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…]

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    

Dec 072012
Why Community Banks are Ill-Positioned to Serve the Cash-Less

Most Americans have little or no cash.  Most, it appears live paycheck to paycheck.  Schwab’s OnInvesting magazine published a story summarizing the findings of a Bankrate survey conducted in June 2012 which shows that just 25% of Americans have enough cash to support at least 6 months of living expenses. Why is this relevant to Banks and Credit Unions?  Well, for one, it validates other findings that suggest that most consumers hold less than $1,000 in deposits.  But perhaps more importantly, it suggests that the vast majority of consumers are unlikely to be interested or approvable for the vast majority of products and services that Banks and Credit Unions wish to sell. For example, we all recognize that Banks and Credit Unions typically have a good track record in lending to individuals with high credit scores, ample income, and high net worth — the traditional ‘A paper’ credit.  On the other hand, Chief Credit Officers tend to frown upon applications that slip into the realm of ‘B paper’ or below which are the credit ratings occupied by the majority of Americans. The key point – it is essential for Banks and Credit Unions to proactively and deliberatively focus on specific customer [Read More…]

Apr 232012
Payments Offer a Unique Opportunity for Community Banks and Credit Unions to Compete and Win

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…]

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