COMMUNICATION STRATEGIES

Banks and credit unions are taking differing approaches to dealing with the recent security breach involving credit cards and debit cards used at Target stores over the holidays. Some banks are identifying compromised debit or credit cards and issuing fresh cards immediately while other banks are taking a watch-and-wait stance, taking action on a case-by-case basis if fraud is detected.

Either way, many banks are using a proactive, multichannel approach for keeping customers informed which can build much sought after loyalty and trust.

In what may turn out to be the largest data breach of its kind, Target reported in December that hackers had stolen credit card and debit card information connected to as many as 40 million customers who shopped at Target stores between Nov. 27 and Dec. 15. Since then, Target has issued additional information that another 70 million customers may have had personal information compromised, including names, phone numbers and email addresses. 

Subsequently, Neiman Marcus revealed it too had been the victim of a security breach, and there are some reporting that the POS system hacking could extend to additional retailers.

The full magnitude of the damage will not likely be known until later in January, when customers receive and examine their monthly statements and call their banks, security experts have said. In past cases, it has taken 30 to 45 days for the vast majority of bad charges to surface. Unfortunately, in a scenario with so much publicity, the impact of the breach may be felt for months . . . or longer.

So, the question is - What is the best way to communicate around a data breach of this nature? In working with a leading communications tracking firm, Competiscan, I was able to see a variety of communication strategies involving multiple channels and a variety of resolutions to the Target data breach.

"In today's environment, it's not a matter of if a data breach will occur, but when it will occur, and how well you respond. Do everything you can to prevent data breaches, but also fully plan out how you will respond if a breach occurs. Today's media and consumer demands that two-pronged approach." - Brian Lapidus, COO, Kroll Fraud Solutions 

"More than 55 percent of respondents said the notification about a data breach occurred more than one month after the incident, and more than 50 percent of respondents rated the timeliness, clarity and quality of the notification as either fair or poor." - The Consumer's Report on Data Breach Notification

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INNOVATION

Expectations from today's consumer are outpacing the ability for banks and credit unions to keep up. The digital consumer is hyper-connected, highly informed and demands a highly personalized approach with regards to communication, product development and customer service.

On January 13, 2014, I was the featured guest for a global Twitter chat hosted by @IBMbigdata entitled, "Customer Experience Innovation in Banking". During the hour, there were 158 participants, 1,095 posts and over 6M impressions!

Below is a sampling of the interchange (including my responses)

A1: Biggest challenge for traditional banks is . . . tradition. Legacy systems, processes and mindsets #CXO
— Jim Marous (@JimMarous) January 13, 2014

A1: #CXO Customers expect online commerce--facilitated by e-banking--to become core of all transactions.
— jameskobielus (@jameskobielus) January 13, 2014

Not only seamless online transactions but also seamless online SECURITY. #cxo A1
— Lois Martin (@LoisMarketing) January 13, 2014

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For the past three years, I have published an article on resolutions bank and credit union marketers should make for the upcoming year. While these posts have always been extremely popular and well read, many marketers still have difficulty achieving some of the most important resolutions.

Despite this lack of success by some, I am again providing suggested resolutions for financial marketers since research shows that people who make resolutions are ten times more likely to attain their goals.

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As I travel across the country, visiting financial institutions in the midst of their annual planning cycle, it is like a trip down memory lane. While the technology and distribution channels have changed, banks and credit unions are still faced with the many of the same strategic challenges we talked about 20 years ago.

As a long time banker and friend, Michael Bencic said, "Improving the customer experience, embracing change, deriving value from data, building strategic partnerships, leveraging technology, ensuring privacy and security, cutting costs and generating fees is like deja vu all over again."

I agree. While the details behind these goals have changed, why have the overarching themes stayed the same? Is it because the planning process usually begins with broad financial requirements and many involved in the process simple dust off last year's plan and hit the restart button? Or is it because, despite a lot of talk around embracing change, the industry (and the regulators) frown upon the potential risk associated with innovation and doing things differently?

