Tuesday, April 8, 2014

For The Best In Bank Marketing Strategies, Go To The Financial Brand

Effective immediately, all articles from Jim Marous appear in the Retail Banking Strategies section of The Financial Brand

Many of the most popular articles written for Bank Marketing Strategy in the past are already migrated to the new location. By late June 2014, all of the remaining content from Bank Marketing Strategy will be available at the new location. 

If you are a subscriber to Bank Marketing Strategy, you will be receiving an email newsletter every other week containing all of the articles I have written over the previous 14-day period (eventually this will be a weekly newsletter). 

If you are not a current subscriber, but would like to become one, go here.

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Friday, April 4, 2014

Bank Marketing Strategy Joins The Financial Brand

Beginning today, Bank Marketing Strategy will be known as Retail Banking Strategies and will become part of The Financial Brand.

Go to the new site

When I launched Bank Marketing Strategy over four years ago, the financial services industry was a lot different than it is today. We were in the middle of a huge financial crisis, the first iPad was just introduced, and banking customers were still more likely to go to branches than to bank on mobile devices.

My website began as a quest to better understand social media and content creation, with early posts generating less than 100 page views. Today, most articles published are viewed by more than 5,000 people, with the most popular article generating more than 35,000 page views. Boy, have times changed. And my website has evolved as well.

For the last two years, I’ve been talking with Jeffry Pilcher, publisher/founder of The Financial Brand about ways we could partner and work together. After careful planning and months of preparation, I’m pleased to announce that The Financial Brand will be my new publishing home.

Subscribe TodayEffective today, I’ll be sharing my insights at the Retail Banking Strategies section of The Financial Brand. Articles from my this site will be moved to the new location as quickly as possible (it is a manual process). The most popular articles have already been migrated, with the complete transition expected by June 1. Until articles are migrated, they will still be available on Bank Marketing Strategy.

By combining forces, we will be able to dig deeper into the opportunities and challenges banks and credit unions face. While The Financial Brand will continue to deliver the marketing, branding and advertising coverage you’ve come to expect, my Retail Banking Strategies section will provide a deeper level of analysis and perspectives into the issues confronting CEOs, CMOs, COOs and retail bankers at financial institutions around the world such as:

  • Distribution strategies
  • Customer experience management
  • Online and mobile strategies
  • Payments
  • Retail banking technology
  • Product development
  • Innovation
  • Sales/marketing strategies
As in the past, my Retail Banking Strategies section will combine my personal views and analysis with guest posts from some of the brightest minds in the industry. I will also continue to include crowdsourcing articles that provide views from dozens of financial industry followers worldwide.

I want to thank all those who have read and shared the hundreds of posts I’ve written over the last four years. Your loyalty and readership has transformed my modest website with humble beginnings into one of the most popular digital publications in the industry, with over 1 million pageviews annually. Without your continued support, the opportunity to launch Retail Banking Strategies at The Financial Brand would not have been possible.

I also want to thank the many people who have been instrumental in my growth. To Brett King, Ron Shevlin, Chris Skinner, Matt Wilcox, Deva Annamalai, Rob Findlay and Scott Bales, and Bradley Leimer, I offer you my deepest gratitude. You are some of the foremost visionaries in the financial industry, and I consider myself the fortunate beneficiary of your insight and friendship.

To the many bloggers and tweeters who I communicate with regularly, your continuous support and insight is also valued beyond measure.

And most of all I’d like to thank my wife, son and the rest of my family. If it weren’t for their patience as I write on weekends and late at night, their confidence in me and their ongoing encouragement, I wouldn’t be where I am today.

Monday, March 31, 2014

10 Ways iBeacon Can Improve Banking Sales & Service

At a time when banks and credit unions are trying to improve the economics of branch banking, iBeacon could deliver a personalized digital sales experience as soon as the customer enters a branch office.

iBeacon, working in conjunction with Bluetooth Low Energy (BLE), can integrate the physical and mobile channels, enabling a bank's mobile app to deliver highly tailored digital promotions, coupons or offers directly to the consumer's smartphone when the customer is in the general vicinity of an office, at any specific location within an office or at an ATM.

There are already more than 200 million iBeacons in the form of phones in our pockets. Google has included BLE into the Android 4.3 and other recent phones. Apple has been including BLE in their devices since the iPhone 4, meaning that every iPhone from the past two years is an iBeacon in itself. More importantly, standalone low cost iBeacons ($40 - $100 each) can be placed in physical branch locations, linking the bank branch with consumers' smartphones.
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iBeacon technology is designed to deliver continuous content based on the precise location of a customer within a branch, allowing for highly relevant messaging or special offers on products to be sent to smartphone users at the exact time and place they are most useful. This immediacy is a big advantage over other technology like NFC or QR codes that are either less accurate or require additional steps by the customer.

In order for iBeacon to work in banking, customers must first install the mobile app of the bank they are visiting and opt-in for personalized promotional alerts. By providing the bank access, the bank could track activities performed both online and in the branch in the past to customize both mobile and in-person communication the moment they step inside the branch.

Consumer Acceptance of In-Store Alerts

While there is virtually no research on the acceptance of in-store alerts by financial institutions due to the current lack of use by banks, there is positive response from consumers when in-store alerts are used by retailers. According to a study of 1,000 smartphone users commissioned by Swirl, 67 percent of consumers reported having received shopping-related push notifications on their smartphones during the previous six months. Of those, 81percent said they read or opened these alerts most of the time, and 79 percent made a purchase as a result.

