How to Become Your Customers' Everyday Bank

Banks have a unique opportunity to capitalize on the vast amounts of customer insight they hold to go beyond simply facilitating payments. They can reinvent themselves as an Everyday Bank, helping customers reach decisions about what to buy, when and where to purchase, and even helping to negotiate the best deals in a ubiquitous format.

Non-banks are capturing more and more of the banking value chain, providing services such as payments, checking and even savings accounts that could erode as much as one-third of traditional bank revenues by 2020 according to Accenture. These new entrants pose a threat to banks by raising service expectations and coming between banks and their customers.

According to a new report from Accenture, entitled "The Everyday Bank," the response is not just about closing branches, improving online and mobile banking offerings or making current products and services "more digital." Instead, banks need to move further into the daily lives of customers, providing assistance before, during and after the financial transaction.

Customer behaviors and expectations are quickly adjusting to a world where products and services are recommended based on past behaviors and where location-based offers are provided instantaneously on their mobile device. Customers want information to be fingertip-ready. 

The Everyday Bank

According to Accenture, an Everyday Bank leverages the vast amount of insight it possesses to become central to a customer's financial and non-financial digital ecosystem. The Everyday Bank reinvents itself as a value aggregator, advice provider and access facilitator, acting proactively on the customer's behalf, improving reputation and trust. 

An Everyday Bank drives continuous daily interaction by building partnerships and connections with provider partners who offer goods and services in every area of area of consumption, including retail, home services, health and security, travel and leisure, communication and transportation. By tapping its wealth of transactional data, without ever sharing analytic information outside of its four walls, the bank reaches out to the right third-party providers and other key players to build a digital customer experience combining mobile, big data, analytics, digital marketing coupling, ticketing capabilities (at ATMs?) and more.

The Everyday Bank uses its digital engine to automate front- and back-office processes to optimize for speed, efficiency and scalability. According to Accenture, a highly functioning Everyday Bank can:

• Slash back-office effort by as much as 80 percent
• Reduce its managed applications portfolio by 70 percent
• Cut time to market by 40-50 percent
• Increase operating income by 25-30 percent

In a real-life example, an Everyday Bank has the rich customer data to know when a customer may want to purchase a car (based on the age of current vehicle, family structure, etc.). After offering the customer assistance if they agree that a car purchase is in order, the bank can recommend vehicle models that might fit their lifestyle, personal preferences and budget. 

Next, because the bank is in a position to negotiate thousands of car deals on behalf of their customers, they can get a price that meets both the customer's and dealers needs. After bundling in insurance and any other after-market products, the bank then recommends a payment plan that is best for the customer.

According to Accenture, the five critical elements of an Everyday Bank include:

1. Provides services that are digitally optimized across a variety of platforms
2. An omnichannel approach
3. Uses big data and predictive analytics to help anticipate customer financial and non-financial needs
4. Offers a human touch for high value interactions
5. Is attuned to their customers' moments of truth

The Everyday Bank also brings pricing transparency, trusted advice, social recommendations and transactions - as easy as one click.

Omnichannel Banking: More Than a Buzzword

As customers continue to change their channel usage patterns, banks and credit unions must focus on delivering a consistent and seamless experience across various touch points. More than just a buzzword, omnichannel banking is an opportunity to deliver bottom line results by gaining insight into customer's channel preferences and behavior.

Today's customers are becoming highly sophisticated and are accustomed to receiving seamless service and targeted offers from companies like Amazon regardless of the device in use. So, it should come as no surprise that these same customers are beginning to expect similar experiences from their banking partner(s). From researching new services, to opening an account, checking balances, conducting transactions or getting customer support, delivering an omnichannel experience has become table stakes in a highly competitive marketplace.

The Importance of Omnichannel Banking

Banks are in an unequalled position to understand their customers. They already can see product use, transaction patterns and demographic profiles. By leveraging channel usage insight, they can develop an even more detailed customer profile. Understanding not only what the customer looks like, but also how they conduct their banking can allow for improved product offers using their preferred channel.

Developing strategies to integrate disparate digital and physical channels into a single, seamless experience has to be a priority. By analyzing the activity and preferences of their client base, banks can tailor offerings to address the priorities of each individual customer. Mass, low profit segments can be serviced accordingly as can high margin services and clientele.

Streamlined, integrated systems, a single customer view and an optimal customer experience are all objectives to work towards. Banks that focus on these objectives will get the edge over the competition.

Customer Experience Innovation in Financial Services

INNOVATION

Expectations from today's consumer are outpacing the ability for banks and credit unions to keep up. The digital consumer is hyper-connected, highly informed and demands a highly personalized approach with regards to communication, product development and customer service.

