Thursday, September 20, 2012
Banks Transforming Branch Networks to Improve Efficiencies
A lot has been written lately around the desire for banks to transform their branch networks given the consumer acceptance of alternative channels and the need to reduce distribution costs. In the past week, there has been coverage in both the American Banker as well as in BAI's Banking Strategies publication (see links to recent articles and white papers below).
One such report, published by the financial market research firm Fitch Ratings entitled, U.S. Banks: Rationalizing the Branch Network, expects that both fewer numbers of branches and different types of branches will be serving customers in the future. According to the report, the continuously increasing cost structure of banking, accompanied by a challenging revenue environment and higher capital requirements is prompting banks to evaluate all expense categories — especially their branch distribution system, which is one of the most significant expenses.
Past Branch Growth
For the past 30 years, branch growth continued unabated while the number of financial institutions declined by more than 50%. The growth occurred largely through consolidation and de-novo expansion, with the objective being to expand a bank's footprint and customer base and therefore low cost deposits and loans.
One such report, published by the financial market research firm Fitch Ratings entitled, U.S. Banks: Rationalizing the Branch Network, expects that both fewer numbers of branches and different types of branches will be serving customers in the future. According to the report, the continuously increasing cost structure of banking, accompanied by a challenging revenue environment and higher capital requirements is prompting banks to evaluate all expense categories — especially their branch distribution system, which is one of the most significant expenses.
Past Branch Growth
For the past 30 years, branch growth continued unabated while the number of financial institutions declined by more than 50%. The growth occurred largely through consolidation and de-novo expansion, with the objective being to expand a bank's footprint and customer base and therefore low cost deposits and loans.
Tuesday, September 18, 2012
The Changing Definition of Convenience in Banking
Historically, one of the reasons people have chosen big banks has been their large network of branches and ATMs. Especially for people like myself, who travel across the country frequently, finding a place to conduct basic transactions without a fee was a competitive advantage for those institutions with a wide distribution network.
Recently, however, small institutions have been working on ways to erode this advantage, closing the gap through expanded ATM networks, improved online banking and now mobile banking services. In short, technology is quickly changing the definition of convenience for bank customers.
A recent study, The New Banking Value Proposition , from market research firm Chadwick Martin Bailey, finds that credit unions and smaller banks are maintaining their perception of having high levels of personalized service while also catching up with their larger competitors in terms of banking convenience. For those smaller institutions who are focusing on new technologies, this can allow them to more effectively compete for the increasing number of accounts in motion. Additional findings include:
Recently, however, small institutions have been working on ways to erode this advantage, closing the gap through expanded ATM networks, improved online banking and now mobile banking services. In short, technology is quickly changing the definition of convenience for bank customers.
A recent study, The New Banking Value Proposition , from market research firm Chadwick Martin Bailey, finds that credit unions and smaller banks are maintaining their perception of having high levels of personalized service while also catching up with their larger competitors in terms of banking convenience. For those smaller institutions who are focusing on new technologies, this can allow them to more effectively compete for the increasing number of accounts in motion. Additional findings include:
Friday, September 14, 2012
The Impact of the iPhone 5 on Bank Marketing
So, the anticipation is over and the newest version of the iPhone has been introduced. When all was said and done, there were few surprises left as to what the iPhone 5 would offer, and for those of us who were crossing our fingers for the possibility of NFC integration (and further payments disruption), there may have even been a bit of disappointment.
And while additional enhancements to the Passbook app provides a glimpse into the potential for a head on competition with Google Wallet for payments supremacy in the future, the shop-with-your-phone coupon capability is not applicable to most bank marketers. What should be of more importance to bank marketers is the additional marketing real estate provided with the new phone and the growth in sales that may be on the horizon.
Bank marketers should see promise with the iPhone 5's larger, 4-inch screen with Retina display which provides 18% more pixels for delivering enhanced mobile ads, banners, landing pages and interactive campaigns. While the extra pixels may not seem like much, it moves the iPhone experience closer to that of the iPad, which has already proven itself to be a major tool for consumer consumption. And for those who are still tablet-less, it is possible that this new device will a bridge for engaged behavior.
Sunday, March 4, 2012
Bank of America Should Become a Credit Union
I have
decided that the best course of action for Bank of America may
be to become a credit union. Despite the regulatory hurdles and government
scrutiny that the bank would need to deal with, it may be an easier course of
action than trying to catch a break with our industry's trade press, the
general media and definitely those using social media to respond to every move the
bank makes.
For
instance, American Banker published a story last week from Ed Roberts entitled, Bank Transfer Day Spurs Big Membership Growth at CUs .
The story cited that the credit union industry had near record growth in the
second half of 2011 . . . 'after the ill-fated September announcement by Bank of America of monthly
debit fees prompted Bank Transfer Day '. This growth of 850,000
members in the final six months of the year contributed to an annual growth for
the credit union industry of almost 1.3 million new accounts, reported the NCUA.
According to my calculations, a growth
of 850,000 new members for the second half of 2011 represents an average of
fewer than one incremental new account per credit union
(not per branch) a day. The statistics are roughly the same when you look at the annual growth rate as well. Assuming that the number of new members represented incremental growth, the 1.3 million new members reflect only a 1.4% growth over 2010 according to the 2010 Government Census.
How does this become newsworthy? In almost all U.S. major newspapers, a version of this article ran including a reference to both Bank Transfer Day and Bank of America. The Los Angeles Times ran a headline, Banks' Fees Pay Off - For Credit Unions while Forbes ran an even more sensationalized headline, Credit Unions Membership Soars as Customers Spurn Big Banks. Does any other industry get as much press for close to flat line growth? Shouldn't this be more realistically considered business as usual?
How does this become newsworthy? In almost all U.S. major newspapers, a version of this article ran including a reference to both Bank Transfer Day and Bank of America. The Los Angeles Times ran a headline, Banks' Fees Pay Off - For Credit Unions while Forbes ran an even more sensationalized headline, Credit Unions Membership Soars as Customers Spurn Big Banks. Does any other industry get as much press for close to flat line growth? Shouldn't this be more realistically considered business as usual?
Thursday, March 1, 2012
Banks Need to Collect More Insights to Communicate Effectively
By Bob Williams, Director of Marketing Technologies at Harland Clarke and author of the blog, The Merchant Stand .
A friend and colleague Jim Marous shared an article from American Banker on Googe+ entitled Banks Underuse Mobile for Communication. The article discusses challenges that financial institutions have with communicating with their customers through mobile devices. While mobile device applications and mobile optimized sites are becoming more common, and expected by account holders, financial institutions are not using the mobile channel for proactive communication. Kael Kelly, senior director at Varolii is quoted in the article “Banks don’t have the data that they need. A lot of the phone number data doesn’t easily distinguish between a mobile number and a land-line.”
So the idea that banks don’t know what data they have made me think about some other data that Jim Marous shared about financial institutions and customer data. Like this tweet about banks not having email addresses for their account holders.
The challenge I see is missing or unintelligible customer profile data. That problem expands beyond the boundary of the financial services industry. It’s really a common need for any type of business. Another challenge is the misuse (or lack of use) of the data that an organization has. Another conversation with Jim last week revealed that he noticed his bank mention that online banking was 'down' using Twitter. While admirable that they used a more modern social media tool for this notification, there probably aren't many people following Twitter the way Jim does. Making matters worse, they didn't use either his email address (which is tied to his online banking account) or SMS (the bank has his cell phone) to make this notification. In other words, the bank had the tools, but didn't use what was at their disposal.
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