Credit Card DM Volume Finally Rises

For the first time in three years, credit card-related direct mail volume increased during last year's fourth quarter according to research recently released from Mintel Corporation.

According to the research, while the volume of credit card direct mail in 2009 (less than 2 billion pieces) was 66% less than in 2008 and far less than the annual level of 7 billion a year experienced from 2004-2007, there was an increase of 47% during the fourth quarter of last year, compared to the previous quarter. Contributing to this increase, Chase increased their credit card mailings by the largest amount – 87% over the same period in 2008. In addition, US Bank's credit card mailings were up 64% over the same period of time, according to the study.

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.

Now's the Time to Build Retirement Dialogue With Your Customers

In yesterday's post, I discussed the significant deposit growth being experienced by major banks and the opportunities and risks that can be associated with an economic environment of uncertainty. An often overlooked opportunity for account acquisition and relationship growth is delivering on consumer's retirement needs.

Now is the best time to reach out to customers and prospects in your market area and position your institution as the safe and secure place to place their retirement assets. And with retirement assets approaching $20 trillion, the opportunity is significant.

Growth in Deposits Presents Opportunities and Risks

The American Banker today had an article detailing the recent trend of low cost deposit growth experienced by the major banks in the fourth quarter of 2009. According to KBW Inc.'s Keefe, Bruyette & Woods, the top 40 banks experienced a deposit growth rate of 8% in the quarter, with only a couple large banks intentionally allowing higher-cost deposits inherited during acquisitions to run off during the year.

Even though interest rates remain extremely low, consumers were still saving at a rate of 4.7% as a percentage of disposable income in November, according to the Bureau of Economic Analysis primarily due to uncertainties in the marketplace and due to the view of banks being the safe harbor for funds accumulated during a time of reduced spending.

Small Business is Big Business

While most banks are spending more time and resources trying to address the needs of small businesses, a large percentage of this segment is still underserved. According to a Javelin Strategy & Research report released last year, about two-thirds of the 26 million small firms don't have business banking accounts.

Smaller companies usually integrate their business and personal relationships or simply open another personal account according to the Javelin report released late last year. That means they may pay lower account fees, but also don't receive cash flow and treasury service attention from a bank's small business sales team, potentially impacting the business' ability to grow.

New Checking Plans Emerge in Response to Reg E

Already experiencing loss of fee income due to lower transactions and lower OD/NSF fees resulting from higher balances, banks are beginning to develop and introduce new checking products that can supplement these lost revenues.

In place of traditional free checking accounts are value-based accounts that allow customers to customize their account for a fee. Features such as identity theft, rewards and even enhanced OD/NSF protection can be selected from a menu of enhancements that allow a bank to replace some of the fee income that already has been lost or will be lost in response to Reg E.

One of the first to build a new array of checking accounts was BBVA Compass which introduced Build to Order Checking more than two years ago.

What Banking Needs to Become

In this quarter's Strategy + Business Magazine, Vanessa Wallace and Andrew Herrick discuss the significant changes in the banking industry over the past few years and how bank's business models, capabilities and practices must change as well. In their very good article, they emphasize that the purpose of banking and the needs of the customer have remained relatively consistent with regards to safe havens for savings and consistent access to credit for investment.

The environment has changed, however, with the competitive landscape changing, the regulations increasing and the public trust eroding. In addition, the times of high growth have ended.

CDs Being Promoted as Alternative to Stock Market

In this period of economic uncertainty and stock market variability, many financial institutions are promoting Certificates of Deposits (CDs) as the safe, predictable alternative. Continuing the theme of 'safety and soundness' that began in late 2008 and early 2009, firms like Citibank, Bank of America, ING and many smaller financial institutions are emphasizing the guaranteed rate of a CD. Taking this product a step further, Ally Bank is promoting a CD with a guaranteed rate but no early withdrawal penalty while Capital One is paying a $100 bonus for deposits to CDs or their High Yield Savings account of $10,000 or more.

I expect the marketing of CDs to escalate in the next couple months as banks try to capture their share of the IRA contribution inflow.

Online Customers Aren't the Only Target for Mobile Banking Services

While attending the 2009 Mobile Financial Services Congress in Miami a little over a month ago, there was a consistent message from almost all of the speakers that a mobile banking customer is less likely to attrite, more likely to use additional engagement services such as bill pay, and less costly to serve.

Interstingly, it was also emphasized that while most banks have promoted the use of mobile banking to their current online banking customers, the real financial benefit is realized when a customer who is not as heavy a user of online banking is converted to the mobile channel. In other words, it makes stronger financial sense to try to segment offline customers and implement a proactive channel migration strategy to convert channel usage.

