Four (4) Factors Affect Mobile Payment Adoption

To attract and retain customers, banks need to fully embrace mobile payments into their business. In the most recent payment study from the US Federal Reserve, each year nearly half of the 3.4 billion checks deposited and over 132 million bill-payments involving US banks are completed through a mobile device. For some, mobile payment systems are becoming a ubiquitous part of everyday life and the preferred method of buying and selling.

A multitude of mobile payment systems have been introduced into the market. For a bank to integrate one or more of these systems into their operations, they need to determine which platform best suits their customers and prospects.

A new white paper from Director Sarah Beth Morton, PMP discusses four factors that affect mobile payment adoption.

“Omnichannel” approach offers customer retention and new business opportunities.

PROFIT INSIGHT® has a new white paper that details the benefits of “Omnichannel,” the banking industry’s latest watchword for leveraging available technologies to create a more rewarding banking experience for customers. The white paper was authored by PROFIT INSIGHT Director Susan Canfield, a banking business intelligence expert specializing in process improvement, change management and electronic & online banking channels.

Banks historically create new channels to introduce evolving technology and increase services to their customers, but can take different routes in delivering those services. The white paper, entitled “Improve Customer Experience by Optimizing Channels,” describes the silo channels used when a customer interacts with the bank through an ATM, an online service, branch operation or mobile device, as well as the silos used for interactions like deposits, loan processing, withdrawals and payments. “Offering a customer this multiple channel approach may do more harm than good,” the white paper explains. Customers may be required to verify their identity at multiple points, or their preferred channel may lack the data needed to make decisions, frustrating customers and driving them to seek better services elsewhere.

Many banks are using cross-channel approaches, in which customers begin their interaction through a single channel and then are routed to other channels when the initial request cannot be fulfilled or when the customer wants to accomplish additional tasks during the visit. “It’s an improvement over channel silos,” Canfield says, “but it still requires the customer to jump through hoops and interact with the bank the way the bank wants, not the way the customer prefers. It’s simply not the modern approach that banks need to build business for today’s more discerning and tech-savvy consumers.”

The omnichannel approach is the answer, as all business channels and services are optimized to create the best possible experience for customers, PROFIT INSIGHT has found. “Big box retailers have developed the concept extremely well,” Canfield says. “Banks can too, and not just the big box brands. Leveraging existing technologies, banks of most sizes can bring virtually all of their services and business channels to every device and location, increasing customer retention, creating new business opportunities and optimizing their channels,” she says.

As detailed in the white paper, banks must examine five aspects when considering creating an omnichannel experience for their customers: usability, functionality, consistency, availability and channel analytics. Today’s successful banks can no longer satisfy the ever-growing customer expectation of seamless information with the silo strategies of yesterday, and cross channel experiences must be both efficient and transparent for customers. “Financial institutions who take the initiative to improve and enhance the customer experience will have the edge over the competition,” Canfield says. “By implementing omnichannel, they will improve vital relationships with existing customers and attract new ones.”

“Improve Customer Experience by Optimizing Channels” is available at no charge at the company’s website, www.PROFITINSIGHT.com.

Peak Performance in your IVR & Contact Center

There are many metrics to help an institution understand how the company IVR and Contact Center are performing.  But do managers really understand what impacts those numbers and what can be done to make improvements?

Contact Centers can be a hotbed for customer dissatisfaction. Their performance can make or break customer loyalty.  A Contact Center can only become an organizational asset when it:

  • Honors the customer needs (or department needs for internal contact centers)
  • Builds processes to satisfy those needs
  • Measures key performance factors to ensure those processes are working

When these goals are achieved, data such as customer call rationale, representative utilization, hold times, etc. become a critical and trusted part of understanding the entire organization.

Customer service representatives need the ability to answer the phone and resolve questions quickly. Hold times need to be minimized and at or under the customer’s expectation. Yet these important metrics, taken alone, with little or no regard to other client-affecting service level indicators, can lead to a loss of relationships.

PROFIT INSIGHT® helps financial institutions understand how their company IVR and Contact Centers are performing.   We help develop ways to change those centers and the methodology to implement those changes for immediate and dramatic impact on performance. Contact us at www.profitinsight.com/ContactUs to help ensure your front-line is performing at its peak performance.

White Paper Cautions Banks on Threats to Deposit Base

PROFIT INSIGHT® released a new white paper focused on the risks banks are facing regarding their deposit base when customers move capital into more attractive options as rates rise.  Authored by PROFIT INSIGHT Senior Managing Director Tom Bennett, a banking expert with over 20 years of experience, the white paper is entitled, “Plan For a Rising Rate Environment” and is available on the company’s website at www.profitinsight.com.

