Is there a limit on how much value Banks are willing to give away for free? To return to normalcy, Banks must establish reasonable operating models that meet customer needs while generating respectable returns.
Ron Shevlin recently wrote an interesting article on his blog entitled What Engagement Banking Needs Is REAL Engagement. Ron’s blog post is a reaction and comment to Jeanine Skowronski’s article in American Banker titled What Engagement Banking Needs Is Less Engagement. Both articles are well written and, more importantly, offer keen insights on the challenges facing bankers as it relates to customer engagement. The emerging questions include: What is customer engagement? Why Should Banks and Credit Unions care? How are Banks and Credit Unions performing? How to do customer engagement effectively? What Is Customer Engagement? Real Customer Engagement is only relevant and valued when a) customers want it, AND b) the interaction solves customers’ problem(s). Preferably, the solution offered through the Engagement is proactive with a positive customer experience. To Ron’s point, cashing a check or taking a deposit is not engagement. Nor is a ‘Like’ on your Facebook account because your customer liked the silly cat photo, or a heartwarming story about one the Bank’s or Credit Union’s staff. Engagement can, however, include helping customers with a home purchase, assisting during the selection of insurance product, supporting wealth management activities including investments, trust creation / management, among many other activities. Why Banks and [Read More...]
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...]
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...]
Brett King discusses how customer behavior and technology are changing the future of financial services. The reality will challenge the thinking of traditional Bankers through a discussion of topics including: · Why customer behavior is so rapidly changing, including the four phases of disruptive change; · How community financial institutions and their branches must evolve; · Why checks are rapidly disappearing and cash is next; · Why your mobile phone will replace your wallet in the next 2-3 years; and · How financial institutions must reinvent themselves or become irrelevant
Community Banks and Small Business. A marriage made in heaven… or so many Community Bankers would have you believe. This may have been the case in the past, but does it still hold true in today’s environment? A recent BAI Banking Strategies article - Small Business Still the Charm - attempted to make the case that, Small Business is just waiting for Community Banks to come calling. The article is an interview with Richard Dailey, CEO of the 3-branch, $215 million-asset Apollo Bank in Miami, who asserts that Community Banks focused on small business customers can still do well. While we don’t doubt that Mr. Daily, Apollo Bank and a handful of others may find success, Small Business banking is not as simple as some may believe; and may require significant planning before most of the 6,500 Community Banks deploy additional resources to pursue this segment. We suggest that there are at least 4 reasons for this: Weak Economy Not too many need convincing that the economy is not doing well, with many Small Businesses struggling. Most of us will also agree that Community Banks and Credit Unions are not exactly “risk takers” (contrary to the notion of banking) thus further diminishing the [Read More...]
Financial Institutions – particularly Community Banks and Credit Unions – continue to face significant margin pressure, especially post Reg E and Durbin. Boston Consulting Group (BCG) analysis predicts that Banks can expect a 2% decrease in annual revenues while transaction volumes will increase 9% annually over the next 10 years. McKinsey & Co predicts that Durbin will result in as much as 50% margin erosion, and Oliver Wyman’s 2011 study shows that Reg E has already resulted in a 45% reduction in income, even for Banks not subject to Durbin. Louis Blatt, SVP of ACI Worldwide, in a BankNews article notes that explosion in demand for payments from Consumers and Small Businesses can be a boom for Community Banks and Credit Unions. Digital payments offer Financial Institutions (FIs) the opportunity to compete against new entrants (such as PayPal, Square, Isis and others) who are already causing significant market disruption and applying downward pressure on pricing. Moreover, person-to-person (P2P) transactions and mobile payments offer a unique opportunity for smaller FIs to reassert themselves. Mr. Blatt notes that Yankee Group estimates $1 trillion (that’s with a t) in mobile payments by 2015, while Gartner suggests that mobile transactions will exceed $630 billion. Regardless [Read More...]