Profitable Customers – a foreign concept for most Community Bankers?

 Channel, Competition, Cross-Sale, Customer Acquisition, Customer Service, Marketing, Pricing / Rates, Profitability, Strategy  Add comments
Jul 192011
 
ICBA Independent Banker - 2011-06 - Online Bill Pay Usage

ICBA Independent Banker – June 2011 – Online Bill Pay Usage

May 2011 survey conducted by ICBA indicates that less than 6% of Community Banks report that a majority of their customer base uses Online Bill Pay.  In fact, nearly 70% of Community Banks report that less than 20% of their customer base uses the service.

Online Bill Pay is probably the most basic service, after direct deposit, that is marketed by banks to their DDA customers.  Given that the penetration into Bill Pay is so low, then is it any wonder that 80%+ of a typical Bank’s customer base is unprofitable!?

This of course, raises the question of why so many banks are so eagerly spending their limited marketing budgets on acquiring DDA accounts when experience shows that most acquired DDA customers are unable / disinterested in additional products and services offered by the bank.  Instead, Banks should be focusing their marketing budgets on customers who are able and interested in robust banking relationships.

 

Serge Milman

Serge Milman is the Principal Partner of San Francisco, CA based SFO Consultants which provides Strategy, Finance and Operations Management Consulting services. He also the Principal of Optirate – a blog dedicated to growth and profitability strategies for Banks and Credit Unions. Serge can be reached at info@SFOconsultants.com.

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  • http://twitter.com/jmarkarnold Mark Arnold

    Bill payment is one of the most sticky products a financial institution can offer. So why the low adoption rate? It may not just be the marketing: it could be the product. How robust is your bank or credit union’s bill payment product? Also, does your staff use your bill pay product? If your staff doesn’t pay their bills through your institution, then don’t expect them to sell it to your customers or members.

    • http://www.Optirate.com/ Serge Milman | Optirate

      Mark -- you are right that there are many possible reasons for the depressingly low usage rates for BillPay. It isn’t just marketing… it isn’t just product development… it isn’t just pricing… It isn’t just channels… It isn’t just sales expertise… but it is ALL of these things… It IS all about sound Strategy and expedient Execution.

      Banks and Credit Unions can only sell products to customers who find value / benefit in the product, and thus are willing to engage in mutually beneficial exchange (dollars for product or service). This approach requires pre-work including understanding of the customer base, assessment of their needs & wants -- today and in the near future, and determination of the likelihood of engagement and the value of such engagement to both parties.

      These are the basics that too many Community Banks and Credit Unions have ignored to their own detriment. We can only hope that leaders recognize the need and more forward with the much needed repositioning.