On January 13, 2014, I was the featured guest for a global Twitter chat hosted by @IBMbigdata entitled, "Customer Experience Innovation in Banking". During the hour, there were 158 participants, 1,095 posts and over 6M impressions!

Below is a sampling of the interchange (including my responses)

More than half #bank customers’ interactions on avg took place through online or mobile channels ~ @BainAlerts so Q1 >> #CXO
— IBM big data (@IBMbigdata) January 13, 2014

Q1: How does today's customer behavior and expectations in a constantly changing technological world impact banks?

A1: Customer 3.0 banking expectations based on verticals like retail. Wants mobile money mgt. not just access to accounts. #CXO

— Jim Marous (@JimMarous) January 13, 2014

We’re in age where customers are armed w/ info & dictate service – 2 them service w/o instant = lacking A1 #cxo #banking

— Natasha Bishop (@Natasha_D_G) January 13, 2014

A1: Like Netflix and Amazon, bank consumers want their needs anticipated. #bigdata #banking #CXO

— Bob Palmer (@bigdatabusiness) January 13, 2014

A1: Biggest challenge for traditional banks is . . . tradition. Legacy systems, processes and mindsets #CXO
— Jim Marous (@JimMarous) January 13, 2014

A1: #CXO Customers expect online commerce--facilitated by e-banking--to become core of all transactions.
— jameskobielus (@jameskobielus) January 13, 2014

Not only seamless online transactions but also seamless online SECURITY. #cxo A1
— Lois Martin (@LoisMarketing) January 13, 2014

Top 10 Retail Banking Trends and Predictions for 2014

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The Top 10 Retail Banking Trends and Predictions for 2014 are compiled from more than 60 global financial services leaders including bankers, credit union executives, industry analysts, advisors, publishers and editors, bloggers and fintech followers.

This year's list runs the gamut from a continuation of past trends to the introduction of new trends in delivery, payments, competition, operations, customer experience and marketing. Prioritization of these trends may differ by institution, but none should be ignored.

For the third year in a row, I have reached out to global leaders in the financial services industry to ask for their thoughts around upcoming banking and credit union trends and predictions. As in the past, the response was overwhelming, with more than 60 responses. The emphasis of this compilation is mostly North America, but most of the trends are global thanks to responders from the U.K. and the Asia Pacific region.

While everyone had their 'favorite' trend, and some provided a personal top 10 list, I consolidated their thoughts and came up with trends that were considered the most important. Two significant trends that are not listed, but impact virtually every trend discussed, are the omnipresence of previous and upcoming regulations as well as the continued investment in new technologies to make this year's trends a reality. Two trends that may prove important, but got less than expected mentions were the underbanked and alternative currencies like BitCoin.

This year's Top 10 Retail Banking Trends and Predictions are:


All of the contributors did concur, however, that a guaranteed prediction for 2014 is that disruption will continue at an unprecedented pace and that the industry will look different this time next year.

• Drive-to-Digital: Impacting delivery, marketing and service usage
• Payment Disruption: New players, technologies and innovations
• Increased Competition: Neobanks and non-traditional player pressures
• Branch Optimization: Maybe not branchless, but certainly less branches
• Focus on Customer 3.0: Digitally astute, social and yearning for insight
• Breaking Down Silos: Product and data silos begin to crumble
• Simplifying Engagement: Removal of friction and steps to engage
• Improving Contextual Experiences: Leveraging data for improved service
• Differentiating Brands: Avoiding commoditization in a digital world
• Global Innovation Perspective: Expanding view of tomorrow's innovations

The following infographic is a graphical representation of top trend and prediction terms provided by the contributors to this year's report. The size of each word represents the prominence of terms from the industry leader submissions.

My Digital Banking Nirvana

Last week, I was fortunate enough to be one of the keynote speakers at the inaugural Next Bank Sydney. In preparation for my presentation entitled, 'My Digital Banking Nirvana', I looked globally for mobile banking applications that were the best at being simple, encouraging engagement and being contextual.

With help from the team at Mapa Research, I came up with almost 30 components for my perfect mobile banking relationship from every region of the world. Some were completely unique, while others were mobile applications that multiple financial institutions provide.

Link to my Next Bank Sydney presentation, My Digital Banking Nirvana on SlideShare here

What Makes a Great Mobile Banking Application

In many ways, there is no difference between what makes a great mobile banking application and what makes a great non-banking mobile application. The key components are:

• Simplicity: Does the app replace a non-mobile process I do often? Does it make my daily life easier? Is it easy to use? In the non-banking world, I love the KeyRing application because it stores multiple loyalty cards in one place on my mobile phone, eliminating the need to carry plastic cards. The app also links to digital offers I can redeem without cutting coupons.
  
