Bank Branches are Dead. Weight in on our point by point rebuttal to The Financial Brand’s opinion piece purporting to prove otherwise.
The topic of Business Strategy and implications to Customer (Member) Loyalty, Revenue Growth and Profitability are rather timely as Banks and Credit Unions prepare for the Annual Strategic sessions. Specifically related to checking accounts, every Bank and Credit Union ought to be asking questions including: How effective and efficient has the customer acquisition program led by checking account product sales been? How effective is the cross-sale plan that is based on WOWing the checking account customer into additional product sales? How much products have been upsold, on average, to a checking account led acquisition? How much revenue and profit have the checking account led acquisition customers generated for the Bank or Credit Union? Perhaps the experience of your Bank or Credit Union is an outlier, but the data is overwhelmingly and unequivocally negative. That is, checking accounts are effective only at increasing the count of checking accounts (and perhaps the wallets of certain vendors who continue to sell the value of the checking account). 10 years ago, the checking account may have been the gateway to a broader wallet-share, revenue and profit growth, but circumstances have changed and the checking account is a liability – in all senses of the [Read More...]
Do Credit Unions, as a group, understand Business Strategy? The findings are not encouraging based on the survey of nearly 500 Credit Unions conducted by Aite Group. Though the focus of the survey was limited to Credit Unions’ Online- and Mobile-Channel business objectives – the findings give us much cause for concern. The survey found that 88% of Credit Unions believe that Up / Cross-Sell of Existing Members is a key business objective for online offering and 87% believe that online is a key business strategy for Acquiring New Members. So far so good… However, just 27% of Credit Unions believe that Generating Revenue was a key online objective. So, just to restate… nearly 90% of Credit Unions want to cross-sell and acquire new members, but less than 30% are interested in generating revenues! In which case, why bother cross selling and trying to acquire new members? Here is another doozy. More than 90% of Credit Unions believe that a key business objective of their online offering is to Maintain Competitive Parity, while at the same time, 85% also believe that Obtaining Competitive Differentiation is a key business objective. Again – how can you ‘keep you with the Joneses’ and differentiate [Read More...]
Banks and Credit Unions executives continue to be challenged to improve effectiveness of product and service pricing. Never more so is true than when it applies to Checking Accounts – the staple of a banking relationship and the stepping-stone to a deeper Banking relationship. Consumers are Satisfied with their Bank or Credit Union Although many surveys seem to indicate that the vast majority of consumers hold a negative view of Banks and Credit Unions (FIs) and their practices, the reality of consumers’ actions are very different. 88% of consumers are satisfied with their Primary Financial Institution (FI) according to Deloitte’s Retail Bank Pricing survey conducted in August 2012 with over 4,200 checking account customers. Just 7% of consumers expressed some level of dissatisfaction. This figure correlates well to the historical trend of 8% – 10% of consumers who switch their Primary Financial Institution annually. Consumers Disinterested in Paying for Previously Free Products & Services Not surprisingly, most consumers are very sensitive to price increases, especially for products and services that were previously offered at no charge. Given same level of service and same products, consumer reaction to fee increases is … not positive. After all, very few of us enjoy [Read More...]
There has been much debate about Mobile Banking and its ability to create value for Banks. To date, Mobile Banking is all about the promise have generated little or no attributable impact on business performance for Banks – either from revenue generation or via cost reduction. Most recently, Bank Innovation published 21 Reasons Why the Mobile Banking Naysayers Are Wrong which essentially listed a number of yet-to-be hypothetical opportunities that Banks could leverage. And in theory, we agree. However, we have a healthy dose of skepticism that consumers will want to aggregate their financial activities, their shopping and their advisory activities with a single provider channelled via a mobile wallet. There are at least two strategic questions facing Bankers in regard to Mobile 1) Do consumers really need advanced Banking capabilities on their mobile devices? Where is this sense of urgency coming from and why would a consumer choose to utilize Mobile instead of researching and buying more-complex Banking products on their home PC (be that a standard PC or a tablet). 2) How will consumers choose their preferred Mobile Banking provider, if every Bank believes there to be a great opportunity and given that an average consumer utilizes 3 – 4 [Read More...]
Serge Milman, Principal Consultant at SFO Consultants is pleased to present a Free Webinar to Community Bank and Credit Union executives on the importance of Business Strategy to growing revenues, improving loyalty, and enhancing operational performance. Community Banks dominate the industry with 91% of the total institutions, but generate just 8% of the industry’s profits. Intense competitive pressure from traditional and non-bank competitors is exploding with ‘too much money chasing too few good deals’ leading Banks and Credit Unions to sacrifice yields and/or suffer from collapsing loan portfolio both of which result in deteriorating ROE. The panacea is on to find a solution, and many are turning to tactics including serving the un/under-banked, GenY, deploying PFM and P2P capabilities, engaging in the cut-throat game of competition based on price, while some have determined to follow the ‘hope and pray’ strategy. Regardless of the approach, most Community Banks are seeing a deterioration of their value, with trading values (for public Community Banks) and average acquisition multiples (for Community Bank acquisitions) at substantially below 100% Book-to-Value. Deploying tools, capabilities and addressing new customer segments may make sense for some, but does it make sense for all Community Banks? In the landscape of [Read More...]
As technology advanced over the years, more businesses and industries have begun adopting innovative solutions – document management, mobile aps, workflow automation, etc. – to their unique challenges, and electronic signatures are just one of these technologies. Although e-signatures aren’t new – telegraph signatures date back to the mid-1800s – Electronic Signatures in Global and National Commerce, which made electronic signatures as legal as physical signatures, played a big part in increasing the comfort level in adopting these solutions. And since credit unions are certainly not lacking in their own unique challenges, it is not surprising that the most forward thinking of these organizations have adopted e-signature solutions. Meeting regulation and compliance requirements becomes much easier with e-signatures. Electronic signature technology actually enhances security, not degrades it; confidential information is better protected and electronic signatures typically involve passwords, tokens and audit trails for an added level of protection. Printing, shipping and personnel costs are reduced, as are processing times. Member service and business responsiveness are improved. These benefits highlight findings from a recent Gartner report: “Enterprises’ and consumers’ recognition of the benefits gained from adopting e-signature software and services has led to 48% growth in this market in 2011.” The [Read More...]
Cost rationalization and efforts to improve efficiency ratios are important themes in 2012 and likely for the next few years. Much of this effort is likely to focus on the Branch, given that branches and associated branch expenses constitute 60% – 70% (and in some instances much more) of the total cost base for Community Banks and Credit Unions. For this reason, the article published in the BAI Bank Strategies authored by James McCormick, Founder and President of First Manhattan Consulting Group, entitled Branch Consolidations: Handle With Care troubles us. We agree with Mr. McCormick that it is essential for Bankers to understand the challenges and benefits of branch network rationalization, especially in the current environment of weak loan demand, intense competitive threats, transition of sales & service activities into online & mobile channels, and ever growing regulatory burden. There is no doubt that any reorganization, streamlining, and rationalization efforts requires careful planning and execution. However, some of the “concerns” identified in this article may not be relevant in today’s environment, and at a minimum, require further explanation (note: FMCG did not respond to a request the full study): Focus on high-revenue customers vs deposit attrition We concur 100% that Banks, [Read More...]