Archive for the ‘Banking Trends’ Category

Changing Small Business Lending Environment for Financial Institutions

Posted by Doug Roman on November 24th, 2015

lendingRecently, I attended the American Banker’s Small Business Banking conference in Nashville, TN. One of the many interesting sessions I attended discussed Alternative Finance Companies (AFC), and their growing influence and partnerships with small business banking lenders. The partnerships that are being forged with financial institutions will continue to change the lending landscape for small businesses seeking financing, as well as for those financial institutions looking to provide the necessary financing to their small business customers and prospects. The former Secretary of Treasury, Larry Summers, stated, “I would not be surprised if within ten years, alternative finance companies generate 75 percent of non-subsidized small business loans.” AFCs are changing the mindset of how small businesses consider who to seek for financing, and financial institutions are taking notice as well.

An AFC generates loans outside of the traditional banking system and typically involves advance technology and analytics to lend digitally. Most of the focus for AFCs has been on smaller loans for micro and small businesses. Most of these alternative lending firms are:

  • technologically savvy
  • highly adept with social media
  • have a non-bank culture
  • are more entrepreneurial
  • have excellent customer service
  • can make a loan decision quickly
  • have the backing from investors and other capital markets.

Alternative financing for small businesses is becoming more attractive in order to access capital quickly for opportunities that arise. AFCs provides a small business the means to gain funding quickly. A traditional financial institution, for example, may not be equipped to provide loans under $200,000, allowing the AFC to satisfy those quick needs for working capital. Also, some traditional financial institutions  tend to not focus on smaller or micro segments of the small business marketplace due to the cost to serve those companies and the potential risk involved. AFCs are filling those gaps by financing needs of those smaller tiers.

What’s interesting now is that some traditional financial institutions are beginning to take notice and are working to partner with AFCs to better serve their small business portfolios holistically. This type of partnership not only helps banks support their small business lending offerings, but also benefits the AFC by opening up the opportunity to tap into a loyal customer base. Instead of losing a small business customer to a competitor, financial institutions are now partnering with the competitor to become a full service lender to current and potential account holders. Financial institutions can leverage the technologically enhanced platforms that AFCs possess to provide lending alternatives more efficiently and with greater flexibilities, which helps lower their overall cost of origination. Many of the AFC platforms are now being integrated with the financial institution’s website to offer quick initiation and decisioning of financing requests, further squeezing the cost of serving the financing needs of the micro to small businesses.

The digitalization of financing, which allows tremendous cost and process efficiencies, continues to be on the forefront of financial institutions. In order to fully service the needs of the various tiers of small businesses, financial institutions may need to consider partnering with an AFC, or alternatively financial institutions will need to consider building a brand new platform in-house or modify current in-house platforms at a much greater cost, which makes the partnering angle more attractive. The digital age is not going to subside and small business owners will continue to work with those companies that provide the full service and quick response that’s needed to help successfully run their business. Traditional financial institutions will need to consider how best to continue to support the small business segment efficiently and effectively.

1. American Banker Small Business Banking Conference 11/17/2015 breakout session – “Building Bank and Alternative Finance Partnerships”
2. “How to Work with Banks: Advice to Alternative Finance Companies”


Social Media Becoming A Major Player With Financial Institutions

Posted by Tina Young on October 29th, 2015

social conversationIn order to build relationships and increase conversions, businesses must be visible to their customers and, in many cases, this means a social media presence. While major brands have been working to build social communities since Facebook® first began, one-by-one financial institutions are  finding ways to create their own social media buzz. Take a look at any financial institution’s website, and you are likely to see some, if not all, of these social media buttons leading current and potential account holders to their social media sites.



Financial institutions are taking their marketing messages to where people, especially younger generations, are spending their time. Bank of America’s® Facebook page has over 2 million likes. Chase has 300,000 Twitter® followers. TD Bank has made big splashes using YouTube® with their “Sometime You Just Want to Say Thank You” campaign, which has over 22 million hits.

Sometimes, having a social media presence is not enough. It’s essential that the message is relevant. Financial institutions have found ways in the past year to not only provide bank information and videos with account holder comments, but also non-banking topics. For example, Bank of America has taken the need for relevancy a step further with its “The Business of Life” video talk show, which uses a wide range of panelists to discuss subjects that are important to the Millennial generation. “The Business of Life” is produced by Vice Media and jointly promoted through Pinterest.® Bank of America hopes the program will present economic news to all generations and incomes using a non-traditional form of media. As of this October 2015, “The Business of Life” has over 11 episodes with topics ranging from, “Why Pay Your Taxes” to “Why is College so Expensive.” Bank of America has seen 30 percent of its “Better Money Better Habits” website traffic come directly from Pinterest. According to Bank of America, “We’ve been successful on Pinterest, because we’ve listened to what the community wants to know, what people are searching for and customized our content to meet those needs.”1

Financial institutions need to think outside the box when looking for ways to be relevant in social media. Not only is important to utilize the right channel, but also promote the right message/content in order to drive business.


