Archive for the ‘Financial Hot Topics’ Category

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?

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*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.

Sources:

1. Moebs Services (2011).

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

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Venus And Mars Both Bank

Posted by Mara Friedman on June 25th, 2015

Gender BankingMany experts have weighed in on the differences between how the genders tend to approach financial issues. Everything I’ve read suggests men have more debt and more savings, partially because of higher incomes. Yet when marketing banking services, best practices tend to skew communications toward the female who generally handles the family’s banking and sorts the household mail. However, as communications become more targeted and are delivered to individuals rather than households (thanks in large part to individual email addresses), marketing might be well-served by acknowledging different approaches to money management and spending based on both gender and age.

After decades in financial marketing, I just ran across a new term for the first time — money snacking or those smaller purchases that can really add up, just like those insidious calories that accumulate the pounds after mindless munching. I admit I fit embarrassingly well into the stereotype of the typical female money snacker… baulking at any high ticket purchase, while thinking nothing of acquiring yet another pair of black shoes, something most men can’t fathom.

Of course, these are just generalizations. There are men with black belts in shopping and women sitting in homes furnished with little other than high-end stereo equipment, but recognizing valid archetypes can help marketers tip the odds in their favor. This doesn’t mean simply swapping out the gender of the person in a photo; it’s about customizing the message to tightly align with the financial inclinations of the reader. The industry buzz is to target Millennials with positioning designed to meet their needs, but doesn’t that principle apply to all account holders? Don’t adult males also have financial needs that banks and credits unions can profitably meet? As technology and communications advance, so does our ability to target messages to be as relevant as possible.

For the first time since the government began tracking these stats in 1976, more than half of people in the United States are single.1 That clearly suggests that not every prospect household financial institutions are targeting for new checking accounts has a woman at the helm managing the family’s finances. Younger adults and males are taking charge of their banking and investment decisions, and our ability to use targeted digital communications to reach them has never been better. Now let’s ensure the messages we send through those channels are equality relevant.

Source:

1. CityLab/the Martin Prosperity Institute

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Financial Institutions Looking to Get More from Their Mobile Apps

Posted by Tina Young on May 28th, 2015

Mobile bankingMobile banking continues to grow in both usage and importance for financial institutions and, more importantly, their account holders. So much so, that it has become a requirement when account holders, across all life stages and segments, are looking for the right financial institution. In reality, “all things digital” is a growing focus for financial institutions as demonstrated by the recent announcements from some of the largest financial institutions, like Wells Fargo®, BBVA Compass® and Capital One®. These businesses are acquiring and investing in digital design firms and tech companies outside the financial services space. They are looking for ways to improve their account holders’ experience especially regarding the use and functionality of banking apps.

Retailers like Starbucks™ continue to expand their mobile app’s capabilities, and consumers are responding. Starbucks’ mobile app now averages more than  eight million weekly transactions by more than 120 million customers. This equates to 19 percent of the overall sales.1 Starbucks is going to roll out mobile order-and-pay nationwide in 2015, which allows customers to pre-order and pay for drinks before getting to the store. The mobile app along with the “My Starbucks Reward®” club, prepaid Starbuck cards and in-store promotions is creating a mobile ecosystem. Many mobile experts believe Starbucks will leverage geo-targeting to create more relevant, one-to-one customer engagement with the goal to increase customer loyalty and revenue.

Financial institutions desire the same results from their mobile apps that Starbucks is experiencing… acquire loyal account holders by reaching new account holder segments and expanding those relationships to generate revenue. In a recent survey from American Banker, financial institutions are increasing mobile budgets and looking at new technology to add differentiated capabilities for their account holders.2 Some of the new mobile functionality financial institutions are looking to add in 2015 are:

  • Ability to add new payees to online bill pay
  • Mobile photo bill payment
  • Applications for lending products
  • Digital wallets, which would give account holders the ability to make payments at retail stores
  • Money Management functionality with budgeting and savings tools

Developing this new technology comes at a cost, and financial institutions need to quantify the value of these investments. They are struggling to develop strong mobile ROIs especially when it comes to measuring account holder loyalty and engagement. While financial institutions struggle to connect the revenue dots, we know that “mobile life” is becoming more of a reality. This reality is causing financial institutions to invest and increase usage of their mobile apps in order to compete and hopefully drive revenue.