The research also found that the alerts delivered must be both relevant and valuable from the customer's perspective. When asked what caused them to ignore mobile push notifications;

  • 41 percent said they were not relevant to their interests or location
  • 37 percent stated the offers did not provide enough value
  • 16 percent fount the alerts to be annoying
  • 6 percent did not opt-in to receive the notifications
It is clear that the lessons learned in the retail world apply also to the world of banking. While iBeacon technology can provide the power to deliver highly relevant digital content and offers personalized to the customers' location and banking relationship, the use of these alerts must be used judiciously. 

In both retail and banking, privacy remains an ongoing concern for consumers, especially when disclosing their smartphone's location. The good news is that 77 percent of consumers said they would be willing to share their location information, as long as they received enough value in return. An opt-in process helps to establish this trust and consent.

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Wednesday, March 26, 2014

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

Subscribe Today 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.
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Monday, March 24, 2014

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.

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Tuesday, March 18, 2014

Retail Bankers Unprepared For The Future

At a time when powerful forces are disrupting the retail banking industry, financial services executives agree that a transformation of the banking landscape is inevitable. Unfortunately, while they agree on the priorities that are integral to success in 2020, fewer than 20 percent feel prepared to address these priorities.

In a survey of 560 executives from leading financial institutions across 17 markets entitled, "Retail Banking 2020: Evolution or Revolution," PwC  found that 90 percent of financial services executives agree on the priorities that are the foundation for success in 2020, yet only a fifth (20 percent) feel well-prepared to address these priorities despite the fact that nearly all (96 percent) believe that a fundamental transformation of the banking industry is inevitable.

"Growth remains elusive, costs are proving hard to contain, returns remain stubbornly low and regulation is impacting business models and economics," said John Garvey, U.S. banking and capital markets leader at PwC. "Simultaneously, the evolution of technology and heightened customer expectations combined with the emergence of disruptive competitors creates new pressure to deliver higher levels of service at a time when value and trust in the sector is at an all-time low. Surviving and succeeding in this environment may require a fundamental rethink in approach."

Today's Challenges

The impact of growing and changing regulations is the primary challenge for retail banks in the U.S. (47 percent) and Europe (40 percent), where banks are trying to stop seeing regulations as a burden and hoping to weave compliance into the fabric of their operations.

In the U.S., attracting new customers (35 percent) and increasing profitability (33 percent) ranked second and third respectively, aligning with the hierarchy of investment priorities (56 percent regulatory compliance, 46 percent enhancing customer service and 30 percent implementing new technology).

Source: PwC Banking 2020 Survey
Nearly all respondents (97 percent) view innovation as a critical driver of growth – with companies who consider themselves innovative predicting 62 percent growth over the next five years, nearly double the market average of 35 percent and triple the 21 percent for the least innovative companies.

Despite understanding the importance, only 10% of CEOs view their organizations as innovation leaders. Further, 64% of CEOs agree that neither innovation nor operational effectiveness are dominant – and are looking to succeed at both.

PwC believes executives recognize they need to do things differently. According to the study, over 50% are planning to enhance their internal capabilities to foster innovation, and to create innovation management teams across business units. There is also a recognition that partnerships and third-party relationships may be the best way for banks to reap the benefits of innovation.

In the U.S., the primary areas mentioned for innovation were products (43 percent), customer interfaces/channels (60 percent), core platforms (50 percent) and customer need identifications (40 percent).

Finally, nearly three quarters (71 percent) of U.S. retail banking executives consider non-traditional competitors a threat, significantly higher than executives in Asia (42 percent), where more view them as an opportunity for partnering.

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Monday, March 17, 2014

Bank Switching Increases As Consumers Look For Better Mobile Capabilities

After a period of relative stability, the primary bank switching rate increased by more than 40 percent in late 2013, with 60 percent of smartphone/tablet users reporting mobile banking capabilities as being either "important" or "extremely important" in their decision to switch.

After relatively stable switching rates since the financial crisis, the number of consumers switching primary banks jumped from 7.1% in the first half of 2013 to 10% in the fourth quarter of 2013 according to the "Mobile Financial Services Tracking Study" from AlixPartners. This is the highest rate of switching since the end of 2008.

The highest incidence of primary bank switching was evident among millennials, where the annual switch rate approached 20 percent. The rate of switching quickly drops for older segments of the population, with baby boomers and seniors switching primary banks at low single figure annual rates. 

% Who Switch Primary Bank in Past Year
Source: AlixPartners (March, 2014)

% Who Switched Primary Banks in Past Year by Age
Source: AlixPartners (March, 2014)

Among younger consumers, technology and innovation was of greatest importance, with the reasons for switching primary banks including:
  • "My previous bank didn't offer the level of technology/innovation that I wanted"
  • "My previous bank didn't offer the online services that I needed"
  • "My previous bank didn't offer the mobile services that I needed"
For older consumers, the primary reasons for switching were because of a bad customer experience or because of a move, new job, etc.

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Thursday, March 13, 2014

Millennials Find Banks Irrelevant

A three-year study from Scratch, an in-house unit of Viacom, found that a third of millennials believed they won't need a bank in the future. These millennials, defined as those between ages 18 to 33, also ranked the top four banks in the "ten least loved brands" and would rather go to the dentist than to their bank.