• Engagement: Does the application stimulate positive interaction, and build a better application from this engagement? For me, my Marriott mobile application does a great job. Beyond providing the standard ability to make reservations and check my loyalty balances, it also allows me to check in early, receive notifications when my room is ready and informs me about special offers through multiple channels.
  
• Contextual: One of the benefits of a mobile application vs. an online tool is the ability to provide value based on where I am located. My favorite app from a contextual perspective is OpenTable. Using locational functionality, OpenTable provides suggestions of restaurants based on my current location and previous dining experiences. Reward points are provided for using the app and starting next year, the app will also allow me to pay for my meal using my phone and the OpenTable application.

So, which mobile banking applications meet one or more of the above criteria and could become part of my digital banking nirvana? As could be expected, this list is fluid, since new innovations are being introduced every week, replacing previous applications that were once best-in-class.

Mobile Banking 'Basics'

As an active mobile banking user, there is some functionality that must be the foundation for my best-in-class mobile banking relationship. First of all, as covered in a recent blog post entitled, Banking Innovation for the Fat-Fingered, leveraging mobile imaging technology and my phone's photo capability simplifies mobile banking by removing keystrokes and improving accuracy. Therefore, I expect my future mobile bank to provide the following:

• Mobile photo account opening using just my drivers license
• Mobile photo bill pay
• Mobile deposits
• Mobile photo balance transfer

Traditional Banks At Risk Due to Digital Disruption

According to two recent reports from Accenture, 35 percent of banks' market share in North America could be in play by 2020 as traditional branch banking gives way to new digital players. The research also indicates that 15 to 25 percent of today's roughly 7,000 North American financial institutions could be gone as a result of consolidation before 2020.

To combat this shift, Accenture recommends that traditional providers take a radically new approach to distribution, combining a simpler yet more comprehensive branch offering with integrated digital services.

"Digital technology and rapid changes in customer preferences are threatening full-service banks that do business primarily through branches," said Wayne Busch, managing director of Accenture's North America banking practice and author of the report, A Critical Balancing Act: Retail Banking in the Digital Era. "Given the scale of these disruptions, traditional full-service banks, as a group, could lose significant market share by 2020 -- to banks that reorient around digital technologies and to new entrants from the retail and technology sectors."

Digital Disruption

New digital technologies, emerging digital competitors and the extremely rapid changes in customer preferences are threatening to dramatically impact those full-service banks that limit themselves to products and services that get distributed primarily through physical branch channels. The outside disruptors tend to be more agile and more innovative, while traditional banks are weighed down by unprofitable branches, legacy back offices and inefficient silos. 

Business as usual is no longer an option in an industry that could see up to 25 percent of U.S. banks disappear completely.

In conducting online interviews with more than 2,000 US retail banking customers of the 15 leading retail banks in the U.S., Accenture found that 71 percent said they were “satisfied” with their bank and 68 percent said they would be “extremely likely” to recommend their primary bank to a friend, family member or colleague. In addition, only 9 percent of those surveyed switched institutions over the past year.

This loyalty is fragile, however, since more than a quarter (26 percent) of bank customers who remain with their primary provider do so simply because they consider switching to be a hassle, while about half said they haven't seen a competing offer that was attractive enough to make them move. The survey also found that two-thirds of bank customers would consider a branch closure as inconvenient and nearly half would switch banks as a result.

Source: 2013 Accenture Retail Banking Survey

This not only exposes the tenuous relationship banks have with their customers. It also confirms that the right offering and approach can induce them to switch. "The core challenge for banks: how to build a seamless digital customer experience -- and optimize its power with a better and more cost-effective complimentary offering in the branches that customers find so attractive," concludes Accenture.

The Disruption Has Already Begun

According to Accenture, many banks have already begun losing their customers to digital disruptors. The survey showed that customers acquired 34 percent of traditional banking services such as CDs, money market accounts, personal and auto loans and even new checking and savings accounts from institutions other than their primary bank.

Source: 2013 Accenture Retail Banking Survey

While traditional players have the innate advantage of extensive branch networks that the customer still says they value (nearly 60 percent of new product sales are still closed in branches), these same players should be concerned about the the transition to an online sales environment.

The growth rates in online sales since 2012 are strong in several categories, with online auto loans growing from 11 percent to 21 percent in the past year, online sales of mortgages rising from 15 percent last year to 25 percent in 2013 and sales of personal loans through the online channels jumping from 8 percent to 24 percent in only one year.