Sources:

1. Wolfe, Daniel. (24, April, 2015). “Starbuck’s Mobile Pay Updates Win Over New Audiences.” The American Banker.

2. (October, 2014). “Moving Targets, Shifting Metrics The State of Mobile.” The American Banker. 

 

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Where Do I Go With All My Branches?

Posted by Stephen Nikitas on April 21st, 2015

Many bank and credit union executives are noodling over their branch networks. Do we grow them? Shrink them? Reduce their size? What’s one to do?

Since 2008, the number of bank branches has fallen by more than 4,000 locations.1 Before you get alarmed, realize that history tells us that over the past 50 years, there have been two periods of branch consolidation. The first followed the savings and loan crisis of the late 1980s. The second, as evident in the accompanying chart, came on the heels of the 2008 recession.

Outside of those two time periods, the number of bank and credit union branches in the U.S. has increased.

Banks Opened Graph
*Federal Deposit Insurance Corporation

As we recover from the latest financial crisis, it is likely that we are coming to an end of the most recent branch consolidation period. So much so, that a recent study by The Financial Brand states that one out of every three financial institutions report they will grow their branch network, while less than 10 percent expect to close branches in 2015.2 But there will be one difference — brick and mortar locations will more than likely be three times smaller than the facilities of the past. Although the size of the branches will decrease, we must keep in mind that account holders enjoy visiting their financial institution’s locations, especially if these account holders are satisfied with the online banking experience.

So what is the best approach for financial institutions moving forward? They must ensure account holders can access their accounts through a network of channels, including branch, telephone, online and mobile. At the same time, it’s time to seriously consider the case for the universal banker.

Account Holder Graph
*McKinsey and Company

Source:

1. Federal Deposit Insurance Corporation
2. The Financial Brand

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Better Isn’t Always Best

Posted by Mara Friedman on March 24th, 2015

Marketing for FIsIt’s an almost comical stereotypical battle, the aggressive financial institution marketer who only cares about response rate versus the conservative credit manager only wanting to target top quality loans. This can lead to the assumption that the marketer doesn’t care whether the loans fund, but only that they generate applications.

Clearly a marketer has to support the financial institution’s loan goals, and applications don’t accomplish that, only funded loans do. So if both the marketer and lending managers have the same goal, why are their approaches so different? Yes, underwriters understandably tend to be more risk adverse and thus are comforted by the highest quality loan applications, but there’s a more important reason marketers try to loosen the requirements — premium credit consumers tend to be unresponsive and relying on them to do so only hurts the financial institution’s chance of meeting its loan goals.

Recently I saw an offer from a local financial institution — “Receive $500 – $1200 (1% back) when refinancing an auto loan.” That means that particular offer was valid for auto loan amounts from $50K – $120,000. Almost weekly, I’m involved in creating auto refinancing campaigns for clients and I can count on one hand the number of consumers who refinanced based on these types of offers whose current auto balance was greater than $40K regardless of how much the financial institution could save them. The reality is simple — if consumers cared enough about their monthly payment to refinance to save, they wouldn’t have purchased and financed a vehicle that costly in the first place. I can picture the lending team telling marketing that they should target larger loans, but marketers know those consumers aren’t responders, and you can’t fund loans that haven’t been applied for.

So let’s give the marketers a little extra credit. When they suggest targeting less than premium credit, they aren’t trying to inflate meaningless response rates. They truly understand what’s needed to drive total new loan volume at a solid margin.

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