Is this surprising? This segment of the population has grown up in an era that saw trust in banking erode due to the financial crisis and a near stagnant economy. This is also a period when new technology has enabled firms like Simple, Moven, Square and PayPal to be more relevant with a generation that would rather handle finances on their phone than in a branch.

Here are some of the findings from the Millennial Disruption Index:

  • 53% don't think their bank offers anything different than other banks
  • 1 in 3 say they are switching banks in the next 90 days
  • 71% would rather go to the dentist than listen to what their banks are saying
  • 33% believe they won't need a bank at all in the future
  • Nearly half are looking for tech start-ups to overhaul banking
  • 73% would be more excited about a new offering from Google, Amazon, Apple, Paypal or Square than from their own bank
These beliefs are coming from the largest generation in the U.S. (84 millions) with a new found purchasing power of over $1.3 trillion that represent the vast majority of new home buyers. They are far more tech savvy than previous generations, use their mobile devices continuously, look for deals in every buying category and are connected through multiple social networks.

According to the TD Bank Financial Education Survey, many millennials look to their parents and friends for advice on financial services and many still rely on their banks. Ninety percent use online or mobile tools for everyday banking activities, with 57 percent saying they used mobile banking more frequently than last year.

It is clear, however, that banks are having a difficult time keeping up with the needs of this segment. While banks spent time improving the online banking experience, millennials had already moved to mobile devices for communication, transacting, entertainment and information. The industry's response, for the most part, has been to provide mobile access to online banking platforms. Only banks built for the mobile device like Simple, Moven, GoBank, Fidor, mBank, Soon and Hello seem to see the future.

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Tuesday, March 11, 2014

9 Secrets to Building Customer Engagement in Banking

Virtually every bank and credit union has the acquisition of new customers as a top priority for 2014. But generating a new account is only the beginning. To generate near-term profitability and long-term relationships, the new customer must become fully engaged. 

Customer engagement can not be achieved in a day, week or a month. It is the foundation of a relationship that includes trust, dialogue, a steady growth in service ownership and a growth in share of wallet if done correctly. The alternative to focusing on building customer engagement is a relationship that does not meet its full potential or customer attrition.

According to Gallup research entitled, The Financial and Emotional Benefits of Fully Engaged Bank Customers, the tangible benefits of a fully engaged customer that is both attitudinally loyal and emotionally attached to the bank include the following:
  • Increased Revenues, Wallet Share and Product Penetration: Customers who are fully engaged bring $402 in additional revenue per year to their primary bank compared with those who are actively disengaged, 10% greater wallet share in deposit balances and 14% greater wallet share in investments. Fully engaged customers also average 1.14 additional product categories with their primary bank than do customers who are 'actively disengaged'.
Source: Gallup (2014)
  • Greater Purchase Intent and Consideration: An engaged customer not only holds more accounts at their primary bank, they also look to that same bank when considering future needs. At a time when so much of the shopping process is done online, improving your bank's chances of being in the customer's consideration set is important.
  • Becoming a Financial Partner: Less tangible, but no less important, the Gallup research showed that an engaged customer builds a bond with their bank or credit union that every financial institution would covet. According to the research 54 percent of engaged customers strongly agree that their bank helps their financial dreams come true and a similar percentage believe their bank makes their life more enjoyable. Most importantly, 71 percent of engaged customers say they will use their current bank for the rest of their life.
Here are the secrets to setting the foundation for strong customer engagement:

1. Improve Acquisition Targeting

Customer engagement begins before a new customer even opens an account. With today's depth of data and processing capability, it is possible to find new prospects that are similar to the best customers who already have accounts at a financial institution. By building acquisition models that look at product usage, financial behavior and relationship profitability, opening accounts that have limited potential for engagement or growth is reduced.

Beyond demographic, financial behavior and product use modeling, geographic modeling is also important since the strongest potential trade areas are not always clearly defined by branch radius mapping. 

2. Change the Conversation

One of the key elements of building an engaged customer relationship begins with the conversation during the initial account opening process. To build trust, the conversation must focus on making sure the customer believes that you are genuinely interested in getting to know them, are willing to look out for them and that, over time, you will reward them for their business/loyalty.

This early conversation needs to focus more on capturing insight from the customer and discussing the value different products and services will have from the customer perspective as opposed to simply discussing features. The goal is to illustrate to the customer that the products and services being sold will meet their unique financial and non-financial needs. 

Some of the insight that should be collected (beyond the basics) includes:
  • Financial objectives
  • Primary financial decision maker in the household (it is often the wife)
  • Communication channel preference(s) 
  • Accounts held elsewhere (balance details are not as important as knowing the category)
Unfortunately, research studies indicate that the majority of branch personnel have difficulty having in-depth conversations with customers around needs and the value of an organization's services. In other words, having a firm grasp of product knowledge is no longer enough. The initial focus should also be on sales quality as opposed to sales quantity. 

Interestingly, some financial institutions have begun utilizing iPads to collect insight directly from the customer. While seeming less personal, an iPad new account questionnaire standardizes the collection process and usually is able to collect far more personal information than the bank or credit union employee is comfortable collecting.

3.  Communicate Early and Often

It is interesting how banks and credit unions set objectives for expanding a customer relationship and engagement and then establish arbitrary rules around communication frequency and cadence. It is not uncommon for a bank to limit the number of 'touches' to one a month or less despite the fact that a new customer has been shown to desire significantly more interaction as part of their new 

In fact, research from J.D. Power has found that the optimum number of communication messages during the first 90 day period from both a customer satisfaction and relationship growth perspective is seven 'touches' across various communication channels.

