Mobile has long been a talked about strategy for the financial industry. But finally it is moving beyond simple online banking tasks of just being able to check account balances or receive mobile account alerts to providing sticky applications that will change a consumer’s lifestyle. Cases in point are the Google Wallet and Pay by Square. I have both. They are both fabulous and easy to use. I wish more merchants would embrace NFC (Near Field Communications) technology so that I can ditch my “real” wallet. Based on the results of a recent survey conducted by Pew Internet & American Life Project, a lot of people share my sentiment.
Nearly two out of three respondents to the survey (65%) told the Pew Internet & American Life Project that they think most people will have fully adopted the “mobile wallet” as their day-to-day means of paying by 2020….
…By 2020, most people will have embraced and fully adopted the use of smart-device swiping for purchases they make, nearly eliminating the need for cash or credit cards. People will come to trust and rely on personal hardware and software for handling monetary transactions over the Internet and in stores. Cash and credit cards will have mostly disappeared from many of the transactions that occur in advanced countries.
The mobile payments market gained a lot of traction last year thanks to Square and other mobile merchant acquirers like NA Bankcard giving a lower cost alternative for merchants to accept credit card payments. This is broadening consumer awareness about mobile apps and uses for their smart phones and tablets.
All the activity around mobile and payments is really heating up with the big brands. Here’s a short summary list to catch you up to date:
Earlier this year, IDology did a webinar with BankInfoSecurity on the updated FFIEC guidelines, which set a new standard for online banking security. The guidance called for a layered security approach and stronger more effective authentication techniques, including replacing challenge questions based on shared secrets with a more sophisticated solution called out-of-wallet challenge questions. This webinar examined both the security and customer service issues associated with challenge questions in place at financial institutions today and why the FFIEC is guiding Banks to switch to out-of-wallet challenge questions.
As a follow up we have launched a survey to study authentication methods and evaluate how the FFIEC guidelines have impacted Banks. With this survey we are looking to:
We want your input! Participate now, take the survey.
I have written a lot in the past several months about all of the competition that traditional banks face today.
In addition to dealing with bad real estate loans and rising FDIC fees, banks are now watching as brokerage and mutual fund firms introduce online bill pay, free checking accounts, and high yield saving accounts.
In an article in the Wall Street Journal last week, several companies offering new banking services were mentioned. TD Ameritrade has introduced online bill pay and ATM rebates, while TIAA-CREF is offering multiple banking services including free checking and high yield savings accounts through its new internet bank, TIAA Direct.
Charles Schwab is also targeting its brokerage clients with no-fee checking accounts and offering FDIC-insured savings accounts through its Charles Schwab Bank.
Fidelity Investments is offering a Fidelity Cash Management Account with many of the same services as the other brokerage companies. The only difference is Fidelity keeps its deposits in traditional banks.
They are also offering free trades to customers with higher levels of deposits.
With all of this competition, community banks have to start marketing their services.
For many banks, success in the past has been credited to location, location, location. But now, with the internet and all of this new competition, banks will have to concentrate on service, service, service!
They’ll need to get aggressive with their marketing and advertising and win the customer over with wonderful customer service.
When was the last time you called your customers on their birthdays or sent them a birthday card? Even my dentist does that. When was the last time you picked up the phone and thanked a customer for his or her business? Have you ever clipped out an article about a local business person from the newspaper and mailed it to them with a hand written note? Or, more likely, was an overdraft notice the last thing your customers received from you?
Last week, my son put in a contract to buy a foreclosed home from Bank of America. One of the requirements was that he had to be pre-approved by their bank. Since there are three Bank of America’s between his work and his apartment, he stopped at one to meet with a customer service rep.
When he was finally able to meet with someone after waiting in line for almost 30 minutes, they took him into an empty office, dialed a 1-800 number, and handed him the phone.
This was his first visit to a Bank of America and it will be his last.
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Neal Reynolds has worked with hundreds of banks and credit unions around the country helping them to grow core deposits and market share without growing their marketing budgets. Contact him at nreynolds@eadshop.com.
The heart of successfully stopping fraud in a consumer-not-present channel is having assurance you are interacting with customers, not thieves. Verifying a customer’s identity is important for anyone doing business online. With identity theft continuing to be one of the fastest growing crimes in the United States, using identity verification helps reduce the risks for both your business and your customers from becoming a victim of fraud. The key is to automate your identity verification process so that you are able to verify consumers in a way that will keep business moving and without sacrificing customer satisfaction.
