Many Community Banks and Credit Unions provide a great service to the community in the form of free checking accounts. And many in the Community Bank and Credit Union sector are rightfully proud of their contribution and support of the community. Unfortunately, the big win for consumers results in a huge loss for Banks and Credit Unions which jeopardizes the viability of the very institutions providing the service. The reality is that most consumers do no need or want anything more than a checking account (accompanied by a debit card and perhaps direct deposit & bill pay). These limited set of products require substantial scale before a provider can generate economies of scale to produce a profit; and by definition, this excludes Community Banks and Credit Unions. Because of this, most Community Bank and Credit Union customer relationships result in recurring, non-recoverable annual operating losses. Understanding this, Community Banks and Credit Unions [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 [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, [Read More...]
Banks and Credit Unions would be much better served by focusing their Customer Acquisition programs on profitable consumer demographics. It is not sexy, but it is profitable. Would you rather be profitable, continue to employ your staff, have happy customers (or members) and shareholders; or would you rather rely on the “Built it and they will come” strategy that is 100% guaranteed to fail!?