Missed the BAI Retail Delivery Conference & Expo, or attended and trying to make sense of the over 200 vendors? Here’s my personal “Top 5″ do-not-miss list
Panoramic view of exhibit hall – use mouse to move left or right.
Walking through the exhibit hall at BAI Retail Delivery you’d never know it had its origins as an ATM conference. This year only 11 of the roughly 210 exhibitors were in the ATM space while over 60 were promoting mobile payments. How times have changed!
What else were the vendors promoting? “Customer experience” was the hot buzzword this year, closely followed by “gamification” (I’m still trying to figure out what that means).
So how do you boil this all down? Here’s my personal Top 5 “must see” list.
PayPal pioneered person-to-person (P2P) payments, and banks are finally entering the game in a serious manner. Recently, Bank of America, JPMorgan Chase and Wells Fargo formed a joint venture to create clearXchange, a direct competitor to PayPal. Customers of the three banks will be able to move funds from their checking accounts using an email address or mobile number, instead of having to provide checking account and routing numbers. The clearXchange service will roll out nationally and there are plans over time to expand it to include other financial institutions.
Jerry Siebenmark of the McClatchy Newspaper Group wrote an interesting article on this effort, which included some of our insight. A few key points:
- Customers want it – what could be easier than sending funds by email or phone message?
- Technology is not a barrier
- Adoption is high. ClearXchange claims about 50% of on-line customers adopt the service immediately after it is offered.
- We know how to manage risk.
Banks have higher trust level than non-banks, and should achieve higher acceptance rate.
Do you have a strategy for P2P payments that includes technology, risk, pricing, customer communication, customer service and impact on deposit operations?
As customers accelerate their migration from traditional payment forms, are you thinking forward about the impact on your branch network (do you still need the same number, managed in the same way?)
Are you re-thinking your sales and customer acquisition process, as fewer customers come to your branches?
This article was originally published in BAI Banking Strategies on July 16, 2012
Bankers have reason to worry about the CFPB, but mainly because of the impact that new approaches to consumer complaints and new disclosures for deposit products may have on the industry.
It would be an understatement to suggest that the industry is worried about the Consumer Financial Protection Bureau, but it does seem that the initial fear – almost panic – has moderated as the industry and our new regulators get to know each other.
Certainly there is plenty of concern. Hedge fund investor Tom Brown, never shy in stating his opinion, articulated the “it’s-a-disaster” argument. But as Jack Milligan wrote in Bank Director and Robert Johnson and Ken Rees discussed in an American Banker op-ed, the CFPB is doing many things right. They’ve won praise for their industry outreach. They’re focusing on leveling the playing field between banks and non-banks (e.g. payday lenders), and that is a good thing for our industry. They act like a think-tank, open to new ideas. They’re taking their time – the regulatory process as a whole takes time – so there will be no sudden moves and surprises.
So, why the worry?
Not too long ago, banks were asking whether they really should invest in Internet banking. Now many are raising the same questions about consumer remote deposit. As my daughter would say, “I don’t get it!”
Our youngest daughter grew up in Vietnam and joined our family when she was 8 years old. She learned English quickly, but understanding idioms and some of our illogical customs remained challenging.
A few months after she joined us, we took her to summer camp along with the rest of her siblings. “It will be fun,” we told her.
She looked around.
“No air conditioning? No TV?”
“I have to share a room with 12 other girls, sleep on an upper bunk, and eat in the dining hall with 100 other people?”
“You have to pay for this?”
“I don’t get it!”
Here’s what I don’t get the reluctance of many banks to adopt consumer remote deposit capture (scanning checks or taking photos on their smartphone and transmitting them to the bank).
A few weeks ago I listened to a presentation by USAA, Chase, and others, about their Consumer RDC strategy.
USAA explained how 35% of deposits now come through remote capture. They explained how they could specifically attribute a 10% increase in total deposit growth to this channel, and how they had plans to continue to grow consumer Remote Deposit to 65% of total. Both USAA and Chase explained how fraud was lower than expected and articulated some of their fraud control techniques. They talked about how the duplicate check problem was really not a problem.