An example of an onboarding engagement communications plan is shown below. The contacts below don't include additional media such as online and mobile banking messaging, ATM messaging, digital retargeting, etc. It is important to remember that at the very least, an engagement communications plan should include a 'thank you' message within the first 5 days of the account opening (from either as new or existing customer).

FocusMessages SentEmailMobile
Day 1Welcome
& Activation
Welcome Kit
Preapproved Offer
Email CaptureMobile Capture
Day 2Thank YouWelcome EmailWelcome Text
Day 5UtilizationNew Account Follow-Up
'Go With' Service Discussion
Alert Notification
Alert Notification
& Engagement
Branch Phone Check-In
Engagement Letter
Engagement Email
(Direct Deposit/Online BillPay)
Engagement Text
(Direct Deposit)
& Engagement
Engagement Call
Day 30
Engagement Email
Day 45
Utilization Email
Engagement Text
(Mobile Deposit) 
Call Center
Relationship Expansion
Modeled Engagement
Service Email
Engagement Text
Rewards Offer 
Cross-SellCall Center
Relationship Expansions
Modeled Service
Modeled Service

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Tuesday, February 25, 2014

43 Retail Banking Myths


With the financial services industry changing so quickly, it should come as no surprise that many assumptions banks and credit unions believed to be true for years could actually be rendered obsolete. To uncover retail banking myths and provide new realities, I reached out to more than 40 global financial services leaders including bankers, credit union executives, industry analysts, advisors, publishers and editors, bloggers and fintech followers and got 43 myths.

Myth 1. Banks must embrace big data to be successful
Reality: Most banks and credit unions have not fully leveraged insight that is currently available within their firewalls. Account ownership, demographics, product use and other behavior data should be used for offers and communication before adding unstructured data from outside the organization.
Data analyst from $20 billion bank

Myth 2. The majority of consumers prefer to open "important" accounts in the branch.
Reality: When deciding what channel to use, consumers weigh a number of factors (eg. reliability, speed, safety, convenience, time of day, cost, previous experience, brand perceptions, etc. etc.)
Jim Bruene, Editor & Founder The Finovate Group | Online Banking Report | Netbanker blog

Myth 3. New market entrant competition is limited to deposits and payments but lending is safe.
Reality: Over the past five years, emerging Online and Independent lenders, many of whom did not exist during the depths of the Credit Crisis, have stolen 10% market share away from primarily the midsize / regional banks in the US.
Wayne Busch, managing director of Accenture's North America Banking practice

Myth 4. The branch is dead. 
Reality: It's not even on life support. There is a place for a brick and mortar experience albeit with fewer bricks and less mortar. We need to rethink the branch model and experience, but bankers will be offering a strong physical (and digital) presence for decades to come.
Bryan Clagett, CMO, Geezeo

Myth 5. We need to excel in omnichannel banking
Reality: There is no such thing as a channel. Our objective should be to ensure a consistent digital approach across the whole customer engagement without thinking about channels. Channels should be considered as digital platforms that provide customer touchpoints.
Chris Skinner, Chairman, The Financial Services Club 

Myth 6. Boomers like the touch of paper.
Reality: While this was true in the past, it is now a myth based on recent research from Celent.
Bob Meara 
Senior Analyst, Banking Group, Celent 

Myth 7. If you don't cross-sell a new customer within the first three months of the relationship, you've lost the chance to cross-sell.
Reality: It is better to focus on engagement (go with) services in the early days of a relationship, but selling additional products is best done later in the relationship when more is known about customer activity, product use, financial goals, etc.
Ron Shevlin, Senior Analyst, Aite Group

Myth 8. Bankers need to at least sell 6+ (or 10+) products to customers to remain profitable.
Reality: More products doesn't mean guaranteed profitability or engagement. More importantly, the focus should be on customer needs and an improved experience as opposed to the bank or credit union's goals of 'more products sold'.
Deva Annamalai, Bank Marketing Technologist, Salt Lake City

Myth 9. Customers are not willing to pay for mobile remote deposit capture.
Reality: Several banks have started to charge for this service without impact to their adoption/usage targets.
Matthew Wilcox, 
Managing Director of 
Marketing Strategy and Innovation, Digital Payment Solutions
, Fiserv

Myth 10. To purchase a complex banking product, the face to face relationship with an expert is irreplaceable.
Reality: The same was said for selling shoes. 
However, this does not mean you will not need any more experts, in combining face to face rendez-vous and remote access or to describe the rules of artificial intelligence software.
Raphael Krivine, 

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Monday, February 24, 2014

Wearable Banking Still Not Ready for Prime Time


In the past year, wearable technology has emerged as the next big consumer electronics market category, particularly in the areas of health and wellness. To capitalize on this growth opportunity, banks and payments firms are investing in wearable product innovation to expand their mobile banking platform. The question remains whether mainstream consumers will find an advantage to adding yet another device to do their banking.

There have been a number of studies conducted on the potential penetration of wearable devices and the acceptance of these devices by consumers. Speculation is a confusing mix of skepticism and hype, as can be expected with any new technology where there is low overall awareness and where viable uses are still being developed.

