Banks and Credit Unions are actively marketing Debit Cards without realizing the disastrous consequences including lower engagement, lack of Revenue and ROE
Banks are initiating aggressive customer acquisition programs, and a recent Fed reports helps with the finding that household wealth rose by $3 trillion in the first quarter, to $70.3 trillion. On average, household wealth at the end of the quarter was $613,635, about 11% below the 2007 peak but a sharp rebound from the lows set just a few years ago. That’s the good news… The bad news is that the Net Worth of the older generations has recovered and in some cases exceeded previous peaks, the case is far from the same for the younger generation (those under the age of 40). As can be seen in the chart below, the Net Worth of those under the age of 40 has declined and remained depressed at around $100,000, while the older generations average Net Worth has risen to ~$700,000 for 40-61 year olds and over $900,000 for those over 62 years of age. This information is crucial to Bank and Credit Union executives focused on customer acquisition, customer retention, cross-sell strategies and more generally, value creation for customers and growth / profitability for the Bank. Understanding customer segments is essential. Understanding customer preferences, needs, and wants is a pre-requisite for succeeding [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
As with everything in life, some things are better than others. To some consumers, Coke tastes better than a generic cola. To some car buyers, a Mercedes is preferred to a Honda. To some print store owners, a customer placing a large order is preferred to a customer placing a small order. To some financial advisors, a client with a large portfolio is preferred to a client with a very small portfolio. We ought not be surprised that the preference likewise should hold for customers and members of Community Banks and Credit Unions. That is, a Bank or Credit Union executive, assuming a rationale individual, should prefer a customer / member that is capable, willing and interested in purchasing numerous banking products & services over a customer / member who is interested in just one or two basic products. To help us understand customer segmentation, FIS Global recently published an article entitled Attracting and Retaining Gen Y and Gen X, in which they discuss some of the demographic traits of the Gen Y population. One of the most interesting findings is provided in the following graphic: Not surprisingly, FIS found that Gen Y has high penetration of credit card debt and [Read More...]
Community Banks and Credit Unions are doubling down on their efforts to grow the proportion of Gen Y in their customer base. We find this strategy puzzling given the mountains of data that suggests Community Banks and Credit Unions should focus on the affluent (read here and here), rather than investing resources on Gen Y which is likely to results in negative ROI (read here and here). Yet another data point comes from Pew Research Center that notes that Gen Y has been hard hit by the recession and the profound changes in the employment realities. Their February 2012 survey entitled Young, Underemployed and Optimistic provides important insights to businesses that believe that their near-term (next 3 – 5 years) growth and profitability are dependent on Gen Y. Optimism Just 31% of Gen Y say that they earn / have enough to have the kind of life that they want, as compared to 50% Gen X and older. Optimism among Gen Y is registered for 57% who say that they will earn / have enough in the future, although that is not the case today. This level of optimist is more than 3x higher for Gen Y, as compared to [Read More...]
42% of the general public lives paycheck to paycheck according to a recent CareerBuilder survey, but the same is true for only 17% of Affluent consumers. Banks and Credit Unions must strategically focus their marketing efforts on Affluent consumers who are best positioned to help the Financial Institution grow and improve profitability though a mutually beneficial relationship.