There were lots of questions – mostly about risk.
So I was thinking:
“Consumers become their own proof operators and send checks directly to you, fully imaged.”
“Fraud is lower than regular check deposits.”
“Consumers like this channel, and move their relationship to banks that offer it.”
“But you are still worried, and are holding back because you prefer to have customers take their checks to high cost branches with expensive tellers.”
“I don’t get it!”
It seems that everyone under 30, and most people under 40, know that this is South By Southwest week in Austin. Or SXSW, or simply “South By” for those in the know. 15,000 people from all over the world pay from $700 to $1,300 to attend the various “tracks” of the festival. For us who live here, it seems that the official conference registrants only reflect a small percentage of those who converge on Austin this week to meet up and mash up.
The fastest growing section of SXSW is the Interactive Festival. This is where Twitter first got widely noticed and where Facebook’s Mark Zuckerberg was a recent keynoter. It seems that every influential blogger, developer and internet media mogul is here.
I was fascinated to see that one of the first sessions was titled “Banks: Innovate or Die!” The premise was that banks are simply too big and moribund to innovate, and that new financial players can give better service and steal customers away with creative new products. This was not just a wake-up call to the financial services industry, but a call to action to all the developers in the room that the payment industry is a wonderful opportunity for entrepreneurial growth.
Last week I was at the BAI Payments Connect conference. While there were some interesting new ideas, I’d have to say that much of the discussion in the DDA Under Siege track was around the “disastrous” impact of the new interchange fees and how this is bad for banks, and bad for consumers. As one speaker put it, “a lot of opining and whining”.
The folks attending South By can’t understand why financial institutions, which are facing disruptive change and frustrated consumers, are digging in their heels and not innovating. They are asking fundamentally different questions. Instead of “how can we protect our payment revenue”, they are asking why we even need a traditional payment system. Think about PayPal a few years ago, which asked why we couldn’t just email or text money instead of having to write checks.
Too many banks are saying that if the proposed new interchange restrictions go into effect, they’ll have to raise fees and it will force many people out of the banking system.
I don’t buy this logic.
First, the assumption that banks will have to raise fees assumes that income declines but the expense base and business model remains the same. That doesn’t make sense. It’s like a small retailer, faced with Wal-Mart moving into their community, explaining that they have to actually increase pricing because their revenue is declining due to low cost competition.
Second, some consumers may be forced out of the banking system but I don’t think they care. With all the innovative new solutions, there are plenty of ways for them to be served at even lower cost than offered by banks today. If PayPal, Facebook and Google offer payment solutions, why should I care if banks don’t want me?
There is so much innovation in the consumer and B2B space today that it is confusing. What should we invest in? Which technologies will dominate? We don’t have to be on the bleeding edge, but we can’t stand still and hope that the model that worked in the past will continue to serve us well in a very different future.
“Innovate or Die” is a real imperative!
Everyone is worried about DDA and payment revenue, but some banks have a clear roadmap for success.
If your inbox looks like mine, every day I get a new round of confusing emails:
- “Free checking is dead, really dead”
- “Free checking is still very viable – at least for community banks”
- “Debit rewards? Not sustainable in the new environment”
- “Debit rewards? You still need it, just have to revamp your program”
- “Durbin will be the death of us – it’s the last nail in the coffin”
- “Durbin will revised and it won’t be so bad”
- “All of this means that customers are being driven out of the banking system, leaving us with fewer opportunities”
It’s enough to make your head spin!
But I am very encouraged.
In a few weeks I’m chairing a panel discussion at the BAI’s Payments Connect Conference – it’s called “Bankers Respond to the Industry Challenges”. As I’ve spent time talking with the panelists and discussing the solutions they are implementing, I am tremendously encouraged that there is a clear path forward for revenue improvement.
Three very different banks have agreed to participate on this panel: Comerica, Fifth Third, and BBVA Compass. Each has different target markets and different marketing strategies. Each is big enough to have explored and analyzed a wide range of issues and opportunities. Each is specific in their recommendations.
I hope you can join us. If so, please stop by and say hello. I’m expecting thoughtful but lively interaction.