deposit and online banking information. If your new bank uses the same bill payer as your current bank, they may even be able to transfer your information over.

My friend told me that her old branch is reaping the rewards from her work years ago. When she sat down with a new customer, she opened the checking account and setup the other “sticky” services. Also, she would talk to them about opening a savings account, even if they didn’t have the minimum amount.

She explained that yes, they would get a $4 monthly fee, but she’d set it up so that each pay period, $25-$100 (whatever the customer was comfortable with) would be deposited into their account. This way, after a couple of months, they would have the minimum balance and begin building an emergency fund.

After 6 months to a year, she would sit down with them again and suggest moving some of the money to a CD so that they could get a better rate. They would still have some money for emergencies, but also be building more wealth. Within a couple of years, she’d refer them to our investment group. During all this, she’d be building a personal relationship with all her customers, plus getting more referrals as they told their friends.

After our conversation, it hit me that a savings account is the stickiest product that we have. It’s also the foundation for building a relationship with our customers. It all starts with servicing the customer and having their best financial interest in mind. As my friend said, it’s a lot easier to sell that $10,000 annuity when you service the customer and help them save that amount to being with.

I Told You So…

Right now, spread throughout the many banks and credit unions, there are people sitting back and saying “I told you so”. I know that I mentioned to a co-worker or two that these ARMs were going to get a lot of people in trouble. Just because someone tells you that you can afford a $400,000 home doesn’t mean you have to buy it. Over the last couple of years, I heard the term “house rich and cash poor” used quite a bit.

Keeping up with the Jones and having a house worth half a million dollars on paper isn’t always worth the potential consequence. As my wife and I have said to each other, having an appraisal for $500,000 and having someone willing to pay that much are two completely different things. I’m sure these people in Denver and Charleston, SC can attest to that. (side note: Since I married a Jones, are people trying to keep up with us? If so…cool)

Financial institutions that hedged some of their bets on the sub-prime market are really feeling the pain. Right after the news about the collapse of Bear Sterns, I made a joke about “what if this happens to Bank of America”. Well after B of A’s first quarter earnings report, I don’t think it’s funny any more. I enjoy being able to go coast to coast and not pay any ATM fees. Ken Thompson at Wachovia is also feeling added pressure. There is talk about him being asked to step down.

Closer to home, Carolina First took a $201 million paper loss, but a $14 million operating loss in the first quarter. Most of this is because of loans in their Florida operations. Fortunately, their NC and SC areas are holding strong.

The bad part is the banks and credit unions that stayed away from the sub-prime market aren’t exactly safe. Quite a few of them did a lot of business in the home equity market. So if you’re in the same market that is dealing with a depressed real estate market and facing a rising foreclosure rate, what are the odds you’ll collect on that HELOC or second mortgage? If I remember correctly from my Principles in Banking class, second position is a bad place to be in.

I’m not sure how this will all play out, but one thing is for sure; we need to go back to banking basics. Just looking at FICO scores won’t do it. There’s a reason that good bankers also compare debt/income ratio, payment history, job stability, collateral and character. Most of us refer to that as the 5 C’s.

BarCampBankCharleston: Update

The date and location for BarCampBankCharleston have been set. The un-conference will be held at the First Federal Corporate Center in N Charleston on July 26, 2008 (9am-5pm) and July 27, 2008 (9am-1pm). The address is 2440 Mall Drive.

The location is about 10 minutes from the airport and there are about 10 or so hotels located nearby. For those that love to shop, the Tanger Outlet is in the area also. Historic Charleston is about 15 minutes away.

So go ahead and pen it in your calendar and we’ll see you at the end of July.

Putting The “Bank” Back In BarCampBank

Ok, I admit it. I’m jealous of all the credit union people meeting and discussing cool ideas. I’m also saddened that no bankers have shown up at a BarCampBank. Well, that is about to change. After much contemplation, soul searching and meditation, I’ve decided to organize BarCampBankCharleston.

Well, actually, I just mentioned it to a couple of people and they said it would be a cool idea. So, I’d like to invite you all to beautiful, historic Charleston, SC. Right now, it looks like the event may happen in late July. So bring your families along for a fun weekend. Hopefully, this will be big enough that we have to spread it out over a Saturday and Sunday. If anyone would like to help with the planning and organization, please don’t hesitate to contact me.

Protecting your PIN

The Copenhagen Post reports that four business students won an international competition for their invention of protecting the use of PINs on ATMs. The girls, students at Arhus Business College, got the inspiration for the idea after hearing about an elderly woman having her account cleaned out when a thief gained access to her PIN.