Source: 2013 Accenture Retail Banking Survey

Banking Innovation: Not Made in the U.S.A.

For the third year in a row, I attended the BAI-Finacle Global Banking Innovation Awards ceremony that takes place as part of the BAI Retail Delivery Conference. This year's program, which recognizes innovation excellence in the banking industry, drew more than 200 nominations from institutions based in over 30 countries.

The two overriding impressions I have had each year when the finalists and winners were announced were that 1) despite industry challenges, there are amazing innovations happening in the banking industry that impact the daily customer experience and 2) with the exception of Citibank in 2011 (for their 'Smart Banking Branch), no other U.S. bank has ever won the award.

Traditionally, the financial services industry in the U.S. has been slow to innovate compared to many other industries due to compliance and regulatory obligations, dependence on large internal and external infrastructures and the need to focus on security and privacy. In addition, the lack of a formal structure or process for innovation or dedicated funding also inhibits initiatives.

Despite these limitations, the industry globally continues their effort to innovate, with varying degrees of success. Some institutions are recognized regularly for their efforts, with some regions (Asia Pacific) being hotbeds for new ideas and innovation. In addition, social media banking innovations are being found in places like India, Brazil and Nigeria.

The Efma and Infosys Finacle sponsored study, Innovation in Retail Banking: Simplify Technology to Innovate provides a good perspective on global innovation trends, ways banks can overcome some of the barriers to innovation and why some banks have been so successful in their efforts. This year is the fifth year of the study and it appears that banks worldwide are increasing their investment in innovation and beginning to structure organizations in a way that is more conducive to innovative practices.

While defining innovation continues to be a challenge, examples of new ideas globally illustrate the need for banks to measure not only against domestic competition but also against global standards. The key findings of the study were:

• More banks have an innovation strategy: 60% had a formal strategy in 2013 vs. 37% in 2009.
• Investment in innovation is increasing: In 2009, more banks were decreasing innovation investment than increasing. Today, 77% of banks say they are increasing investment vs. 5% decreasing (personally, I am concerned about the definition of innovation investment in this study).

Is Your Bank Ready For Customer 3.0

The banking industry is in the midst of a significant shift in customer behavior fueled by new channels, new competitors and new shopping behaviors. Today's customer is hyper-connected, highly informed and demanding a highly personalized approach with regards to communication, product development and customer service.

These customers cannot be defined by a specific age or income category or geographic parameter, but by their ability (and desire) to adopt and apply new technologies to meet their banking needs.

Say "Hello" to Customer 3.0.

Customer 3.0 begins their bank and credit union product shopping experience at their desk, in their car or on their couch, relying on friends and family reviews and published reviews across social media channels. Instead of walking into a local branch office and sitting down to open an account during banking hours, these customers purchase their banking services much like they purchase music, books or other products . . . online, 24/7.

As Brett King highlighted in his book, Bank 3.0, the new customer doesn't 'go to' their bank or credit union or rely on a physical distribution network. Banks and credit unions need to find and effectively engage customers who are mobile-first and have vast choices and a 'want it now' attitude. This paradigm shift in the balance of power between banks and the customer positions Customer 3.0 as a power player who is firmly in charge of their personal buying process.

To find and engage with Customer 3.0, financial institutions need to transform their back office and delivery networks and begin to think like the new customer. They need to understand that the competition is not just other traditional banks or even the digital-first 'neobanks'. Instead, we are competing across all of the touchpoints used by Customer 3.0, where experiences are shaped by the latest in retail, gaming, search and mobile technologies.

In a just released research report, Say Hello to Customer 3.0, Accenture discusses the transformation of the banking customer over time and the need to move from being a financial facilitator to becoming a part of the ecosystem where Customer 3.0 interacts. The report also discusses the need to move from mass marketing techniques to a highly personalized approach that takes advantage of both structured and unstructured data to improve the overarching customer experience.

Defining Customer 3.0

Unlike the customer of the past, Customer 3.0 is not defined by traditional demographics like age, income, geographics or gender. Instead, they are defined by the way they leverage new technologies to meet their individual needs. Digitally astute, mobile-first and socially connected, Accenture found Customer 3.0 to have some generally common attributes. I provide my take on what these attibutes mean to bank product managers and marketers:

• Highly Informed: Customer 3.0 leverages the information available on the internet more than any previous generation. They use comparison sites and associated apps to gather insight about the banks and products they want to purchase before a bank even knows they are shopping.
  
  The change in bank shopping behavior was discussed in my previous post, Digital Shopping Has Transformed the Bank Purchase Funnel, and more generally in the Accenture report, Energizing Global Growth: Understanding the Changing Consumer. Customer 3.0 starts (and sometimes finishes) their bank shopping experience in the digital world.
  