One of the most interesting studies done on wearables has been done by TNS showing that awareness of both smart watch and headset wearable technology over the past several months is increasing rather rapidly. Unfortunately, during the same period, usage remains almost non-existent and desire to use the technology is actually decreasing.

The decrease in desire to use wearable technology could be caused by the high cost of early wearable technology introductions combined with the lack of strong, unique capabilities of the devices introduced to date.

These findings are similar to a late 2013 study by Harris Interactive, that showed that despite a lack of understanding on potential uses, nearly half of Americans (46 percent) are at least a little interested in owning a wristband or watch device with over one-quarter (27 percent) saying that they would be somewhat or very interested. Fewer were interested in an eyewear device (36 percent at least a little, 20 percent somewhat or very).

An Accenture study entitled, 2014 Digital Consumer Tech Survey also found 52 percent of consumers in six countries were interested in buying wearable technology, particularly for health and fitness reasons, with 46 percent potentially wanting smart watches and 42 percent seem interested in web connected glasses.

As would be expected, younger consumers, males and households with children under 18 were the most interested. Interestingly, there was no significant difference is level of interest based on income, despite the potential high cost of the technology.

The overall sentiment today is that there is still skepticism around the technology, with close to half of those surveyed by Harris believing the devices are just a fad (49%). Slightly fewer than four in ten Americans said they would only be interested in the technology if it could replace something they already use. However, one other finding of the poll is interesting: 48% admitted that they’d like to be able to access smartphone functions without having to dig in their pocket or bag.

Friday, February 21, 2014

5 Lessons Bankers Can Learn From WhatsApp


On the surface, the purchase of WhatsApp by Facebook for $19 billion seems to have little to do with retail banking. Digging deeper, however, the transaction illustrates the most important consumer trends today that bankers must understand or risk becoming irrelevant in the future.

Interestingly, these trends were also important to the sale of Simple to BBVA a day later.

Is WhatsApp worth $19 billion? By traditional financial metrics, the consensus is no. But Facebook is justifying the price by citing WhatsApp’s startling growth, which has been even faster than Facebook’s early years.

In discussions with analysts, David Ebersman, Facebook’s chief financial officer, compared WhatsApp to companies with the potential to grow to 1 billion users. “The primary thing we focused on was how healthy this network is and the pace at which it was growing,” he said. “We looked at other networks that have achieved this kind of scale and that helped provide a framework", Mr. Ebersman said. More than just raw growth, WhatsApp has grown in the key demographic that many believe Facebook has been losing as of late...the Millennials.

So, what lessons can retail bankers learn from WhatsApp...especially when our industry is surrounded by traditional thinkers and legacy systems?

The Shift to Mobile is Seismic

The shift to mobile is unprecedented, with combined smartphone and tablet usage rapidly overtaking the desktop. This mobile trend is driven by increased application-based actions (e.g., communicating on social networks, posting photos, tweeting) and task-oriented web usage (e.g., location-based searches). While Facebook was built for the desktop and migrated to mobile, WhatsApp was built for mobile first, giving the network an advantage in today's marketplace.

This shift presents strategic challenges to banks that also until now have built mobile banking apps starting with the desktop experience. As more users are accessing their banking relationship from mobile devices, it makes more sense to begin development with the form and function of mobile. By doing so, the design and flow of the mobile banking application improves as the user-experience becomes more narrowly defined.

In todays mobile-first ecosystem, we should be developing downloadable mobile banking apps. When we do so, we enable the customer to access their address book, bypassing the need to enter information to make payments, etc. We also can allow access to mobile photo libraries instead of uploading photos from different websites. Finally, the app can more easily push alert notifications directly instead of relying on emails or requiring the customer  to check a website.

A well built mobile banking app is just two taps away, while accessing and using online banking via a mobile device is far more cumbersome. If built correctly, the mobile banking app will also get a prominent icon on the home screen (the mobile version of share of wallet).

Going forward, it is much better to scale the mobile experience to the desktop as has been done by Moven, GoBank and Simple. By doing so, instead of removing online banking functionality for mobile (or developing a separate but parallel mobile site), additional elements can be added if needed to supplement and enhance the user experience on the desktop/tablet.

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Monday, February 17, 2014

Payments Innovations Replace Debit and Credit Cards


At a time when payment innovation seems like an everyday occurrence, it is exciting when new ideas come along that embrace both mobility and simplicity. In separate personal user tests, LoopPay allows me to make contactless payments at virtually every retail point-of-sale terminal while Square Cash enables me to collect money from friends with an email.

Here's why I no longer need a wallet filled with plastic.

When I initially covered these payments innovations in late 2013, both LoopPay and Square Cash drew my attention because of their unique strategies to impact the way people make payments. LoopPay promised to deliver a device that would 'trick' a traditional POS terminal into thinking a card was being used, making virtually every transaction contactless. Square Cash provided a secure method of making P2P payments via email. LoopPay's value proposition was to provide an easier and more secure way to pay merchants while Square Cash aimed to simplify P2P transactions.

Loop Wallet

Several weeks ago, I received my Loop Fob, the first in a series of Loop Wallet 'AppCessories' that would allow me to securely store and organize my payment, loyalty and gift cards in my iPhone while making contactless payments at more than 90% of today's terminals worldwide.

My first impression when I received my Loop Fob was that, while the packaging was very well done and provided a clear overview of what was needed to use the device, the device was larger than I anticipated. Once I began to use the device, however, I found the fob to be convenient while serving to whet my appetite for the soon to be released iPhone ChargeCase.