So what exactly is identity verification? Simply put, identity verification solutions help uncover if you are dealing with legitimate, real people. And depending on the level of verification your business requires, you can also find out if someone is who they say they are even though you can’t see or check their ID in person.
At its lowest level an automated identity and age verification solution allows you to verify information provided by someone, such as name, address, and date of birth, with information that can be found on that person while searching thousands of trusted data sources. If there is something suspicious associated with the identity, like the address doesn’t match or the person is actually deceased, you will know instantly. And depending on the level of assurance needed, you can incorporate a set of multiple-choice questions that are dynamically generated based off of the personal history information found on each individual consumer. These questions are sophisticated and designed specifically so that the true identity owner will know the answer but not someone attempting to be that person. The end result provides an automated process that helps businesses make more informed decisions about how interactions with consumers are handled while also preventing fraud.
If you are still on the fence about using an identity verification solution, here are some of the benefits our customers see:
· Increased Revenue- Using technology to identify your consumers-not-present keeps business moving forward in a timely manner. As a result, orders are approved and processed faster thus increasing the opportunity to capture more revenue.
· Decreased Cost of Business- Electronic identity verification decreases the amount of manual review needed to evaluate and legitimize questionable activity freeing up your employees time to focus on other areas of the business
· Improved Fraud Protection- Identity verification gives better insight into potentially fraudulent activity so that businesses can deal with suspicious activity accordingly. Being able to validate someone’s identity quickly reduces the amount of fraud loss. And by decreasing the amount of data that is shared within a company, it protects sensitive consumer information from being overexposed and limits the potential of an employee misusing a consumer’s information.
· Fulfilled Compliance Regulations – some businesses, such as financial companies and age restricted products and services, have compliance regulations they must follow. Incorporating an automated identity and age verification solution gives you the resources to quickly comply with legal obligations while providing an audit trail to prove you performed your due diligence on your customers.
In this new era of banking, where real estate loans are often frowned-upon by regulators, niche markets are popping-up fast. Instead of loaning money for new buildings, financial companies are even lending money for new babies.
“Fertility Finance” companies are partnering with doctors to make loans for in vitro fertilization, fertility treatments and egg harvesting.
In the past, couples have used home equity loans and credit cards to fund fertility treatments. But with traditional forms of financing drying up, dozens of companies like Springstone Financial LLC in Southborough, Mass, NBT Bancorp of Norwich, NY, and My Medical Funding in Tampa, FL, are working with doctors to promote this financing.
Their pitch is that these loans will help grow patient demand.
Traditional loans made by banks are governed by state and federal banking regulators, but some of these firms that get money from private investors aren’t monitored by banking agencies. These loans are typically unsecured with interest rates averaging 17%. (Rates are generally based on a patient’s credit-worthiness.)
What makes these types of loans so interesting from a marketing perspective is that these firms have found a niche and positioned themselves as an expert in this area. They even supply brochures for the doctor’s office. I call this vertical marketing: finding a market and designing your product around a particular need.
Obviously, this could be applied to a variety of industries.
Instead of “fertility finance” you could have “farmers finance” and position your banking products and services around a farmer’s needs. Farmers need financing to buy seeds and fertilizer with plans to pay the loan back when they sell their ripened crop.
Or what about “manufacturers financing” that supplies loans when a manufacturer gets an order knowing it will be paid back by the vendor? Companies like PrimeRevenue in Atlanta, GA, bring buyers, suppliers and financial institutions into a common trading environment that is accessed securely over the internet. They operate internationally in multiple languages and multiple currencies. The finance companies are able to see purchase orders in real-time and the manufacturers are able to get their money sooner.
Niche loans are great, but how will companies be able to find funding in this economy?
Just this month, the JOBS (Jumpstart Our Business Startups) Act overwhelmingly passed in the House with a vote of 390-23, which allows entrepreneurs to use “crowdfunding” to fund their start-ups. The bill will now move on to the Senate, where Majority Leader Harry Reid has announced that the Senate will support bills like this “to spur small-business growth.”
This legislation will enable companies to solicit small equity investments from large numbers of people using the internet. The most they can raise is $2 million, but this is a lot more than a majority of America’s small businesses would ever need.
As it stands, the bill would limit an investor’s investment to 10% of their income or $10,000. So, instead of investing $10,000 in a CD at a local bank that is paying .07%, an individual could “loan” that same amount to a small business and earn a lot more.