  My Take: Traditional media is no longer enough for acquiring or cross-selling the new customer. The importance of digital marketing tools, such as retargeting, must become part of ever bank and credit union marketers tool kit.

An Interview With Chris Skinner on Building a Digital Bank

It is becoming more and more difficult for traditional banks to compete in an increasingly digital marketplace. With most bank systems stuck in the last century, the conversion of legacy technologies to new platforms with total reliability, security and resilience is a massive challenge.


How can today's banks evolve to a new model of servicing and processing, where the mobile internet allows consumers to bank wherever and whenever they want using an increasing array of devices? How can banks leverage their existing foundation to compete with new and nimble mobile-first competitors?

I had a chance to speak to Chris Skinner recently about his perspective on the evolution of banking, the emergence of new competition, winning the mindshare of an increasingly connected consumer and on the release of his newest book, Digital Bank: Strategies to Succeed as a Digital Bank (available on Amazon for $9.99 for the Kindle version or $17.99 in paperback).

Best known as an independent commentator on banking and the financial markets through the Financial Services Club blog and Chair of the networking forum The Financial Services Club, Chis is the author of several previous books covering everything from emerging regulations to innovation and new currencies. He is also Chief Executive of Balatro Ltd, a research company and a regular commentator on BBC News, Sky News and Bloomberg on banking issues.

In reading an advance copy of Digital Bank, I found that Chris provides a great overview of the digital revolution in banking from channels to systems to emerging currencies. He also provides in-depth analysis of the how incumbent banks such as Barclays to new start-ups such as Metro Bank in the UK, Alior Bank in Poland and FIDOR Bank in Germany are building for a digital future.

As several noted fintech followers mention in online reviews of this book, Digital Bank is the most recent must-have for anyone wanting to help their organization stay relevent in banking or for businesses wanting to better understand the impact of digitalization on the marketplace. 

What inspired you to write this newest book?

I've been blogging daily since the start of 2007 at the finanser.com. With the blog, I would write a series of four or five posts on a particular subject, like why branches were the wrong focus, how data is becoming the new banking battleground, why existing banks have challenges, what organizations are innovating in unique ways, etc. These posts were never edited or placed in any sequence, but provided a great foundation for potential chapters in a book. So, I finally got around to taking all of that experience and all those thoughts and personally editing them into a readable, digestible, logical book. 

What do you hope readers take away from your writing?

The overarching theme of Digital Bank is that banks are being fundamentally restructured and challenged by the Digital Age. From physical services through physical branches, we have rapidly become a business that provides digital products through digital relationships. That leap is not happening fast enough, however, as most banks are tied to their traditional operational, technological and physical structures. This book provides a roadmap to take that old bank into the new world, how it can be achieved, proof points as to why it is needed and lessons of what to do and not do. Anyone dealing with digital bank distribution through the mobile, social internet will find it useful.

Banks Sit On Sideline As Tablet Growth Continues

According to PEW Research Center, tablet adoption has almost doubled over the past year and for the first time, a third (34%) of American adults currently own a tablet computing device, including almost half (49%) of those in their late thirties and early forties and a majority (56%) of those in higher income households.

With this platform becoming increasingly important to customers, banks and credit unions can no longer sit on the sidelines and watch as the digital landscape develops around them. Unfortunately, with limited resources, new research indicates that development of native tablet apps has occurred at a snails pace due to limited resources and a focus on developing new smartphone applications.

In a just released report from Celent entitled, Tablet Banking: An Evaluation of Tablet Apps at the Top 13 Banks, it was found that only seven of the top thirteen US Banks have a live iOS tablet app, and only two of the top banks have a native Android app. In many cases, banks are using their online banking platform as the foundation for tablet users or are making adjustments to their web portals for tablet use.

“Consumers are rapidly growing more accustomed to interacting with their financial institution through devices other than PCs,” says Jacob Jegher, Research Director with Celent’s Banking Group and co-author of the report. “Celent believes that tablet banking represents a tremendous opportunity. However, banks aren’t exactly scrambling to release tablet specific apps.”

Unfortunately, the lack of commitment to the tablet user is not a new phenomenon. In May of 2011, I covered this problem in a post entitled, Banks Slow to Embrace Potential of Tablet Computing. 

Tablets Require Special Attention

As part of the Celent study, it was found that many banks remain unclear as to how the channel should be classified. Is the tablet platform an offshoot of online banking? Is the platform better supported by the mobile banking team? In reality, tablets are a unique platform that deserve individualized attention. According to Stephen Greer, Analyst for Celent and co-author of the report, "Tablets take the best of the PC and the best of mobile and combine them into a device that offers functionality, portability and a rich user experience."