1. “Bank of America’s Millennial Marketing “Pays Off” with Pinterest.” August, 18, 2015.



Target Millennials with the Right Financial Content

Posted by Mallory Green on October 8th, 2015

Financial ContentSince the Great Recession, financial institutions have experienced difficulty targeting the next generation of people entering the work force…Millennials. These young men and women have helped financial institutions see that the tides are changing from previous generations. For example, Millennials know less about investing and more about money sharing websites like PayPal™. Furthermore, studies have shown that Millennials struggle to prioritize their money outside of paying for necessities like rent. An article in the Wall Street Journal found that Millennials have a savings rate of -2.0 percent, meaning they are spending more than they are saving,1 which might attribute to the fact that financial institutions struggle to get Millennials through their doors.

In order to combat this growing trend, financial institutions are looking for ways to engage Millennials in hopes to build long lasting relationships. With the youngest of the Millennial generation just graduating college and the oldest in their early 30s, financial institutions hope that as these adults begin to accrue assets, they will turn to the financial institution with whom they built the strongest relationship.

A report published by Redshift Research stated that, “55 percent of Millennials would trust a financial institution more if they received helpful, unbiased content.”2 Make your financial institution a reliable resource for this group by providing them with helpful information based on common pain points, such as an inability to save money or a struggle with credit card debt. They might not be ready to make any solid decisions right away, but the more educated and well informed they feel, the faster and more willing they become to do business with you. The key is to plan ahead and create a content calendar that is filled with fresh, seasonal and topical content.

Fill your calendar by:

  1. Playing to your strengths: In a study conducted by Viacom Media Networks, 53 percent of Millennials don’t believe there is a difference from one financial institution to the next.3 Make it a point to show key differentiators, whether it be the financial planning services you offer, customer service, online banking, etc. Prove why your financial institution is equipped to meet the needs of this generation.
  2. Exuding confidence in your areas of expertise: Millennials want to be fully informed before they make any kind of decision. Use your content pieces to make it perfectly clear that you know what you’re talking about and have the tools to help each current and potential account holder meet his/her goals. For example, use case studies and testimonials to show success and take the opportunity to fully explain the steps you took to get your account holders where they wanted to be.
  3. Highlighting the benefits of financial literacy: Managing money is stressful on anyone regardless of your age or generation, but feeling uninformed can cause new levels of anxiety. In an article from the Financial Industry Regulatory Authority, only 24 percent of surveyed Millennials could answer 4 out of 5 questions correctly on a financial literacy assessment.4 Provide Millennials with the tools they need to better manage their money and combat common issues felt by many in this age group, such as debt management, credit, borrowing, etc. This is a great chance to offer them tips on how to improve their financial health and highlight the benefits of using products and services from your financial institution.

Millennials have proven to be a difficult age bracket to tackle. As they reach adulthood and the cusp of making financial decisions, some not only feel skeptical about committing to one financial institution, but also lack some basic financial knowledge to make smart and realistic choices. It’s important to create a content strategy that appeals to their needs and offer information they actually care about. This will help build a solid relationship putting your financial institution in this generation’s consideration set when he/she is ready to get serious with his/her money.




Yes, Competition is Good — Even For Financial Institutions

Posted by Mara Friedman on October 1st, 2015

Healthy CompetitionSome industries seem to not only accept competition, but also use it to their advantage. Retailers are masters at this, while most banks and credit unions struggle with the concept but could benefit from embracing it.

Ever wonder why competitive businesses are often located next to one another? It’s hard to imagine any city that doesn’t have a cluster of fast food restaurants, streets lined with vehicle dealerships or gas stations on opposite corners of the same intersection. And, does anyone question the logic of shopping malls with all their shoe and clothing stores catering to the same audience?

Competition isn’t only good for the consumer, because it provides information, holds prices at reasonable levels and creates options. It’s good for many businesses as well in that it actually increases the size of the market. So while it might seem counter-intuitive, the same competition that could limit a financial institution’s (FI) slice of the pie helps develop a larger pie and thus more business overall. Think of it this way: infinitely more consumers visit the mall than they would an isolated shoe store. So while each merchant only gets business from a share of the shoe shoppers, the total number of shoppers is so much greater that all the businesses benefit. Unfortunately, all FIs don’t embrace that concept as readily as other retailers.

Two major television shopping networks consistently offer comparable products, such as a vacuum cleaner or air purifier, as their daily special either on the same day or one immediately after the other. This happens too frequently to be coincidence, so they may intentionally be creating competition. When similar offers are made on consecutive days, this practice extends the reach of the joint message (“you need this appliance”) and the total response window. The retailer that makes the offer first pulls in the early adopters, while the latter retailer benefits from the first’s promotion and attracts those who were slower to purchase.