The Loop Fob Wallet AppCessory Packaging

Loop Wallet Set-Up

Once I downloaded the LoopWallet application from the iPhone store (Android version to be introduced shortly), I simply signed-up for the service and answered a series of security questions within the app. The securitization was complete after I entered an activation token that was sent to my connected email account.

Loading my cards was done using the card reading component of the fob while the fob was connected to my iPhone. A nice feature of the scanning process was the optional feature of adding a picture of my cards, the customer service phone numbers for for each card and an example of my signature. I could also add gift and loyalty cards as well as my drivers license to be part of my Loop Wallet. 

The last step of the initialization process was to designate a default card that would be used when the fob is disconnected from my phone (the majority of my transactions have been with the fob disconnected). The default card can be changed at any time when the fob is connected to the phone. The tutorial below was a great way to understand the application process and usage of the Loop Fob.

Wednesday, February 12, 2014

Tomorrow's Checking: Built For The Mobile-First Consumer


The checking account is the foundation of a customer relationship and has withstood the test of time even as electronic payments and debit cards have replaced checks, online banking has eliminated the need for paper statements and remote deposit capture has made a trip to the branch a rare occurrence.

But all that we have become accustomed to is about to change as we enter the era of the downloadable bank account.

The downloadable bank account differs from today's checking account because it is built specifically for Customer 3.0. This customer manages much of their life on the go from their smartphone, wants access to real-time information about their finances and wants the ability to transact business without checks or plastic. They are the type of customer who pays for their coffee with their Starbucks mobile app, and uses mobile deposit capture instead of going into the bank or credit union branch.

Tomorrow's checking is not just having mobile access to a traditional checking account. It is a bank account built for mobile.

It is a downloadable mobile banking application that provides the basic money storage and money management capabilities of today's checking as well as integrated payments, contextual insight and an overall customer experience not being provided by traditional financial institutions today. It is easy to open and manage using a mobile device, and is similar to the products offered by Moven, Simple GoBank, Bluebird in the U.S. and mBank, FidorHello, CommBank and Soon overseas. Tomorrow's checking may not have any associated plastic card, but may be able to store alternative currencies as was recently announced by Standard Bank.

Both Moven and Simple Provide Exceptional
Mobile Banking Contextual Insights

While the traditional checking account may not completely go away anytime soon, the risk of not meeting the needs of the mobile-first customer is increasing. This is because more new players are entering the marketplace such as T-Mobile's Mobile Money, with the potential of providing a downloadable bank account to a much broader audience than just the underbanked, unbanked and debanked. With either an already established physical presence or no bricks and mortar, these services can be provided at a lower cost than traditional banks.

Combining the attributes of a prepaid card and a traditional checking account, new checking disruptors can provide FDIC insurance, the ability to make direct deposits and electronic payments, accessibility to nationwide surcharge-free ATMs, mobile deposit capture and even branch access, checks and integrated rewards.

Attacking on a different front, players such as Google, PayPal, Amazon, Apple, Isis and others are hoping to control the digital wallet processing component of the payments ecosystem, leaving traditional banks with only depository functions.

Wednesday, February 5, 2014

Banks Can't Close Branches Fast Enough


U.S. banks are closing branches in record numbers as customers are increasing their use of mobile and online banking. Yet, in conversations with seven of the nation's top ten banks, many more branches would be closed if there wasn't concern for public or governmental backlash.

Do banks have an obligation to keep branches open, or will the need to cut costs drive an accelerated wave of new closures?

According to SNL Financial, banks closed a net 1,487 branches last year. That's the highest number of net closures since the research firm began tracking the statistic in 2002. The majority of these closures have been attributed to the increasing use of online and mobile banking as technology enables consumers to manage their accounts, make remote deposits and shop for services more efficiently from desktops or smartphones.

Despite these closures, the number of bank branches in the U.S. still hovers above 80,000 according to the FDIC, making the U.S. one of the highest branched countries per capita in the world. That is why, in an era of sluggish revenue growth and heavy compliance costs, most bankers are trying to close or reconfigure underperforming branches as quickly as possible.

But closing branches involves more than just locking the doors and informing customers of other banking and branching options. In conversations with banking executives from seven of the largest banks in the country, I was told that between 50 percent and 80 percent of all branches that should be closed based on financial considerations are not closed due to potential regulatory or public relations repercussions. With many analysts saying that 25-30% of all branches are unprofitable, this could represent a 'backlog' of well over 10,000 branches nationwide.

In my discussions with these banks, it was mentioned that many of the branches that are not carrying their weight from a revenue perspective are either in lower income markets or in small rural areas where access to an alternative nearby physical location may be limited. This creates a unique dichotomy between a prudent financial decision and the desire to maintain trust and goodwill lost during the financial crisis.

When I asked whether reconfiguring these underperforming branches was an option, many of the executives I contacted said that they were even concerned about negative reaction to replacing tellers with automated kiosks or moving to smaller physical footprint locations. Said one banker, "We're caught between a rock and a hard place with many of the closings we would like to do. The decreasing number of transactions at many of these offices makes them highly unprofitable, but moving to an automated model brings its own issues."

