Sep 162013
Are Checking Accounts a Viable Acquisition, Retention or Growth Strategy?

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…]

Sep 092013
Credit Union Strategic Thinking: Contradictions And Insight

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…]

Aug 192013
Deloitte Warns Banks and Credit Unions to Change (while they still can)

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…]

Jul 192013
Free Webinar: Why Every Bank and Credit Union Needs a Business Strategy

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…]

Jan 102013

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    

Sep 282012
Growth And Profitability Require Competitive Differentiation

How does a Bank remake itself so as to attain the prestige, the following of the likes of Apple, Disney, Harley Davidson, and Starbucks? This is the question Ken Olan, EVP / CFO of a $2 billion assets Victoria, TX based First Victoria Bank asks in his opinion post entitled Mission Possible: Creating a Category-of-One-Bank published on BAI’s Banking Strategies website. There is no doubt that retail banking is highly commoditized and without breaking out of the sameness, retail banking will continue to be plagued by cannibalization from non-traditional competitors and will eventually evolve into what Brett King refers to as ‘Utility’ services. In the article, Mr. Olan posits that “…banks need to start thinking more like category-of-one retailers and less like banks. The great companies of the world innovate more than products and services. They consistently challenge the status quo to create brands of ever greater relevance. Sometimes that means creating a vision to deliver something that your customers don’t even express a desire for.” And I completely agree.  Financial Institutions – particularly Community Banks and Credit Unions – must dramatically reshape virtually every aspect of their business to grow and prosper.   The traditional 80/20 rule is actually 80/2 [Read More…]

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