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Archive for the ‘Strategy’ Category

It’s A Mobile World

Apple recently released their third quarter earnings and the iPhone and iPad combined for 68% of all of Apple’s revenue.  The iPhone actually makes up 46.6% of the total revenue, which breaks down to over 20 million units and $13 billion.

In case you’ve been sitting on the fence about implementing that mobile strategy, it’s time to go all in.  Android device sales have been keeping pace with Apple devices.  In the near future, more people will access the web from their mobile device than their computer.  You can bet they’ll be looking for that cool mobile banking app also.

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Are You Uncomfortable?

I happened to catch part of an interview with Paul Azinger on ESPN’s “Jim Rome is Burning.”  They were discussing Tiger Wood’s decline and possible return to the PGA tour.  Paul mentioned that since Tiger became a professional, he only plays on familiar courses.  Now I understand why I never hear of him being at minor tournaments.  His whole game plan has been to master the few courses he plays on.

This sounds very similar to the banking industry.  Decisions are still being made based on what happened in the past.  Ron Shevlin posted a graphic on his blog recently about the declining branch channel.  Yet executives still have increasing branch goals as though branch traffic is going up, not down.  There also isn’t much emphasis on other channels that customers obviously seem to prefer.

Like Tiger, they just want to stick to what they know and what worked in the past.  Well, Tiger now has the lowest ranking he’s ever had in his career.  Banking is going through a similar struggle.

The question is, will executives actually start to make decisions based on the changes in the industry?  Telling the rank and file that “banking has changed” doesn’t mean much when your strategic plan is to do more of what you did in 2002.  Just like Tiger needs to heal and improve his fundamentals, bankers need to do the same.

I think playing new courses could help Tiger, and capitalizing on the changing environment can help bankers.  Going outside your comfort zone is how you grow and become better.

Categories: Strategy Tags: ,

Why I <3 My Big Bank

Steve Topper, over at Financial Marketing Insights, brought up an interesting question a few days ago: why would anyone with a lick of common sense continue having their checking account with any of the nation’s four largest banks?  Well, I happen to think that I’m smarter than the average bear, so I’d like to respond to that question.

First, let me say that I do understand where Steve is coming from.  I used to work for a large community bank and I’m also a fan of credit unions.  But I still do a majority of my banking with one of the big four.  There are really only two reasons that I stay there:

1. They have ATMs coast to coast
Years ago, I used to travel a lot.  Now, I anticipate traveling even more.  It’s nice to know that wherever I go in the US, I can find an ATM for my bank.  I do realize that credit unions actually have a larger network (which is something they DON’T play up enough, if you ask me.)  It all comes down to location, location, location. 

With my former employer, as soon as you left the coast (and I mean a county or two over), you were subject to ATM fees.  Actually, that’s no longer true.  There is just a perception that you have to pay a fee.  You can use an ATM if it’s in the MoneyPass network.  However, it’s not really advertised, so they are like credit unions in that regard.

2. Better technology

How many banks and credit unions have mobile banking through the mobile browser?  How many have an app?  How many have text banking?  Now, out of the ones have text banking, how many offer transaction alerts? Let’s be clear, mobile banking through the browser doesn’t have a big adoption rate for a reason.  The FIs that are really growing mobile banking faster than the industry rate have text banking with transaction alerts. 

With very little marketing, my former employee blew away Bank of America’s adoption rate because they had text alerts.  However, most FIs don’t offer this feature.  The big four all have text banking.  They also have apps for smart phones and have either launched or plan to launch a tablet app.  Here are some other services they offer:
– Online loan applications
– Online account opening
– External transfers
– Deposit through ATM
– RDC using a smart phone
– PFM

In customer segments, I think I fall into the “tech-savvy and prefer self-service” segment.  I want to perform my bank transactions through any channel that suits me.  I also want to be able to go an ATM without incurring a fee, no matter where I am.

The smaller banks and credit unions aren’t there yet.  Heck, I have a feeling that most of them are still trying to push through the business case for better technology to upper management.  But to most people, a checking account is a commodity.  Although my account doesn’t say “free”, it is free, provided I stay within the required conditions.  For the life of me, I don’t see what is so bad about this.

At the end of the day, customers just care about whether their money is safe or not.  Also, can they get to it any time/way they want?  I have never been charged a fee that I didn’t know about.  But then, I tend to read the fee schedule on my account.  For the times I was charged a fee, I was able to get it reversed most of the time.  For the times that I wasn’t, there was a lesson learned.

I think that as an industry, we need to get past this “no free checking” = “bad bank/credit union”.  There are a lot of happy customers that are willing to pay for peace of mind and multiple banking channels.  Odds are, these are the customers banks and credit unions would want. Offering a free checking account isn’t going to make them open an account.  That’s just one of the many bullet points they’ll be looking at.  They also know that “free” doesn’t necessarily mean better.

