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Marketing and Product Management

Marketing has become more complex with proliferation of channels and media.

 

Marilois Snowman, CEO of Mediastruction and David Kerstein, President of Peak Performance Consulting Group, discuss their presentation at The Financial Brand Forum 2017.

 

Their presentation covered strategies to increase marketing efficiency and sales by improving optimization across media and sales channels, and they presented a case study on how one community bank completely retooled its approach, generating a 40% lift in efficiency.

 

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Debit interchange is one of the key fee income drivers, especially for community banks. But many institutions struggle to find strategies that fuel revenue growth, especially as merchants become more sophisticated in directing debit transactions to lower cost PIN vs. signature.

 

In today’s environment are debit rewards programs successful in stimulating demand? Can they help you jump-start performance? Is there sufficient payback after expenses are considered?

 

We believe there are more effective ways to improve debit revenue.

 

Rewards programs reached their peak in 2009 when they were offered by 58% of financial institutions. This dropped to a low of 32% in 2012, before stabilizing at 38% during the past two years. The decline in rewards programs gives us a test case to measure effectiveness. What happened when rewards programs were discontinued? Are the banks with the highest debit revenue generation offering rewards, or are they improving revenue through other means?

 

There are 3 drivers of debit revenue: penetration, activation, and usage

 

  • High performing institutions have significantly higher penetration of their customer base – more customers have cards, and are active. At the top quartile of performance, 92% of customers have a debit card. This compares to the average for all financial institutions of 77%, and only 62% for the bottom quartile.

 

  • We often hear that “many customers don’t want a debit card” or that “many of our customers don’t qualify for a card”.  But top performers have demonstrated that high penetration is possible. If customers don’t have a card, they can’t use it.

 

  • Best in class banks encourage their customers to use their cards more. At the top quartile, active cardholders use their card 31 times per month, vs. an average of 22 for all institutions, and a low of only 14 times per month for the bottom quartile of performers.

 

Data analytics is key to improving usage. Well performing institutions understand who is using their card, and where they are using it. They have programs to target activation (get non-users to make at least one transaction), and to encourage users to transact more (“you used it at the gas station, now try it at the supermarket”).

 

What about rewards programs? The decline in rewards participation is driven by the recognition that most customers receiving rewards are already predisposed to debit use. When programs were discontinued there was no significant diminishment in activity – certainly not enough to offset the savings from program management.

 

Instead of the highest users, spend your time and energy to identify non-users, or low users, and incent them to increase activity.

 

Remember PAU (Penetration, Activation, Usage) and establish metrics to measure, monitor – and improve – performance.

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For years, community banks have tried, with varying degrees of success, to boost fee income through wealth management. Now, thanks to the robo-advisory trend, smaller banks can compete more effectively, even with larger, more established players according to a new article in ICBA’s Independent Banker Magazine,  Say Hello to Your New Employee.

 

The article highlights the experience of Cambridge Savings Bank and quotes David Kerstein, president of Peak Performance Consulting Group.

 

“A robo-advisor allows banks to have the potential for greater control over their services, and it allows them the opportunity to be able to service more of their customers and to manage it under their brand,” according to Kerstein.

 

“Conventional wisdom would say that robo-advisors would be more important to younger, more digitally savvy customers, but that’s not necessarily the case. For Cambridge Savings, the Connect Invest platform has gained widespread interest; its average user is 47-48 years old. ‘It’s not just millennials.’ says Kerstein, a consultant to the bank.”

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David Kerstein, president of Peak Performance Consulting Group, was interviewed by S&P Global (formerly SNL Financial) about FinTech and the whether they are competitors or partners. He said that digital disruption isn’t new, citing past developments like automated teller machines and automated call centers. The difference, he said, is that today’s developments are much more rapid.

 

Nonbank competition can be a sore subject among community bankers as the banking landscape — along with customer expectations — is continually changing. “If you think about it, banking and technology have been tied together for all of our lives,” Kerstein said. “These were developed not by the core banking providers, but by what we would now call fintech firms.”

 

Today, wealth management is one area where small banks and fintech companies are teaming up. He said he sees ample opportunities for robo-advisory companies to team up with community banks to simplify and standardize wealth management platforms, citing SigFig Wealth Management LLC’s partnership with Cambridge Savings Bank.

 

Fintech companies such as PayPal Inc. and LendingTree Inc. have put pressure on banks to up their digital game, and teaming up with fintech companies rather than competing with them is a sensible solution, Kerstein said.

 

“There’s a huge number of fintech initiatives that are really building their business propositions around providing services to financial institutions to make quicker loan decisions or provide more efficient investment advice,” he added. “Small-business processing has been complex for financial institutions. It’s been difficult to maintain the skill sets, just given the amount of training that it takes and the skills of loan officers.”

 

For more, see the full article.

 

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In a recent Banking Exchange article, David Kerstein, president of Peak Performance Consulting Group, observed that there is no needbanking-exchange-logo for banks, especially community banks, to sit on the digital sidelines.

 

“Partnership is a no-brainer,” Kerstein said. “Fintechs are happy to work with small banks.”

 

Kerstein observed that traditional companies that partner with fintechs quickly realize that they can apply agile—or lean—processes to other products, as well. They also begin to look for “friction” in various products and processes.

 

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Mark Hendrix, a 30-year banking industry veteran who currently acts as an advisor for Peak Performance Consulting Group, was quoted in Advertising Age on the changes in Bank of America’s brand strategy leadership and the potential implications for bank brand strategy.

 

Like many traditional banking competitors, Bank of America is dealing with an increasing number of digital rivals as it tries to improve its customer-centric approach.  Hendrix noted “There is an awful lot of disruptive change that is occurring in the marketplace and there is a change in consumer expectation that all banks are having to grapple with.”

 

He further noted, “Customers don’t really care about banks — they’re more interested in what banks can accomplish.” And this is causing banks to re-think their brand strategy and brand promise.

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