The perceived obligation to keep branches open, and the real estate related costs of closing branches, may explain the rather conservative rate of branch closures to date despite branch transaction volumes that continue to plummet and costs that continue to rise. The same challenge is being faced by banks worldwide, evidenced by a recent U.K. article in The Telegraph asking, 'Do Banks Have a Duty to Keep Branches Open?' Interestingly, more than half the people who responded did not believe banks should be required to keep unprofitable branches open.

Telegraph (UK) Consumer Survey (2014)

Wednesday, January 29, 2014

Simplicity In Banking Is Anything But Simple


It's time to build your simplicity capability.

Financial institutions are starting to realize that simplicity does not only improve the customer experience, resulting in trust and loyalty, but also reduces operational costs from redundant products, processes and dealing with customer complaints.

By Jin Zwicky, VP Experience Design, OCBC Bank, Singapore

How can banks achieve simplicity?

We can find great lessons from smart banking alternatives such as Simple, Moven, GoBank and Bluebird. What is less discussed is how to achieve simplicity in traditional banks that deal with a legacy of old processes, infrastructure and often don’t have luxury of starting afresh. Translating the big intent to achieve simplicity into realization is not easy.

The good news is that realizing simplicity is possible in any bank. As a design practitioner in one of the largest banks in Singapore, I’ve been leading a broad range of ‘Simplicity’ initiatives in the bank, such as website design, mobile banking, advisory tools, investment product communications as well as redesigning physical spaces. All of these initiatives have reaped measurable success in bottom line results and operational efficiency.

We saw double-digit increases in sales in investment and insurance products when we simplified the communications material. We saw 100% adoption rate in using the digital needs analysis tool in our top branches after we simplified the tool. We increased customers’ satisfaction in our account opening experience by simplifying the system. Finally, our simplified website was not only listed as The More Gorgeous and Simple Banking Website, but also we could save about 0.5 million dollars per year by reducing the number of pages in the website.

From years of my simplicity journey, I came to believe that ‘simplicity’ is not just a project. It is not just a team of simplicity specialists. It is a capability that we have to cultivate! Furthermore, it is an organizational culture that we have to create in order to achieve simplicity.

I came up with the following framework to illustrate this point.

Sunday, January 26, 2014

How Will Banks Respond if Apple Becomes Mobile Payments Player


According to a report in the Wall Street Journal, Apple is gearing up to roll out a new payments system for physical goods and services beyond the walls of it's Apple stores.

If true, Apple would leverage the iTunes payments system, credit card data already on file for more than a half million consumers, and recent patents to become a big player overnight.

How will banks or credit unions respond? 

A new report claims that Apple’s senior vice president of Internet Software and Services, Eddy Cue, “has met with industry executives to discuss Apple’s interest in handling payments for physical goods and services on its devices, according to people familiar with the situation.” The paper also said that online store boss Jennifer Bailey has been re-assigned to a new role where she’s tasked with growing a payment service at Apple.

According to the Wall Street Journal, Apple also spoke to at least five other well-known executives in the payment industry about the position before tapping Ms. Bailey.

These moves come just months after Apple installed new iBeacon payments technology in their stores and allowed for the payment of smaller ticket store items using the iPhone app and without the need to interact with a store employee.

Obviously, if Apple does enter the mobile payments space, they would not be alone. Mobile payments is a highly competitive industry which has yet to develop a uniform standard due to the lack of tangible benefits to the consumer, the processor and the merchant. This hasn't deterred the likes of PayPal, Google, Square, Stripe, Visa, Mastercard and American Express from developing their own mobile payment platforms however.

While a solution from Apple may not require major changes from the customer or merchant as NFC or EMV does, Apple would still need to improve their position as a 'trusted payments partner' beyond what was found in a 2013 Oglivy and Mather's Mobile Shopper survey shown below.

Note: 'Trust' of Apple as a payments provider was much higher for current Apple customers and many consumers didn't view Apple as a payments player at the time of the research.

According to Denee Carrington, analyst at Forrester Research, "Apple is absolutely the sleeping giant in the payments world. They have the capability... they just haven't tied it all together."

Why Enter Mobile Payments

Why would Apple enter the mobile payments battlefield?

First of all, mobile payments is BIG business. According to Forrester Research, 31% of US online consumers who own a mobile phone are interested in or already use mobile payments for in-store purchases, up from 18% in 2011. However, while 61% of US consumers have heard of a digital wallet, only 11% use one.

But that is expected to change. Americans are expected to spend $90 billion through mobile payments by 2017, up from $12.8 billion in 2012, according to Forrester.

Secondly, current payments infrastructure is outdated. As can be seen from the recent data hacking done at Target, Neiman Marcus, Michael's and probably elsewhere, debit and credit cards are inherently insecure. And since most cards in the U.S. still use outdated magnetic stripes as opposed to EMV technology, personal data is relatively easy to steal.

Thirdly, each card in your wallet represents access to an account without real time insight or interface. A mobile-first payment application similar to what is offered by progressive financial institutions like Moven, Simple, and several banks overseas is a much better way to make payments. They allow you to see what is happening with your account in real time, provide instantaneous receipts, allow for interactive money management and have the potential to be more secure.

Lastly, similar to what banks do today, processing payments with a mobile device could enable Apple to charge a nominal processing fee, but more importantly, gather deep payments and behavioral data from customers and build even more brand loyalty.

Wednesday, January 22, 2014

7 Reasons Mobile Money From T-Mobile Should Worry Bankers


The cellular company that promised to shake up the wireless industry, has now disrupted the banking industry by introducing a free way for customers (and non-customers) to keep money in a checking account, make direct and mobile deposits, pay bills and get fee-free ATM access to cash with a Visa debit card.