Categories: Marketing, Strategy Tags: ,

Are You Winning?

Lately I’ve seen a lot of posts bemoaning the lack of innovation in the bank and credit union industries.  I do agree that companies such as industry outsiders Apple, Google, Square and BankSimple seem to be leading the industry disruptions.  But there are companies, such as Ally, TD Bank and USAA, that are also innovation driven.

One thing that I’ve noticed about these three companies is, they all seem to be customer-centric.  While every bank and credit union talks about their great service, these three seem to back it up.  USAA and TD Bank especially seem to offer products that allow their customers to bank the way that is most comfortable to them.  Unlike their peers, these institutions don’t follow the crowd.  They lead the crowd and let everyone else pay catch up.

This follow the crowd mentality has always been something that has bothered me.  Especially when you realize that following everyone else is what brought us to this crisis in our industry.  But I think there are other issues at play here.  In the past, bankers were the ones that controlled the flow of money.  Without much work on their part, bankers could just wait for customers to come to them with requests.  Now, with disruptive technology, one does not have to rely on a bank to get access to capital.

I believe this “wait and see” approach is one reason there has been a lack of innovation in banking.  Here’s one example: everyone tends to agree that mobile banking will play an integral part in the future of banking.  But I’ve seen comments on blogs where executives were reluctant to offer mobile alerts because it will reduce NSF fees, so they were just holding off on mobile altogether.  Not very customer-centric is it?  Never mind that offering mobile alerts could drive up customer acquisitions and increase income.  They’re more focused on the “potential” loss of fee income.  But as competitors begin to offer mobile, they reluctantly look to add the service.

Now, the biggest reason for the lack of innovation?  That would be fear.  Particularly, the fear of losing entrenched power.  If you think about it, most bank and credit union executives view IT as a cost center.  Therefore, they don’t look at it as a competitive advantage.  Also, they don’t understand it, and really don’t want to understand it either.

Over the last few years, there have been articles about the purpose of physical branches changing.  Branch traffic has been steadily declining for years.  This means that the opportunities for cross-selling have gone down also.  But online usage is trending up.  Which means online account openings, bill pay, mobile, and other online services are also trending up.  Also, customer acquisitions are cheaper online.

So in order to survive, the people that currently have the power have to deal with those IT people.  Which means they’d have to give up power.  But more importantly, if the branch isn’t as important and online is, what will their future purpose be?  They don’t know that much about online banking, but they know a whole lot about branch banking.  Better to keep their head in ground and ignore the change that is happening around them.  Just maintain the status quo at all costs.

We all know that people that ignore change and try to stay the same are just spectators.  Spectators aren’t in the game.  If you’re not in the game, that means you can’t possibly be winning.  Which means you’re losing.

Andera Launches SDK

January 20, 2011 1 comment

We were one of Andera’s first customers for their online account opening product. So far, the experience has been really good. They’ve always been open to suggestions and have a pretty quick turnaround. Well now they’ve released a SDK for their web services. While listening to the presentation, I could just imagine the potential uses.

A few that they mentioned dealt with verification of identity, credit and funding sources. This functionality could open doors for even better loan and account applications. With mobile becoming a bigger priority, being able to tie into these services could be a boon.

Some other examples they gave dealt with the gaming and travel industries. You could tell that they’ve put a lot of thought into this. The GUI for service looked really cool also.

I’m looking forward to working even closer with Andera in the future.

The Death of Free Checking

January 2, 2011 Leave a comment

All I wanted for Christmas was for someone to sit down with me and explain how a checking account was profitable.  Well, I didn’t get that present, and I still don’t know.  Now, I don’t really believe that free checking accounts will go away.  But I do believe that banks and credit unions that continue to focus on checking accounts may go the way of the dodo.

Changes in banking laws have done nothing but hurt the profitably of checking accounts.  In the past, fee income and interchange fees drove the focus on this account type. Now, overdraft fees have been drastically reduced.  It also looks like a law will be passed that will limit the amount that can be earned from interchange.  But as they say, trouble comes in threes.  Number three will be mobile payments.

This summer, iPhone 5 will hit the market, and along with it, NFC capable phones.  Although the Android based Nexus S is NFC capable, it’s not currently being used with mobile payments.  Apple will change that.  Even with “antennagate”, Apple has sold close to 6 million iPhone 4s.  A newer phone that fixes the old problems and adds NFC will be big.  The kicker would be offering the iPhone on Verizon’s LTE network.