Use cases also need to be taken into consideration when working with multiple platforms according to Greer. "Online banking is functional, complex, and a daytime/work activity, while mobile is quick, contextual and on-the-go. Tablets, in contrast, are often leisure devices, catering to casual couch browsing and intermittent time killing." In addition, since many people multi-task with a tablet device (watching TV, etc.), the visual and tactile functionality of the tablet must be leverage to optimize the user experience.

Because of the interactive dynamics of this platform and the large number of device manufacturers and dimensions need to be supported, a larger investment in development and testing is required. In addition, to date, many organizations have had difficulty measuring the incremental financial impact of this investment. This may be the reason supporting this platform has been so slow.

Evolution of Tablet Banking

While the primary emphasis of the Celent report was a very thorough review of each of the top 13 US banks' tablet application(s) with detailed visual support and commentary on each bank's execution, there was also a review of key trends in the tablet banking marketplace. These trends were reinforced by other research done by Mapa Research in March and Fiserv in a report last month.

• Interactive dashboards that leverage the tactile benefits of the tablet
• PFM tools that add value through unique visualizations of financial insights
• Social media integration beyond customer support and promotion
• Unification of devices to provide common looks for basic functions
• Easily accessible insight such as balances, ATM/branch locations, etc.
• Focus on simplicity using photo capability for account opening, mobile deposit and bill pay
• Speech recognition to minimize keystrokes and improve user experience
• Enhanced security potentially leveraging biometrics

From Free to Fee: Monetizing Mobile Deposits

Is your mobile banking channel a cost center or a profit center?

If your answer references that your mobile channel is 'saving you money' by diverting transactions from more costly channels, then I need to ask you how much you have reduced your CSR team, your teller staff and/or closed your branches as a result of mobile banking use?

You can generate revenue from your mobile channel, however, by building new pricing models that include fees for value-added services. As part of a new monthly series, 'From Free to Fee', I will be discussing revenue opportunities from several emerging financial services beginning with today's post on mobile deposits.

I am not the first to propose that banks and credit unions take a harder look at mobile banking from a revenue perspective. In fact, in May, 2011, Jim Bruene, publisher of the Online Banking Report and the NetBanker blog and founder of Finovate, proposed that new pricing models could propel online and mobile services to the next level in his Online Banking Report entitled, 'Creating Fee-Based Online Services'. He stated, "Unlike the $35 debit card overdraft fee, there are rational and understandable reasons for charging fees for value-added online and mobile services."

In his report, not only did Jim provide an historical perspective as to why and how banks and credit unions continually end up giving away their services, he provided 33 different services that could generate a fee and offered a perspective on the acceptance level by eight different customer segments.

In my post, I am going to try to tackle the opportunity for charging a fee for mobile deposits . . . even if your institution currently does not charge for the service. I will be referencing several research reports to provide rationale, especially a recently released pricing optimization study produced by Market Rates Insight entitled, Growth and Revenue Potential of Emerging Financial Services. This 168-page study covers 13 different emerging financial services, with insights into fee optimization, targeting, institutional differences and bundling options (I reviewed this study in a recent blog post).

I will also provide implementation and marketing recommendations based on my travels across the country and my work at New Control Direct and Digital. 

Note: A audio podcast of a 'Breaking Banks' interview by Brett King of Jim Marous and Dr. Dan Geller from Market Rates Insight around how and why banks should generate revenues from value added services is available for download here.

Banking Leaders Discuss 2014 Strategic Planning Priorities

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As we enter the planning season with a marginally better economy than last year, banks and credit unions are faced with margin compression, high operating expenses, new competitors and channel disruption that challenge even the most efficiently run organizations.

To assist with this year's strategic planning process, I asked some of the foremost global leaders in the banking and credit union industry to provide thoughts on what they believe are the 2014 strategic planning priorities. This blog post is a companion to the post done at the beginning of the year regarding trends expected in 2013.

Understanding that each financial institution and market is different, it was interesting the uniformity of priorities offered to bank and credit union management by the more than 30 industry leaders I interviewed for this post. And while the ability to execute against these strategic priorities may be impacted by size of organization and other dynamics, there was a consensus among those who I spoke with that 2014 may be one of the most important planning cycles ever.

Enhance the Customer Experience

Improving the customer experience was the foundation of almost all of the responses I received around 2014 strategic priorities. Whether we are talking about branch reconfiguration, mobile banking applications, back office operations, etc. banking industry leaders believe an improved customer experience is the key to growth. 

