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Deposit Products

The following article, quoting Peak Performance Consulting Group’s President David Kerstein, appeared in S&P Global Market Intelligence on August 8

 

By  Kate Garber and Kellsy Panno

 

Some of the largest U.S. banks hope to entice their customers with real-time, P2P payment capabilities like those offered by PayPal Holdings Inc. and other fintech companies.

 

As member banks go live on the clearXchange network, a unified payments channel, customers will be able to send and receive money in real time. So far, Bank of America Corp.Capital One Financial Corp.JPMorgan Chase & Co.U.S. Bancorp and Wells Fargo & Co. have the real-time payments capability up and running. Fellow network owners PNC Financial Services Group Inc. and BB&T Corp. have yet to go live on the network. An Early Warning spokesperson said that while all members are in the process of integrating the capability, go-live dates vary by bank.

 

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Digital Payments are growing, and financial institutions have high expectations for adoption. But with usage rates stalled, is this the right time for community and regional banks to invest, or should other options be considered first?

 

We just finished an analysis of Mobile Wallets and P2P payments. Here’s a few key points, but read the full article for more detail.

 

There is wide belief among financial services executives that mobile wallets and P2P payments will shortly become basic table stakes, similar to mobile banking. According to the 2016 Debit Issuer Study, commissioned by PULSE, almost three quarters of financial institutions expect at least 15% of debit transactions will migrate to mobile in the next 5 years, and nearly half believe the migration will be in excess of 25%. They have invested accordingly: issuer adoption of mobile payments has surged and 65% of debit cards are now eligible to be loaded into mobile wallets, up from 30% in 2014.

 

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A modified version of this article was originally published in BAI Banking Strategies on November 13, 2015.

 

As the Millennial generation increases its economic clout, banks need to adapt strategies that enable them to profitably attract, serve and grow with these new customers.

 

It’s a simple fact: Millennials are your future customers. Already the largest group in the workforce, the leading edge is now in their 30’s and reaching an age when they have stable jobs, are forming families and buying homes. By 2020 they will have greater savings and investments than Baby Boomers. They are not just a customer category, but a massive segment that is driving change rapidly.

 

And Millennials are critical to your bank’s growth strategy. Approximately 10% of households switch banks annually – a rate that has been relatively stable for the past decade. But this propensity to switch varies widely by age group. Older customers are more likely to have long-established banking relationships and their average switching rate is only between 3% and 4%, usually as the result of a service or moving issue. On the other hand, younger customers switch at a rate of between 15% and 20% annually. They are most likely to be attracted to financial institutions that offer the technology and online services they prefer.

 

Banks need to take action or risk losing this segment to new entrants in the payment, consumer banking and business banking space. And there is cause for concern: we counted 38 different non-traditional competitors in the payments space alone, of which 10 were new in the last year.

 

Up to now, these competitors have been mostly nibbling around the edges, but the introduction of Apple Pay significantly heightened awareness of the threat. In our recent industry survey, one bank CEO told us: “The fear is that Apple Pay and Google Pay reduce, if not eliminate, the need for banks to provide the payment stream. How do we compete with that? …. Not sure what the solution is at this point. Once the consumer leaves or never comes in to the system, will they ever join again? Jury is out but I am not optimistic.”

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This article, by Peak Performance Consulting Group senior consultant Guenther Hartfeil, was originally published in BAI Banking Strategies on November 10, 2014

 

Even simple segmentation approaches can yield substantial results if implemented with disciplined execution.

 market-Segment

We live in an age of “big data” but sometimes this amounts to data overload. What we really need is more usable data that can translate into better customer service, improved sales, and greater profitability. One very effective way to organize data is to group customers or prospects into segments.

 

The old saying “birds of a feather flock together” is a simple way of describing the dynamic that people tend to group together with those of like interests and similar behaviors. Segmentation is just a way to find people (or businesses) with common behaviors so that marketers and salespeople can then approach each segment in an appropriate manner. These different approaches may show up in product design, media used, pricing or distribution design.

 

Bankers can gain tremendous benefits from even simple segmentation schemes that can help answer questions such as: How much time should be spent with a customer or prospect? How should the customer or prospect be contacted? And, when contacted, what should be communicated?

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Two very different banks appearing at BAI Retail Delivery 2013 show how marketing success depends on utilizing each institution’s competitive advantages.

 

(This article was originally published in BAI Banking Strategies on October 25, 2013)

 

Big banks, small banks. Occasionally the differences are glossed over. Small bank leaders may overestimate their ability to replicate a large bank technology play. Large bank leaders may underestimate how impersonal the bank might look to someone accustomed to a true community bank.

 

But just as often, the differences are exaggerated, as in: It takes huge scale for a bank to afford sophisticated marketing. Or: Large banks’ customer-centricity programs are but a pale imitation of community banks’ natural customer intimacy.

 

The truth is more elusive, as will be demonstrated in a session at the upcoming BAI Retail Delivery 2013 entitled “Changing the Rules: Marketing Strategies that Grow Sales and Revenue.” In this presentation, moderated by me, two very different banks demonstrate that the ability of any institution to thrive depends entirely on what each does with its natural competitive advantages and how it shores up its disadvantages. Rockland Trust in Eastern Massachusetts has just under $6 billion in assets and 77 branches. At the far side of the size spectrum is Fifth Third Bank, the country’s 12th largest with $123 billion in assets and more than 1300 banking offices in 12 states.

 

Both institutions were bent on achieving significant improvements in sales and revenue, and among their first commitments was that of listening carefully to their customers before making product, service and price decisions. On paper, “listen to our customers” sounds the same at both institutions. But how this maxim played out had very little in common – except in stellar results for both.

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What can your bank do to optimize relationship profitability? The early days of a new relationship is when the majority of sales opportunities occur. Do you have the right sales, service and marketing strategies to capture this opportunity?

 

Research has shown that the first 90 days can make or break a new deposit relationship. In fact, about 70% of all cross-sell opportunities come in the first 90 days of a new customer relationship. So time is of the essence in identifying customer needs and cross-selling products and services.

 

Why is this case? When consumers change banks and initiate a new financial relationship, they’re doing so for a reason. It could be that they’ve just moved to a new community, or that their financial circumstances have changed, or that they’ve grown dissatisfied with their previous financial relationship and want some fresh options.

 

How does your institution handle customers immediately after an account is opened? What products do you offer these newcomers? And in what combination? Finally, who does the selling and how are you measuring the effectiveness of your initial marketing efforts?

 

Relationship growth and profitability are dependent on the following key strategies:

 

  • Product Packaging and Pricing. Our client experience demonstrates that refinements in product packaging can significantly improve account acquisition and balance growth. Product engineering is well worth the effort: 20% improvement in profitability is not unusual.

 

  • Account Sequencing. The specific products and services offered can have a tremendous impact on profitability and retention. Don’t discount sales of “sticky” services in this process. A simple example: if a low balance customer signs up for direct deposit, their average balances levels will automatically increase. It may only be a service sale, but the impact on profitability and retention is very real. Sophisticated account sequencing strategies can help your institution significantly improve balance growth.

 

  • Relationship Anchoring Strategies. Different products require different pathways to profitability. Not every customer starts their relationship with a checking account or with the same type of checking account. Our research has shown that strategies need to be adapted to the account type which initially anchors the relationship.

 

  • Problem Resolution. It’s not just the majority of sales opportunities which occur in the first 90 days, but also the majority of service problems and the majority of attrition. The causes: incorrect account setup, unmet customer expectations, etc. This is the time to have detailed programs in place to identify customers at risk so you can be sure to retain all the customers you have worked so hard to bring on-board.

 

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