With all of this pushing down the profitably of checking accounts, why would banks and credit unions continue to focus on them?  I think the industry has it wrong.  Checking accounts are the razors, savings accounts are the blades.  If you look at the history of the industry, savings and loans are how we made money.  Fee income from checking accounts was just the gravy and caused the industry to get lazy.

Once it got to the point that fee income became the focus, the beginning of the end started.  The interesting thing is, customers seem to be most interested in savings and convenience.  According to one poll*, customers that signed up for Bank of America’s “Keep The Change” and Wachovia’s (Wells Fargo) “Way 2 Save” programs did so to build their savings accounts.  Of course, the banks most likely did it to build their interchange fee income, but they also built up their deposit base.

I am definitely in the savings and customer convenience camp.  Apparently, I’m not the only one.  At the end of the day, banking is a service industry.  Focusing on customer needs is what built the industry.  Now, it’s what will save it.

*The people surveyed consisted of me (BofA customer) and a cousin (Wells customer).  See, you can find a statistic for anything

Photo from Ziggy on GoComics.com

The Elephant (Banker) In The Room

November 3, 2010 6 comments

Last week I had the opportunity to attend the CU Water Cooler Symposium. When Matt Davis invited me, I was very hesitant. “You actually want a banker to attend?”, I asked.  “Sure, why not?”, was the response. “You can bring a different perspective.”

So off to Fishers, IN I went. Let me tell you, this had to be the best conference I’ve ever attended. There were two days of great speakers and a wealth of information. As someone commented, if you didn’t get a ticket because you thought it would just be about social media, bad mistake.

The tweets from the event are only a sample of a information we received. You can find an archive here.

While the symposium as a whole was great, I’d just like to highlight a few sessions:

Robbie Wright, from CU Innovators, spoke about using social media to discuss the hard topics.  He said that instead of just talking about marketing fluff, we should try solving the hard problems.  Credit unions need to focus on the non-sexy to stand out for their customers.  At the end of the day, credit unions are a business, not a charity.  They can’t just focus on “being on Twitter and Facebook”. Social media needs to add value to customers and the credit union.  You should build a business case to use these tools and income is a good thing.

Rebecca Corliss, from Hubspot, gave a presentation on inbound marketing.  I’m a big fan of Hubspot and have always wanted to meet someone from the company. Hubspot really helps you leverage your online presence to generate leads. Old school marketing is interruption based while the new school is permission based.  Some advice Rebecca gave was to think of inbound marketing as an ecosystem, not a cubicle.  You need to target your keywords in order to build your rank.  Inbound marketing is an investment and can build down the cost of leads.  Another piece of advice was to have more than one “contact” form.  The forms on your website should have a “call to action”, not just ask for generic information.

Ed Brett, from Westminster Savings, would probably get the vote for best speaker.  No slides, just straight talk.  Ed explained that although his credit union was much smaller than the competition, they were able to compete because they take advantage of their small size.  Smaller companies are able to be much more agile so there are less levels to go through to get to a decision.  At larger companies, there are more politics, agendas, and decision makers.  Also, credit unions need to be better bankers than the bankers.  This is a business and they need to help people do their banking better.  There should be less emphasis on social media and more on simplifying banking.  If you want to be agile, you should partner with agile vendors.  At the end of the day, you need to bring value to your members.  Ed also gave three statements that really stood out to me:

1. I challenge you to find other industries that are seeking to model their service after credit unions (banks).
2. The only innovation in financial services over the last 50 years has been in ‘access’
3. Your job is not to use technology, but to apply it.

Maya Bourdeau, from Attune, spoke about Psychology in Marketing.  She talked about how her company discovered that small sample sizes gave as good results as large pools of participants.  But, of course you have to be very discriminate in selecting your small sample.  Another thing they discovered through their marketing development was credit unions need to show two times the value to get members to switch from a bank.  They also said to keep it simple and explain the personal benefit.  For example, instead of saying “we helped people save over $7 billion”, say “we can help YOU save $200”.

In addition, I had the opportunity to be on the expert panel about credit union branding.  One recurring theme was credit unions really need to sit down and decide what they want to be.  I mentioned that credit unions need to play to their strengths and explain how they’re different from banks.  Most people don’t know what the difference between the two is.  I also stated that “credit unions can’t out bank a bank, we’ve got that down”.

All in all, this was a great conference and I’m looking forward to going back next year.  One question I was continually asked was, “why don’t you work for a credit union?”.  My response was, “I believe I’m a credit union person trapped in a banker’s body.”  As Morriss Partee said, that statement is “an instant classic”.

You can find more summaries here:
CU Times
unCUlturers
Committed to Memory
Currency Marketing
The 2020 Vision of Marketing
Video of Presentations