This way, the business can get funding much faster than waiting on a bank loan committee to make a decision. And since the internet is so transparent and fast, you’re able to track that company’s health even faster than the FDIC can keep up with your community bank!
Some critics of the bill insist that while it makes it easier for companies to raise money by lowering certain regulatory hurdles, it also opens the door to expose investors to fraud because companies are not required to file standard financial disclosures and are therefore less transparent to investors.
The internet is changing the way we all “bank.” We can pay our bills using Google Wallet or PayPal and we’re able to borrow money for our business using CrowdFunding – all without going into a brick and mortar building.
BankMarketingCenter.com equips you with the tools you need to thrive in today’s financial market. Our web-based platform puts you in complete control of the marketing production process for your bank or credit union – all for a fraction of your current marketing costs. For more information, visit www.bankmarketingcenter.com or contact Neal Reynolds at nreynolds@bankmarketingcenter.com . Follow Neal’s blog at www.longlastingideas.com .
Each of these factors affects how we measure customer value. The first is important because it means that every client contributes something to overhead - so de-marketing never makes economic sense (okay your chronic loan default and fraud clients should go but that is about it). The second - aggressive discounting - points the finger squarely back at the banker... it is our fault if we give the store away. The third notion, that from time to time we price irrationally is again something that has little to do with the client. in my view cyclically normalized spreads are more relevant than actual spreads for customer valuation. Irrational pricing is quite common, and it happens when competitive pressures make us favour share over margin (for instance in IRA / RSP season, Spring for loans) or when money market rates are in an anomalous state ( yield curve inversion, shocks).
So there are reasons why what looks like lead might really be copper, brass bronze or whatever. But can the value of customers properly identified as being in the bottom ranks be transformed into great customers ? I think the answer is yes to this, again based on global experience.
Customers with decent direct margins suffer from the monolithic cost base of most banks when we look at their value. We have very heavy fixed costs which buries the value of most of the customer base. Is this problem that the customers are no good for your bank ... or is the problem your bank is no good for these customers !?!
In my opinion the problem is not the customer, it is the service model we offer to one and all as if everyone was one of our highest margin accounts. Other banks in less affluent economies have found new and profitable ways of serving these low margin segments. Simplified lending processes enable one bank I worked with to profitably issue loans with face value as low as $5. One bank actually split itself into a "people's bank" and an "afluent" bank with completely separate platforms, services, pricing and distribution processes. These kinds of innovations are portable across markets, and we should be learning from these emerging market innovations.
A lot of good customers appear bad because we don't measure their value properly or we load them up with service costs they don't need. FiIrst true up your metrics so you have a clear line of sight into your real relationship value situation. Then take a look at how you can service lower margin segments with innovative service models that are better suited to the cost base that lower segments can support. I am a firm believe that smart banks can learn how to turn lead into gold.
- Dave McNab
A recent article in the Wall Street Journal talks about how banks that have given away incentives to new customers are now sending those same customers 1099s.
As the banking industry has become more competitive, especially with bank’s paying very little on CDs and Money Market accounts, many banks are offering gifts that are more valuable than a toaster.
As a result, gift cards and frequent-flyer miles worth more than $600 are causing banks to send thousands of 1099 forms to their new customers! Even though the tax consequences are small, it is causing customers to complain and many are even closing their accounts.
The banks, which include Citigroup Inc., HSBC Holding PLC and the Citizens Bank unit of Royal Bank of Scotland Group PLC, claim they fully disclosed the tax implications to their customers. But will it be enough to keep their business?
Nessa Feddis, senior counsel with the American Bankers Association said that banks tend to be sticklers about tax rules because they operate in such a regulated industry. In contrast, gifts offered by retailers often aren’t subject to IRS reporting because they are classified as a reduction in the purchase price rather than income.
Bank marketing managers should continue to be creative when it comes to innovative ideas to lure potential customers into their banks, but they should also be mindful of the long term consequences.
What seems like a great idea could prove to be a public relations nightmare.
Speaking of 1099’s, I’ve heard a lot lately about banks and mortgage companies that are paying people to sell their homes for less than what they owe. Many banks are finding that it’s cheaper and faster to pay a homeowner who is not making their mortgage payments to do a short sale than it is to foreclose.
What the homeowners don’t realize is that they may get a 1099 for the payment and possibly for the amount that the bank forgives! And remember: the IRS doesn’t forgive or forget. Ex-homeowners could be paying taxes and possibly fines on the amount for a long, long time.
