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.

Random Thoughts

Zions Bank has rolled out their END (Eliminate Needless Debt) Program. With high debt ratios of consumers today, I think this is a terrific program. Honestly, I wish I saw more FIs doing something similar.

The National Association of Realtors have applied for a web-based federal credit union charter. I’m not exactly sure what effect this will have on the local mortgage lending departments. One has to wonder if the realtors will have an extra incentive to go with an “in-house” banker.

Banc Investment Daily mentioned the 2007 ABA survey that showed the primary channels that customers use for banking. 36% still use a branch and 23% mainly use online banking. Personally, the only branches I go in on a regular basis are my employer’s. The last time I was in a Bank of America branch was over a year ago. For the two other banks I use, I visited one about 8 months ago and the other three years ago. My banking is mostly done online, at least until this mobile banking thing takes off…

Who’s Your Targeted Customer?

Contactless cards, mobile banking, personal financial management software, FaceBook applications. All of these can be great for the financial services industry and a lot of people are trying to figure out the best way to leverage them. The question is, who are you providing these services for?

Have you actually sat down and had a group session discussing your plans for these new services? Or is it more like a 3 year old, wanting what big brother (competition) has? There seems to be a lot of “me-too-ism”, mostly because of fear. “If the big boys have it, we have to get it also in order to compete.”

Whether that is true is open for discussion, but if you do decide to follow the leader, do you have a plan? As an example, let’s take mobile banking. Most FIs fall into one of two categories: 1. Let’s be a first mover in the market or; 2. Let’s see what problems the first movers have and which channel (SMS, WAP, client app) wins out.

The biggest problem for adoption that I see is, no one is talking about how to market this new service. Yes, statistics show that 99% of people in the world have a mobile phone. Yes, even your grandmother knows how to “txt her bff”. Yes, Asia, Europe, and Africa have mobile payments, which is growing daily by leaps and bounds.

But for some reason, I don’t think your customers really care about the statistics. Better yet, do you have any idea what your customer wants? A couple of weeks ago, I overheard two couples talking about our bank and one was trying to access our online banking on his Blackberry. When I finished my meal, I went over and introduced myself. I told them that we were looking at mobile banking and explained a little of it to them. When I finished, I asked if it was something they would be interested in. Both couples said yes and the one with the Blackberry said we could sign him up ASAP.

We’ve also done a survey with our retail and commercial online banking customers. The responses matched up with what consultants, such as Javelin, have been saying. However, it all boils down to how we offer this service.

Honestly, I don’t think most of our older customers would be interested in mobile banking. Unfortunately, we also have an older customer base. But if we marketed mobile banking to the younger crowd, we could bring in brand new customers. Since we have a few local colleges in the area, I think that’s a good plan. This age group also “lives” on their cell phone and would most likely be open to “on-the-go” services.

We’re all trying to grow our customer base. But instead of buying new technology and just fitting it into your current customer base, think about how it can benefit you in other ways. Before you just add that new service all willy-nilly, you need to have a plan. As the saying goes, “Those that fail to plan…”

What If You Were Goodyear?

Here in NASCAR country, Tony Stewart’s rant about Goodyear’s tires was all over the news. In this particular tirade, he blasted Goodyear for the hard tire combination used in Atlanta.

“That’s the most pathetic racing tire I’ve ever been on in my career. They exited out of Formula One. They exited out of IRL. They exited out of CART. They exited out of World of Outlaws. And there’s a reason for that: because Goodyear can’t build a tire that’s worth a crap,” said Stewart.

Normally, Tony would have been generally ignored. This time, other racers, such as Dale Earnhart Jr and Jeff Gordon made similar comments, though with a lighter tone.

Goodyear issued a response to Stewart’s criticism and explained that after earlier tire testing, they had no performance problems. Also, there were no complaints from the previous day’s race. However, the tire used in the race on Sunday wasn’t the same as what was tested last year.

Just a few years ago, Goodyear Firestone went through similar scrutiny with the tires they supplied for Ford Explorers. I believe a settlement was reached in that instance. So, this is the second time within 10 years that the quality of Goodyear a tire company has been brought into the public eye.

It seems that most banks’ and credit unions’ biggest differentiator is superior service. What would you do if one of your biggest customers publicly complained about the quality of service you provided? In Goodyear’s case, drivers had complained before. It just all came to a head recently.

How would you handle a large customer that finally got fed up? I have seen some gross errors made and it usually boils down to basic operations procedures. Sometimes, instead of focusing on sales, you need to make sure people can pass Banking 101.

Customers mainly want you to just not mess up. Situations like giving a customer access to a million dollar account that they said wasn’t theirs is just wrong. Sometimes, you can’t just fix a situation. You have to look at what caused the situation to begin with and fix that also. Also, listen to the complaints you may be getting. By digging a little, you could help make everyone’s experience a lot better and live up to that superior service.

Update: Ron Shevlin’s post is a perfect example of customers not wanting their FI to mess up.

Promoting Banking

Recently, I had the pleasure of attending the Career Fair at a local elementary school.  Even though I didn’t get the chance to talk about possible careers in the banking industry, I was able to express my enjoyment in my career.  Plus, I got to beat a couple of kids in Tic-Tac-Toe, found on our kid-centric website.  I also discovered that kids will go to great lengths to win a bag of shredded money.

Your Firewall Isn’t The Problem

Chris Skinner over at Finextra recently wrote an article I’m sorry, you are firewalled out. In the article, he told a story of how the CEO of a major, strategically led, global company was surprised that Google bought YouTube for $1.65 billion. He was surprised because he’d never heard of the company. He then conferred with his direct reports and found that none of them had heard of YouTube either. The CEO then attempted to go to YouTube’s website and was stopped by the company’s firewall.

The conclusion was, management is effectively blocking themselves through policies they dictate for the company. Because websites such as YouTube, FaceBook, LinkedIn and MySpace are blocked, management doesn’t know the value they could bring to the company.

Hogwash. Firewalls and policies aren’t keeping management in the dark. Lack of inquisitiveness and communication is. In the example of the CEO, the direct reports must not have read any trade magazines or websites in the past couple of years. YouTube, FaceBook, LinkedIn and MySpace have constantly been mentioned on sites such as Infoworld, Computerworld and CIO. I’m willing to bet there were plenty of employees at that company that knew about YouTube. They just weren’t asked because they’re lower level employees.

And that is the crux of the problem. Innovation and strategy doesn’t only come from the top and filter down the organization chart. Anyone in the organization can have an idea. Anyone could also be keeping up with technology. Sometimes, it’s as simple as asking the employees around you.