In a new report just published by KPMG entitled, Reshaping Banking in a Dynamic Business and Regulatory Climate , the author emphasizes the importance of getting out of 'survival mode' and embracing change, creating new strategies, crafting new infrastructures and focusing on the customer. While there is no denying the importance of each of these issues, this report is not much different than similar reports I read in the 1990's. The primary difference is that the risk of ignoring these issues has far greater implications.

Dusting off last year's planning document and making small alterations is not enough. It will take more than simply finding ways to 'do more with less', cost-cutting and operational improvement. According to Brian Stephens, national leader of KPMG's banking and capital markets practice and author of the report, "There must be acceptance among the entire leadership team that the rapid, unpredictable, and profound change we are witnessing is structural -- not cyclical." He continues, "The debate in not about the need for change, but what changes should be made."

As in the past, the issues that must be addressed are many. The difference is that today, while the issues may look similar to the past, the issues are more interconnected than ever before and the environment where these changes need to be made is evolving at breakneck speed.

The KPMG report provides a perspective into the following critical areas as banks and credit unions plan for 2014 and beyond:

• Culture of embracing change – In today's environment, change is constant, so banks must be nimble and innovative. "Banking leaders must choose to adapt and evolve, or risk irrelevance," says KPMG. "In the future, when banks look back on this time of change, an organization's resilience will not be measured by how much adversity it endured throughout the financial crisis and this period of recovery; rather, it will be measured by how well it adapted to it." The challenge is a tradition of rigid internal resistance to change and a consequent inability to execute. The change in culture must come from the top, starting with the board and senior leadership. And it must me more than just words.

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Investing in online and mobile channels was not intended to simply provide additional channels for customers to access their accounts. The promise of reduced costs, increased cross-sales and enhanced service was the objective for most banks.

The good news is that online and mobile channel adoption is very high, meaning that customers are downloading mobile banking apps to their phones and creating online access points at a high rate. Unfortunately, that’s where the momentum has stopped.

Third in a Series on Big Data in Banking

Instead of migrating more expensive interactions to less costly channels, consumers have actually increased their total interactions. “In talking to all types of banks across the globe, we’re hearing a similar story – customers are signing-up for online and mobile banking, but calls into the call centers are not decreasing at any noticeable rate,” says Ido Ophir, head of products at Personetics. “People are still calling with transaction-related questions and even account-level questions.”  

A recent industry report revealed that more than 30 percent of customer service calls were preceded by an online visit. That’s a large percentage, especially when the vast majority of these questions can easily be answered in the digital self-services channels.

Based on the numbers being reported by large banks, while they have several million signed up for digital banking services, less than 10% are using mobile banking in any real capacity each month. So, while banks have done a great job of signing up consumers for online and mobile banking, customers are not fully leveraging what these self-service channels have to offer. The utilization problem actually goes even further - most customers log in to check balances or look at individual transaction details, but only a very small percent use in-depth or multiple features like funds transfers and check image deposits on a regular basis.

Source: Board of Governors of the Federal Reserve System  - Consumers and Mobile Financial Services (March 2013) 

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As was discussed in the first of my series on Big Data in Banking, the financial services industry has a vast reservoir of data on their customers, but is in the infancy stage of utilizing this data for financial or competitive gain. 

A new study published by the IBM Institute for Business Value confirms that while the majority of financial firms believe data can create a competitive advantage, the scope of data used and the analytic capabilities lag behind other industries.

Second in a series on Big Data and Banking

Pragmatic Customer-Centric Strategy

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Understanding customers is the foundation to a sustainable competitive advantage in banking. Therefore, financial marketers can no longer wait to embrace the power of advanced analytics to gain insights and evaluate opportunities that will improve cross-selling, up-selling and enhance share of wallet.

Financial marketers also need to extract more value from internal and external data sources, guiding product development, customer communication, innovation and growth.

First in a Series on Big Data and Banking

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With continued rapid growth of both online and mobile banking, banks and credit unions need to come up with better ways of marketing through digital channels. 

The technology is readily available, and best practices can be found at companies like Google, Amazon and others, but many banks are still at the infancy stage in terms of digital marketing capabilities.