Even with gas prices clearly visible to drivers without having to stop in and acquire, lines can be seen at the pumps for various stations immediately across the street from one another despite some stations charging more for a commoditized product. This doesn’t mean that businesses pricing themselves out of the market will be as successful as their neighbors, but it does confirm that price isn’t the only factor. The lesson for FIs is that they don’t have to be promoting the lowest rate, though they should have a reasonably competitive offer, but they absolutely need to be among the promotional mix. It’s important that they are one of the many telling their message and making sure their story is in the mailboxes of consumers. By doing so, they are positioning themselves in the consumers’ decision set.

Some banks and credit unions actually seem less willing to accept the “competition is good” premise than they have in the past, especially when it comes to direct mail. In the mid-90’s when CDs were regularly promoted in newspapers, FIs knew their weekly specials would be printed next to one another and consumers knew just where to look to compare rates. FIs didn’t refuse to advertise just because they would share the real estate with others. Yet now, some banks and credit unions seem reluctant to want to mail offers in a market where their competitors are also mailing, as though the mere presence of those offers will undoubtedly cause their initiatives to fail. Yet, a strong argument can be made that the repeated messaging created by multiple FIs not only adds value to the consumer, but it also reinforces important information and actually creates additional business for the FIs overall.

Consider the example of refinancing existing loans. While consumers may decide on their own to purchase a new vehicle, most are probably not thinking about refinancing an existing auto loan as they are arriving home from work and collecting the day’s mail, which contains loan offers. However, the repetition of refinance offers, regardless of the institution sending them, helps the idea penetrate increasing the pool of potential refinance opportunities for banks and credit unions. This phenomenon was evident during the home loan refinance boom when account holders who never initially considered refinancing started to feel as they were missing out by not researching the idea.

By thinking more like other retailers, financial institutions can reap the benefits of healthy competition. The alternative isn’t to try to find the perfect time to promote a product when the rest of the market is silent, which is unlikely to happen. The only real option is to make sure their message is being heard, and their name is out there among the other competing offers when consumers are ready to make their decision, thereby ensuring that their institution gets its slice of the pie.


Acquisition Anyone?

Posted by Stephen Nikitas on August 18th, 2015

Let’s face it … when it comes to help with managing money, there’s a lot of competition out there, and account holders have plenty of choices. Each state has a multitude of banks or credit unions for account holders to choose from…all within driving distance of their homes. In addition, dozens of investment firms can provide account holders with alternative investment products, along with a checking account.

Unfortunately, many financial institutions rely on serendipity when it comes to account holder acquisition. They think if they have a branch location somewhere along account holders’ work or Saturday errand routes, then new account holders will come. However, you shouldn’t take a “maybe” approach to account holder acquisition. Instead, be strategic and aggressive when it comes to growing your account holder portfolio.

Promote Checking Accounts

When acquiring new account holders, you should always promote new checking accounts. Surprised? Everyone needs a checking account to manage finances. Checking accounts will likely appeal to those who are new in their careers or have recently moved into the area because of a job. They may also appeal to account holders who are generally dissatisfied with their current financial institution and seeking a new banking relationship.

What was the reason for opening a new checking account?

*Synergistics Research Corporation, Checking Account Acquisition and Retention Survey, 2015

A checking account provides approximately $268 a year in revenue to a financial institution.1 It also opens the door to that new account holder acquiring more products and services as his/her relationship grows with the primary financial institution.

Take the time to target account holders with whom you have a likelihood of establishing strong relationships through cross sell opportunities to gain strong share of wallet. Financial institutions have a wealth of account holder data at their fingertips that can be used to profile existing checking account holders. They should use that information to target “lookalikes” in their market footprint.

Ensure that you reach young account holders opening new checking accounts through mediums and messaging that resonates with them to build strong awareness of your financial institution and its products.

Make Doing Business Convenient

Branch locations still play a large role in the banking relationship. Be sure to include messaging about the convenience of banking with you – whether it is access through a branch, ATM or digital banking options.
How likely are you to obtain another checking account in the next year?

*Synergistics Research Corporation, Checking Account Acquisition and Retention Survey, 2015

Which features were most important in choosing a financial institution when you recently opened a checking account?


*Synergistics Research Corporation, Checking Account Acquisition and Retention Survey, 2015

A consistent, multichannel approach works best when marketing to prospective account holders. Nearly a third of prospects cite direct mail and digital ads as the strongest vehicles a financial institution can use in order to make them aware of a product opportunity.

*AOL/Oliver Wyman, 2014

Don’t Forget the Offer

Finally, don’t forget to make an attractive offer when promoting a checking account. Many financial institutions are actively targeting new checking account holders.2 In some cases, the offers are rich (as high as $500). Don’t let this intimidate you.

*The Financial Brand

The “Davids” of the banking world can go up against the “Goliaths” by relying on offers that will get noticed, even $50 to $100. Community roots, consistent communications and targeting will help ensure your marketing dollars are spent as effectively and efficiently as possible.


1. Moebs Services (2011).

2. The Financial Brand, 2015 State of Bank & Credit Union Marketing, February 3, 2015.