According to the white paper, growing and shifting deposit mixes, along with the erosion of time deposits, are of increasing concern to banking executives across the United States.  Most deposit categories are at risk of attrition when rates rise, and every financial institution will face unique challenges in the coming months as their customers adapt to a changing environment.  The white paper explores how much banks stand to lose and how they can prepare for the road ahead as events affect checking, savings, money market and time deposits.

“The deposit mix is very different for the Top Ten banks versus other banks, particularly those with under $5 billion in assets,” says Bennett.  “In general, large banks tend to have lower loan-to-deposit ratios than smaller ones, meaning that attrition will not present funding challenges, but may impact their margins,” he explains in the white paper. “Institutions with higher loan-to-deposit ratios will need to consider alternative funding needs should attrition occur, which may impact their level of aggressiveness in retaining deposits.”  The white paper includes specific recommendations for banks to:

  • Identify risks;
  • Establish the broader corporate strategy;
  • Create specific strategies to address rate movements, as well as competitive responses and customer responses to rising rates, and
  • Prepare and execute those strategies.

“With rate changes on the horizon, the time to prepare is now,” says Bennett.  “Every institution has unique characteristics that have impacted their past performance and will continue to influence their future success,” he notes.  “By spending the time to understand these characteristics, every institution can gain an understanding of their current situation, identify short term gaps or opportunities, and plot their intended actions.”

PROFIT INSIGHT has been working with banks for over 40 years to optimize every facet of their businesses, from deposits to operations, credit cards to loans.  During that time, the company has helped create over $40 billion in value for financial institutions on six continents, receiving much of its compensation based on the cost savings and revenue improvements it enables clients to realize.  “We have seen many market cycles over the years,” Bennett says. “With the right analysis and advice, they often represent opportunities that can have lasting benefits for financial institutions that are well prepared.”

The Three Headed Monster That Is Eating Your Profits

There are a number of factors affecting the profitability of traditional banking services.  But three major contributors have the greatest impact.  This three-headed monster – compliance, commoditization and control – is eating away at margins and threatening to make bank services the water in the soup.

Around the world, government policy seems focused on capping fees and interchange income for retail banking and payment services.  This increased pressure not only eliminates traditionally dependable revenue streams but also increases other costs in operations.  Not only are legal fees and compliance review costs increasing daily from regulatory schemes like CARD, PCI DSS, PSD, but the fear of possible fines and sanctions prevent the development of creative products and programs that differentiate one financial institution from another.  If this continues, consumers will soon be unable to distinguish one bank from another.

But compliance isn’t the only factor putting pressure on profits.  The lines that used to differentiate banking institutions become increasingly blurred with the introduction of non-traditional banking and payment systems.  Retailers like Wal-Mart, online banks like GoBank and payment systems like PayPal offer a variety of traditional banking services to their customers without promoting the brands of the financial companies that back those services.  Lowering the brand recognition of the transactional intermediary burdened with the background payment process, decouples the money-bank relationship by lowering the visibility, credibility and loyalty consumers have with their financial institution.

The acceptance and use of these non-traditional payment systems is growing exponentially.  These new players in the financial world are steadily gaining control of the payment process and influence over both the consumer and merchant.   This control erodes consumer loyalty and the ability for traditional banks to cross sell products and services that have long been the mainstay of internal growth.

No one should eulogize the traditional bank just yet.  There are number of weapons that can fight off this three-headed monster.  Much like the knights of ancient folklore slaying fire-breathing dragons, banks have the size, ability and – for now – the customer base to prevent compliance, commoditization and control issues from eating away their profitability.  But just like the fairy tale knights, they need the courage, weapons and a glistening shiny suit of armor to get the job done.

Time for More Checking Account Changes

Checking once again seems to be in the spotlight as banks and credit unions attempt to balance the need to grow accounts and customers while also driving non-interest income. The ‘new environment’ of lower overdraft fees, less interchange income and higher compliance costs is well documented. Most institutions have now made changes to their product suite to include minimum balance, direct deposit or other activity based criteria in a move away from free checking. As quoted in the Wall Street Journal, and based on Data from Moebs Services, “about 41 percent of U.S. financial institutions are not offering unconditional free checking accounts this year, up eight percentage points from a year earlier.” So certainly there has been a retreat. But while the dust may have temporarily settled, action appears to be heating up.