Their invention works by using a graphically, innovative screen that changes the positions of the numbers between 1 and 9 after each number is pressed. This way, a “nosy” person can’t determine your PIN just by looking at your finger positions. Also, the screen has a blur feature when looking from a side view.

Personally, I know I’m wary of using my PIN in public because of curious onlookers. I hope they hurry up and get this much needed upgrade in the States. It would be nice if all ten numbers were randomized though.

If Money Goes Digital, How Will You “Floss”?

Floss (verb) - To show off, especially things of high value

Ex. Once he got the new iPhone, he couldn’t help but floss.

While watching a special of Yo! MTV Raps, the other day, I was hit by a sudden thought. If money gets to the point where it is only exchanged digitally, how will people “floss”? For example, I always thought it would be cool to walk into a car dealership with a briefcase of money and purchase a luxury vehicle. Or better yet, dine at an expensive restaurant and impress my date by pulling out the ol’ money clip and peeling off some Benjamins ($100 bills).

As I’ve gotten older, I see that carrying around large wads of cash can be extremely unhealthy. Also, the bulky look isn’t in and a briefcase full of money is just cumbersome. Besides, debit card usage has gone way up. It is also highly convenient, as pointed out in the Visa commercials. Unfortunately, using a debit card isn’t very sexy.

Whipping out the ol’ debit card just doesn’t have the same je ne sais quoi as pulling out a stack of hundreds. Showing off that American Express Centurion (Black Card) does raise some eyebrows. Amex even got some free publicity from rappers, such as Jay-Z and Bow Wow.

Moving forward, the 35 and under crowd is who the financial services industry is targeting for contactless payments, mobile payments and mobile banking. I think they could help the adoption along by making it sexier and more of a status symbol if you use contactless/mobile technology. We all know that the masses want what celebrities have. We also know that hip hop sets most of the trends.

If I were a mobile banking vendor, I’d consider getting my name mentioned by a rapper or other celebrity. Having them perform a mobile transaction in a video wouldn’t hurt either. The same goes for showing a transaction in a movie. Most of us thought the Black Card was an urban myth until rappers started showing them off. Now it’s an incentive to get your credit score and income up or floss by using ideas like this.

Is 50+ Really The Preferred Market?

Your Business, on MSNBC, recently mentioned the results of a marketing survey. One of the questions was about the age of people with a yearly income over $100,000. Of those surveyed, 19% were over the age of 54. 27% were under the age of 35.

I know that most of products we market are for the 50+ demographic. However, we are trying to develop more products for the under 35 crowd. The problem is, most of the decision makers aren’t under the age of 35. Offering an iPod Nano isn’t going to do it. Finding out and catering to their needs is the way to begin drawing them in.

Rewards For Bill Pay

SC Federal Credit Union is rolling out a new program called “eChecking”. Members will be able to earn reward points for every time they pay a bill online. To qualify, they will also have to use direct deposit, eStatements and their debit card.

Although rewards programs are nothing new, SC Federal thinks that they may be the first in the industry to offer something like this. More information can be found here.

Not Doing Your Homework Can Hurt, Part 2

Recently, while catching up with the basketball game scores, I saw a commercial about buying a computer. Basically, this company, called BlueHippo, was offering to help those with bad credit obtain a computer. For only $39.99 a week, for 52 weeks, customers could have a new computer with a 17in. monitor, a 3-in-1 printer and about 15 computer applications.

The website’s plan is slightly different. There is an initial fee of $99 and you have to make 6 payments before the system is delivered. This means that you’ve spend $340 before you even get your computer.

Just some quick math, $40 x 52 weeks equals $2080. In case you didn’t know, you can get a new Mac Air for $1800. I always knew rent-to-own was bad, but this is ridiculous. You would come out better by putting that $40/week into an online savings account for 12 weeks. By that time, you’d have more than enough to buy a basic computer system. You won’t have a top of the line system, but then, BlueHippo isn’t offering top of the line anyways.

Now Open: BankingKismet SMB Lending

Entrepreneurs have found a new source for startup funds…Prosper. No more pesky loan applications and dealing with that clueless lender who looks down his nose at your million dollar business idea and refuses to lend you anything because you’re a startup and you need less than $100K, which is too small of a deal for him.

However, entrepreneurs seem to be paying a premium for these funds. It’s not unusual to see rates from 11% to 35%. One has to wonder if they tried to find cheaper funds elsewhere. Surely a smaller bank or credit union would extend a business line of credit.

But I must admit, tapping the old EAL for 7% and lending for 25% sounds pretty tempting. I wonder if I need a business license? Nevermind, my employer may have something to say about my new venture.