Not to be mistaken for the future Isis mobile wallet (backed by AT&T, Verizon and others), the T-Mobile Mobile Money solution is the latest in a wave of neobank competitors such as Simple, Moven, GoBank and Amex's Serve. The major difference is that this offering comes with a vast distribution network, an established customer base, significant marketing muscle and more.

When I heard about this newest banking solution, I immediately imagined the buzz in the halls of banks and credit unions across the country. Some financial executives would be acting like it is the end of the world as we knew it, while others would immediately fall into the trap of saying, "It's no big deal". The reality is probably somewhere in between. But there is cause for concern. 

While this is not the same as turning smartphones into mobile wallets, it is a solution offered by a wireless provider that has distinct advantages over traditional banks and credit unions. I would also caution those who see this as "just a solution for the 'underbanked' (definition still under discussion)". I think it could be much more. 

In fact, in some parts of the world, mobile phones have become the de facto way for people to handle day-to-day financial transactions (as opposed to banks). The best known example would probably be Kenya’s M-PESA which is currently used by 20 million people and includes loans and savings products.

So, why should Mobile Money from T-Mobile worry U.S. bankers (in no particular order) . . ?

1. T-Mobile Has an Established Customer Base

Unlike the majority of previous neobank entrants in the market, T-Mobile already has an established customer base to draw from. T-Mobile US provides services through its subsidiaries and operates its flagship brands, T-Mobile and MetroPCS, serving approximately 46.7 million wireless subscribers (Bank of America has 55 million customers).

T-Mobile also isn't new to the personal finance arena. By separating the costs of wireless services and devices, T-Mobile already provides customers the option of financing smartphone purchases. According to T-Mobile, they have facilitated billions of dollars in loans for customer phones (all without charging a penny in interest).

"One of the main reasons we're doing this is to deepen our relationship with our customers," said T-Mobile marketing executive Andrew Sherrard.

T-Mobile's cellular pricing strategy (cheap and with no contracts) should correlate well with the demographics they are initially trying to reach. While there are definitely mass affluent and affluent customers who use T-Mobile phones, an above average segment of their customer base probably includes customers without access to traditional financial services and who are looking for lower prices.

Notice in the website marketing, that the term 'prepaid debit card' is deemphasized in exchange for references to a checking account.

Source: T-Mobile Customer Mobile Money Web Page

Bank Innovation Through Collaboration


Established by two former bankers, the Bank Innovators Council was developed to help financial institutions that may lack internal resources come together to brainstorm and test new ideas that could eventually be shared. Partnerships with Finovate, NextBank, BankersHub and Innovation Agency will hopefully provide additional momentum. 

By JP Nicols®, founder and CEO of the research and innovation firm Clientific, a partner at Bank Solutions Group and co-founder of the Bank Innovators Council.

Bankers and credit union executives have long sought a competitive advantage in a vast sea of largely undifferentiated competitors. For most players, and for most of the industry’s long history, the chief weapons in this war have been scale and localization. Either growing large enough to create economies of scale and/or scope, or trying to corner one or more local markets by being more, well, “local”. A few have even tried to accomplish both strategies simultaneously.

But how will those strategies play out in this new era of financial services? Regulators will not let the very biggest banks get a whole lot bigger any time soon. The top 100 banks in the U.S.— less than 1.5% of the 7,000 or so still around— already control 81% of the loans and 75% of the deposits. Well-capitalized and well-run small and midsize banks and credit unions will certainly swallow up weaker competitors as this quickening consolidation phase that we have all been predicting inevitably becomes a reality sooner or later. But will this truly create any new competitive advantages beyond survival of the (relatively) fittest?

How about the localization strategy of being 'the bank or credit union of '? Let’s set aside the fact that most organizations that proclaimed to be the bank of XYZ were probably not really the bank or credit union of anything outside of their own imagination. In this hyper-connected, hyper-globalized world, being merely local is meaningful to only a steadily dwindled segment of consumers. 

Sure, there are kernels of truth to each of these strategies. Having the scale to spread out increasing infrastructure costs is important, up to a point. And I chose the words 'merely local' for a reason. I think the real word the localists are looking for is 'relevant'. Being headquartered in my hometown is fine, I guess. More jobs for the local economy. But as a customer, what I really want is for you to be relevant to me — and many of the behaviors of the banking behemoths did little to make me feel that way.

Why It’s Different Now

Those basic strategies worked well enough for the last few hundred years, but until recently, the industry was basically undefeated because it won all of its games by default. Sure, we had large banks and small banks, and credit unions, and for a time, S&Ls and Savings Banks; but these were all just slightly different flavors of the same basic model.

Banking as a product and as a service had no real threat of substitution. But during just the last 5 to 10 years, the proliferation of smartphones, tablets, broadband connectivity and connected networks of all kinds have changed the nature of the game. Forever. Just as radio and movie theaters were disrupted by television, which was disrupted by videotapes, which were disrupted by DVDs, which were disrupted by streaming video, the disruption in banking has only just begun.

You can now live your entire financial life off the grid of traditional financial institutions — at least in your direct interactions. They still play a role behind the scenes, but the nameless, faceless utility that merely holds your insured deposits and ensures an efficient transfer of your funds from Point A to Point B is the very definition of a commodity trap.