In surveying recent remarks, promotions and actions, it is clear that there is a desire to grow accounts/customers. Consider the following:
• Simpler fee criteria – RBS Citizens Bank recently introduced account Monday with a ‘simpler criteria’ of making one deposit (through any channel) per month to avoid fees.
• Cash incentives – a quick survey shows Bank of the West, Chase and PNC among a number of banks offering $150; BB&T offering $125 without direct deposit, and on and on.
• Executive comments indicating commitment, including Steve Steinour, CEO of Huntington, who hinted at continuing to look for opportunities to distinguish the brand and commitment to ‘fair play’ banking that began with Asterisk Free Checking and 24-Hour Grace.
• Foreign players such as Barclays, who are stepping up their efforts for online US savings funds through products like the Dream account, with the potential to extend into checking

So while the last two years have seen a flurry of activity and adaptation, actions over the last 30 days reiterate the need to maintain focus on performance while contemplating actions that may be accretive to performance. Certainly it is top of mind with the clients we are working with. Now is the time for action!

Coal for Christmas?

On Christmas Eve, the US Postal Regulatory Commission approved the request of the US Postal Service for a variety of rate hikes effective January 26, 2014. Some key changes include first class mail going from 46 to 48 or 49 cents (depending on whether it is metered or not), flats going from 92 to 98 cents, and postcards going from 33 to 34 cents. Given the timing, this certainly flew unnoticed for many, and represented little in the way of yuletide cheer.

While one can debate the increase or the amounts, the reality is that paper based communications with customers can be expensive. In most instances they are required, though financial institutions do a good job (pun intended) of keeping customer mailboxes regularly filled. There are many more powerful methods today for maintaining contact with clients, with the benefit of more timely and relevant messaging.

So was it really coal, or perhaps the incentive you need to rethink how you are communicating with your customers? Why spend more money when you can more effectively and efficiently meet their needs by determining what to send, when to send it, and how to send it?  You decide.

Will Deflationary Concerns Put the Brakes on Markets’ Strong Run?

http://www.bloomberg.com/news/2013-11-13/central-banks-risk-asset-bubbles-in-battle-with-deflation-danger.html

U.S. and Canadian Central Bankers – as well as their bretheren overseas – have recently been successful at supporting rising stock prices and home values but less so at driving inflation. While lower cost for goods makes consumers happy, it makes it harder for businesses to reduce debt and raise profits. Taken further, consumers delay purchases in the hopes of finding ever lower prices and companies delay investment, both of which create significant drag on economic activity.

Central Bankers have continued to stimulate activity with low interest rates and asset purchases. Equity market and housing prices have cooperated in the US. and Canada, but if these efforts don’t soon translate into broad increases in economic activity, the fun could end.

With consumer debt levels still historically high as a percentage of disposable income and business investments in infrastructure and staff still stable, it appears that a spark in confidence will be necessary to bail the Central Bankers out. It is hard to see where that spark will come from, but perhaps the holiday buying spirit will start the ball rolling.

Pushing The Limit on Credit Card Add-Ons

From American Banker –  Banks Probe Regulatory Limits of Credit Card Add-Ons

It appears that most of the major U.S. card issuers have folded their tents relating to products such as Payment Protection and Identity Protection.  In the wake of fines last summer levied by the CFPB against Capital One, Discover and AMEX, most of the major issuers anticipated further regulatory action and have pulled these products. Both JP Morgan Chase and BofA have pending actions in play relating to these products, but AMEX, Wells and Citibank seem to be betting that the regulatory focus will stay on the marketing practices and not on the product structures and features themselves.

Consumer advocates remain highly critical of these products, pointing out the high profit margins, but this is one of the few remaining areas for issuers to earn fee income in the wake of Dodd-Frank and the Credit Card Accountability Responsibility and Disclosure act and the bet may yet pay off as long as the banks tread carefully.  In reality, this may simply be a bet by AMEX, Wells and Citi that any fines incurred as the products and the way they are disclosed and marketed will be less than the potential revenue to be earned, which has been the case so far.  If these three banks are correct, look for other issuers to step back into the space with re-tooled products to bring back some of the fee income that has been lost.

Are we better off after ‘Durbin’?

As the dust settles on the implementation of the Durbin amendment, it is fair to consider the implications for consumers since its enactment. This is even more relevant given the ruling of Judge Leon, who called the board’s interpretation as ‘utterly indefensible’ and indicating his desire to lower rates even further. So are consumer better off now, and what does the future hold?

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