To succeed in the future, financial institutions need to have a single view of the customer across channels, be equipped with advanced analytics for predicting behavior, be able to deliver offers to customers in real time and effectively integrate social media into the marketing mix.

A just released study by Efma and Wipro Technologies entitled, 'Global Retail Banking Digital Marketing Report', found that only a few banks are prepared for the digital marketing revolution, with the potential for improvement significant at most organizations. This first ever study also revealed that social media is not yet a part of mainstream marketing and is not a key customer interaction channel for most banks.

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Bank and credit union marketers have traditionally relied on the use of demographic segmentation as a means of targeting customers for product and service communication. 

Recent studies, however, provide growing evidence that changes in product delivery, communication channels and competition may have made a demographic-based targeting approach much less effective compared to other approaches that use additional data sources.

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Commonwealth Bank of Australia continues to be one of the bank innovation leaders, announcing two social-based platforms this week. 'Kaching for Facebook' is an extension of the already popular Kaching smartphone app covered in a previous Bank Marketing Strategy post, allowing customers to do basic transactions within the Facebook website. 

In addition, CommBank introduced the 'Signals' insight hub that collects transactional data to allow customers to view and share how their transaction patterns compare with others.

Kaching Comes to Facebook

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At a time when self-service banking models are replacing one-to-one interaction, personalized videos can provide a highly engaging and relevant communication option that can improve engagement, increase sales and reduce churn. 

Combining real-time data with highly customized content, marketers can turn big data insights into differentiated 'wow' experiences.

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Over the past week, I have reached out to many of my banking industry colleagues in the U.S. and abroad asking for examples of where 'big data' is being used effectively in retail banking. 

The response was underwhelming to say the least, as the majority of banking leaders provided examples of 'works in progress' or 'initial wins', with some of the most mentioned case studies being in the areas of risk and fraud prevention as opposed to marketing. 

In addition to a post on big data by Aite Group's Ron Shevlin on The Financial Brand, and widely covered discussions about 'big data hype' on blogs from Gartner and CapGemini this past week, most industry leaders believe banks need to focus on data close to home before expanding their pursuit of the next shiny object. To this end, a friend from the U.K. offered to provide a guest post on the topic from his perspective as a supplier to the financial services industry.

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Unexpected pleasantries always have a deeper impact. Like moments that surprise you as if a higher power had designed them just for you. The luck of making exciting discoveries by accident, love at first sight, coming across a childhood treasure at a yard sale, unintentionally coming across a precious memory or connecting with an insight that answers your dreams. These are moments that create internal warmth that can only come from unexpected joy.

Take, for example, a concert by your favorite childhood band, The Rolling Stones. Such an event has expectation, build up, and the experience of the moment. The joy is foreseeable. Now, imagine that you head to a local bar for a drink, and on that night a special guest is making an appearance. Without any prior notice, The Rolling Stones come on stage. Previously, such magical moments were only possible by two means. Organized by someone that knows you, or by fate. 

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CROWDSOURCING SERIES

Trying to predict what is going to happen in the banking industry is like trying to predict tomorrow's weather. While you may get the forecast right, it could be more a case of luck than skill. And what you see today could quickly change tomorrow.

With that as the backdrop, I asked almost fifty industry leaders who author blogs I read, post on Twitter, speak at industry trade shows or make banking a career for their thoughts on what may be the most important trends in retail banking in 2013.

The predictions ran the gamut from what may occur in payments to how bank distribution could begin to transform. While some focused on larger megatrends, others had a narrower scope. In all cases, however, the predictions provide food for thought for bankers and industry providers. It is clear the one forecast that is guaranteed to be accurate is that the industry will be different this time next year.

Battle For Payment Supremacy Will Continue

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Now more than ever, the Chief Marketing Officer needs to be a multi-tasker, with enhanced technological and customer analysis skills added to their traditional marketing, branding and advertising credentials. Reposted below is a recent Chief Marketing Technologist post from Scott Brinker that recaps a report from the Economist Intelligence Unit on this transformation of the role of the CMO.

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