Banks Beginning to Prepare for New OD Regulations

According to Sherief Meleis, managing director of New York City-based Novantas LLC, the banking industry could lose between $12 billion and $29 billion a year in checking account revenue when new regulations involving overdraft (OD) and nonsufficient funds (NSF) fees take effect. With such an adjustment taking place in the ability to generate fee income, banks are quickly determining how to communicate the upcoming (and still somewhat undefined changes) to their customers, while looking to dramatically restructure their checking portfolio. At last year's BAI Retail Delivery Conference, SunTrust SVP Hugh Gallagher stated, “We’re in an environment where free checking, if not dead, is all but dead.”

What needs to be remembered is that there is still a segment of customers who want access to overdraft services and actually rely on these services when emergencies occur or when debit card transactions are not monitored.

Using Social Media for Financial Services Marketing

As I travel across the country, more and more banks are dipping their toes in the waters of social media. While the banking industry has been slower than most industries to embrace social networking, the tremendous growth in social networks, the need to better monitor and participate in social network conversations that are taking place, and the value of reaching customers and prospects on popular social networking sites has banks using Twitter, YouTube Facebook and other sites. This almost instantaneous communication comes with new challenges for banks, however, including informality of communication, higher customer service expectations and another venue for customers to voice discontent.

Nate Elliott from Forrester Research has decided to research and write a report on how financial services marketers can most effectively use social media. He is hoping to include data on how different types of financial customers engage with social media and is also hoping to collect more insight from the bank marketers' perspective.

He is looking for financial services marketers willing to walk him through examples of how you've used social media, talk to him about how you manage risk and work with your legal and compliance departments, and share with him some of the lessons you've learned in social media marketing. He can be reached at nelliott@forrester.com.

CBA of Georgia to Host Webinar on Onboarding

On February 1, 2010 from 2:00-3:30, I will be conducting a webinar on how to develop or improve your new customer onboarding program. I will be sharing best-in-class examples and findings from close to four years of programs we have implemented with our bank partners. Look for details on the Community Bankers Association of Georgia web site and on this blog.

Chase Bank Resumes Testing of Checking Offers

Chase Bank is again using direct mail to test checking offers from $125 to $200 across the country for the opening of a new checking account by the end of January 2010. These efforts mirror what was being done across the country during 2007, 2008 and early 2009.

Zions Bank Continues to Improve Onboarding Process by Expanding Channels and Touches

Instead of simply sending a single letter to new account openers to thank them for their business, Zions Bank has expanded their onboarding program to include a 30 day 'engagement' mailing and a 60 day 'cross-sell' mailing. In addition, they utilize their centralized call center for follow-up and reach all new customers with email to reinforce the written communication. This integrated focus towards new customer communication has resulted in a significant reduction in new customer attrition and enhanced cross-sales of services.

The New Year Brings New Excitement for Bank Marketing

As we turn the calendar on a new year, our industry seems to be both well placed and at the same time under threat from both internal and external forces. How we respond as individuals, organizations and as an industry may well determine our growth opportunities for years to come.

After a year of budget and human resource cuts, bad economic news, retrenchment and lack of true focus, we must relearn how to be nimble, innovative and most importantly focused in the face of drastic change from non-banks, direct offerings, and everyone with a PC, an internet connection or a mobile phone.

My goal for this brand new endeavor into the world of blogging is to try to keep abreast of as many changes and new ideas in our industry as possible and provide a perspective around the opportunities and challenges from a person who has been in the bank marketing industry for over 30 years. Let me know when you or your bank have seen or done something innovative and I can share it on this blog.

As we enter a new decade, I see an exciting time ahead for those organizations who have the following attributes:

• A focus on the customer experience: A bank I work with used to paraphrase the focus on the customer as, 'know me, look out for me and reward me'. At a time when trust in banks is at one of the lowest points in history, this attention to the customer will be required.
• Leadership support for innovation: As opposed to simply looking for different flavors of vanilla, innovation that produces new ways of creating revenue, customer relationships and cost reduction will separate the winners from the losers.
• A movement from product focus to channel focus: It will be more important than ever to focus on integrated and seamless outcomes across all channels. With product commodization still the norm from the customer's perspective, more and more will decide where to bank by the way the service is delivered.
• Genuine messages and brand articulation: While it will be imperative to focus on the individual customer, your brand, advertising and all communication have still need meaning from the customer's perspective, with an emphasis on financial literacy.

The question is whether you and your bank be a hunter, and aggressively embrace this new way of communicating and doing business, or will it be hunted, and sit back waiting to be consumed?
 
I am definitely looking forward to this new communication opportunity and welcome any thoughts, insights and suggestions as to how to make this forum more valuable for you.