Thursday, January 28, 2010

Mintel Comperemedia Looks at Financial Service Mega-Trends

In a Mintel Comperemedia presentation recently, Economic Psychologist, Susan Menke, PhD. presented the trends that are expected to have the greatest impact on consumer financial behavior and the banking industry during 2010. Based on tracking of direct marketing programs during the last half of 2009, the following predictions were made:
  • The end of Free Checking: Banks such as Fifth Third and BBVA have already eliminated the account while Free Checking leader TCF announced the end of their Free Checking program at their investor meeting this week.
  • Explosion of reward banking: The decline in Free Checking will most likely result in an increase in checking programs with rewards, especially in light of the increased importance of direct deposit, online bill payment and debit card interchange.
  • Account builder program introductions: Following the trend started by 'Keep the Change', 'Way2Save' and PNC's 'Virtual Wallet', automatic transfers from checking to savings and the linking of credit lines to checking will be two ways to expand relationships beyond a single service.
  • More aggressive debit card marketing: The importance of interchange income to the financial viability of many relationships will lead to many more debit card activation and utilization promotions in 2010.
  • Cash will continue to be king of offers: The offering of cash incentives for opening new accounts ramped up in the latter part of 2009 after a short hiatus. Chase continues to offer different bounties ranging from $100 to $200 and more with many other large banks following.
  • Increased popularity of prepaid cards: While larger banks have not yet focused on prepaid cards, changes brought on by Reg E may change the way banks serve the underserved and unbanked segments.
  • Expansion of mobile banking: There are still several large banks that have only rudimentary mobile banking initiatives while others such as Bank of America, Wells, USAA and Chase have created innovative iPhone Apps. The financial incentive to move more expensive transactions to the mobile channel and the rapidly increasing acceptance of smart phones is expected to fuel rapid growth of this channel.
  • Proliferation of financial literacy programs: Customer experience research for years has indicated the importance of being more transparent, building trust and educating customers on how to make informed financial decisions. Mintel believes that 2010 will be a watershed year for banks to use customer advocacy as a competitive differentiator.
  • Increased use of social media sites: The popularity and growth of social networking sites has made it impossible for financial institutions to sit on the sidelines. One firm is offering a service where customers can receive alerts through social networking sites rather than email while many banks are using these sites for enhancing or reinforcing their brand. Twitter is also used to broadcast changes in rates and to introduce new products.
Unlike 2009, where most banks significantly scaled back marketing efforts and were on the defensive, proactivity seems to be the norm in 2010. Product innovation, changes in pricing models, utilization of new channels and an increased emphasis on the customer experience will definitely put the spotlight on marketing.

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