As was said by Mary Beth Sullivan and the team from Capital Performance Group in their May/June Newsletter, "Many banks have a long way to go to get the basics right, so banks and credit unions should focus first on the basics. Once the basics are humming, ask yourselves: What can we do to be sure that our customers are better off banking with us than with our competition? What will make our customers lives better? How can we help them solve specific problems they are dealing with? Answers to these questions will define the experience you seek to create."

Beyond 'the basics', other specific strategic initiatives were recommended by Steven J. Ramirez, CEO of Beyond the Arc. "Developing a proactive complain management process that goes beyond regulatory requirements can drive new customer experience projects", says Ramirez. He also believes financial institutions need to determine how they can be a finger swipe away from providing guidance and support through mobile devices.

Financial industry futurist and blogger Scott Bales believes bankers need to get out of the office and talk to real customers, developing empathy for their problems, behaviors and desires if they want to develop offerings that align with the needs of the market. According to Bales, "The goal is to build experiences, not products".

Sankar Krishnan from Sutherland Global sees customer experience as the 'X factor' across all channels and interactions the customer has with their financial institution. Comparing what banks need to strive for with customer experience leaders Apple, Amazon and Quicken Loans, Krishman believes banks need to excel at aligning people, process and technology. 

Sam Maule from Carlisle & Gallagher Consulting Group believes that recent start-upssuch as Moven and Simple (and perennial cx leader USAA) are the best at visual engagement and customer experience. He quoted one of his banking clients as saying, "I would pay $500K for ONE great user experience designer. FSI's are horrible at this. We have massive data systems, huge BI tools, and more, but none of that means jack for consumers if there isn't an amazing user experience."

Finally, best selling author and acclaimed management advisor Joe Pine believes banks and credit unions must go beyond providing just checking accounts and loans.

Using Big Data To Predict Online & Mobile Banking Needs

Investing in online and mobile channels was not intended to simply provide additional channels for customers to access their accounts. The promise of reduced costs, increased cross-sales and enhanced service was the objective for most banks.

The good news is that online and mobile channel adoption is very high, meaning that customers are downloading mobile banking apps to their phones and creating online access points at a high rate. Unfortunately, that’s where the momentum has stopped.

Third in a Series on Big Data in Banking

Instead of migrating more expensive interactions to less costly channels, consumers have actually increased their total interactions. “In talking to all types of banks across the globe, we’re hearing a similar story – customers are signing-up for online and mobile banking, but calls into the call centers are not decreasing at any noticeable rate,” says Ido Ophir, head of products at Personetics. “People are still calling with transaction-related questions and even account-level questions.”  

A recent industry report revealed that more than 30 percent of customer service calls were preceded by an online visit. That’s a large percentage, especially when the vast majority of these questions can easily be answered in the digital self-services channels.

Based on the numbers being reported by large banks, while they have several million signed up for digital banking services, less than 10% are using mobile banking in any real capacity each month. So, while banks have done a great job of signing up consumers for online and mobile banking, customers are not fully leveraging what these self-service channels have to offer. The utilization problem actually goes even further - most customers log in to check balances or look at individual transaction details, but only a very small percent use in-depth or multiple features like funds transfers and check image deposits on a regular basis.

Source: Board of Governors of the Federal Reserve System  - Consumers and Mobile Financial Services (March 2013) 

The question is, what’s stopping them?  Is it that:

• They don’t want anything else? . . . Show me the balance and I’m done.
• They can’t find what they’re looking for? . . . They get frustrated and leave.
• The service they want isn’t offered? . . . Only high-level transaction inquiry; no detailed information.
• They aren’t sure what they’re looking for? . . . Expecting better personal guidance.
• They don’t know what to do or where to go? . . . Poor user interface.

Digital Marketing Capabilities Lacking At Many Banks

With continued rapid growth of both online and mobile banking, banks and credit unions need to come up with better ways of marketing through digital channels. 

The technology is readily available, and best practices can be found at companies like Google, Amazon and others, but many banks are still at the infancy stage in terms of digital marketing capabilities.

To succeed in the future, financial institutions need to have a single view of the customer across channels, be equipped with advanced analytics for predicting behavior, be able to deliver offers to customers in real time and effectively integrate social media into the marketing mix.

A just released study by Efma and Wipro Technologies entitled, 'Global Retail Banking Digital Marketing Report', found that only a few banks are prepared for the digital marketing revolution, with the potential for improvement significant at most organizations. This first ever study also revealed that social media is not yet a part of mainstream marketing and is not a key customer interaction channel for most banks.

According to Rajan Kohli, vice president and head of banking and financial services at Wipro, "Digital technologies, social media and the explosion of data are redefining customer engagement models. The CMOs that we spoke with made it clear that the role of the CMO is changing as banks adapt to the development of new channels and capabilities."

For most banks surveyed, digital delivery channels were seen as complimentary to branches, being more important for processing transactions than for customer service and advice. With this transition across channels, it is believed interactions will be more frequent, insight collection will be more prolific and communication opportunities will be more direct.

Migrating Banking Customers to Digital Channels

Today's banking customer can interact with their financial institution through more channels than ever, and the channels selected can have a significant impact on bank revenues as well as customer satisfaction. 

Gone are the days when a customer did all of their business in a branch. Today, most customers use multiple channels to research products, open, use and manage their accounts, resolve issues and receive notifications.

The key for banks is to determine the optimal channel mix for each customer that will maximize revenue (or reduce costs) without significantly reducing customer satisfaction or engagement.

To measure these impacts, the Gallup organization recently completed research on how customers prefer to interact with their bank for 14 of their most common needs. They also evaluated the difference between channel preference and actual channel use and the impact on satisfaction and engagement when a customer uses a channel they didn't prefer.

While this is some of the most detailed research on channel preference and use, Gallup only evaluated single channel preferences as opposed to researching how a customer may use multiple channels for some transactions (researching providers or services, opening an account, managing an account, receiving account information, etc.). Despite this weakness, the research is still helpful in determining how to best migrate customers to an optimal channel mix.

Financial Impact of Channel Use

Recent regulations that have impacted the ability for banks to generate fee income from retail customers has required banks to rethink their business models and even the customers they serve. In addition, banks and credit unions have had to reconsider the optimal mix of channels their customers use to interact with the institution and to transact their business due to the costs associated with different channels. 

According to a 2010 TowerGroup study, the costs of handling a customer transaction varies widely by channel, from as much as $3.75 for a call agent interaction and $1.34 for a branch transaction down to as low as $.60 for an ATM transaction and $.14 for a mobile transaction. Based on just these numbers, it would seem prudent to move as many customers as possible to automated or digital channels and away from branches and call centers. Unfortunately, it's not that easy.

Essential Online Channel Metrics For Financial Marketers

With evolving technologies and platforms, financial marketers need a clear and comprehensive set of metrics to determine the effectiveness of their online channel. 

Instead of drowning in data and not being able to connect the dots in a meaningful way, here are four metrics that rise to the top and provide the clearest picture as to the selling power of a bank or credit union website.

By Melanie Friedrichs, Analyst for Andera, Inc.

In the Wild Wild West atmosphere of the early internet era, companies raced to slap websites online without thinking too hard about what purpose their website should ultimately serve.  Consumer retail companies found their ROI in online shopping, and their websites gradually evolved to draw visitors in and drive them to checkout.  In contrast, financial institutions focused on expanding eServices, until their websites became little more than portals to online banking. 

In the last few years, we’ve seen institutions start to wise up to a second, essential function of the online channel.  As Joe Swatek from ACTON Marketing said, “Your website has an important SALES function.”  Technology has made it possible for financial institutions to acquire new customers and members and grow relationships completely digitally, and like consumer retail websites aim to sell consumer products, financial institution websites should aim to open new deposit accounts and originate loans.  When thinking about the account opening and lending through the online channel, there are four essential metrics that financial institutions should consider:

1)      Conversion Rate

The single most important metric for a financial institution website is its conversion rate, or the percentage of qualified  unique visitors that begin applications for deposit or loan products.

Before the introduction of online account opening and lending, financial institutions focused primarily on making online banking login as easy as possible, and on providing key corporate information.  The rest of the website really didn’t matter that much, so webmasters cluttered pages with news items and product advertisements from different departments.  Over time, most financial institution websites began to resemble ill-managed community bulletin boards.

Competition for Wealth Management Customers Increasing

At a time when retail banks are finding it difficult to achieve pre-recession levels of growth and profitability, the competition for wealth management business has never been more intense. But while increased marketing and significant monetary incentives are being used to lure customers, recent research indicates that organizational barriers remain that could hamper growth. 

A just published Retirement Plans Trend Report conducted by the direct and digital monitoring firm Competiscan found that retirement rollover direct mail, electronic media and digital communication volumes increased during the second half of 2012 as did the value of offers used to entice customers. While many of these offers came from investment firms, more marketing was done by traditional banking organizations than in the past. 

In 2012, Bank of America was one of the most aggressive wealth management marketers, cross-selling the services of their brokerage unit, Merrill Lynch to current higher value bank customers and prospects.

Bank of America/Merrill Lynch Cross-Sell Mailing (December 2012)