1. ten key trends About Bradley Leimer
Bradley Leimer leads online and mobile strategy
for the California based Mechanics Bank. He
brings additional perspective from time leading
from the community marketing and business development teams in
the credit union industry and through a decade
driving big data and database marketing analytic
services for national and regional bank clients.
banking trenches You can see his thoughts on engagement banking
and social channels on American Banker, his
blog, and other financial industry sites.ndustry
sites.
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
2. Our latest white paper on Engagement Banking is available
for download at:
banking.backbase.com/adv/futureofbanking-whitepaper.php
3. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
4. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
5. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
6. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
7. environment
competition
customer
marketing
design
data
customers
our markechanged
behavior
technology
partners
model
utility
Efficiency
content
conversation
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
8. doomed
dumb pipes
under siege
recovering
our industry is growing
poised
pivoting
stronger
innovating
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
9. BofA feeasco
occupy banks
move your money
occupy wall street
bank transfer day
customer behavior
technology disruption
dissatisfaction
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
10. "I'll be damned if
we don't have
record profits in
next year or two."
Jamie Dimon, CEO JPMorganChase
Y2011 $18.98B net income
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
11. + returning to profit
building balance sheets
expanding relationships U.S. Banks (FDIC)
redefining community Q4 2011
growing deposits Banks $26.3B profit (Up 23% from Q4 2010)
Biggest quarterly increase in four years
- need to replace non-interest Loans and deposits both grew 1.8% Assets up 0.6%
income (down 7.4%) 54 institution mergers, ―only‖ 18 failures
Y2011
decrease profit reliance Banks $119.5B in profit in 2011
on reduction in provision Average ROA 0.76% (increase from 0.64% in 2010)
for loan loss 63% of banks reported increases in net income in 2011
Largest 100 banks (1.5%) ~ 80% of deposits, 75% of loans
loan growth
customer/member growth U.S. Credit Unions (NCUA/Federal Insured)
innovation, regulation
Q4 2011
CU Profit $6.41B (Up 4.3% from Q4 2010)
+/- leveraging technology Loans grew 1.2% Deposits up 5.2%
managing COF, risk Memberships up 1.5% (91.8M)
efficiency gains
still adding branches
98,201 J2011 Y2011
CU $16.3B in profit in 2011.
81,273 J1994 (+21%) Average ROA 0.68% (increase from 0.66% in 2010)
consolidation/M&A
redefining “banking”
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
12. Here are the simple facts: By the end of this
decade there will be 40% fewer banks and
50% fewer credit unions.
David Kerstein
Peak Performance
Consulting Group
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
13. The number of banks
declined from 18,000 in 1984
to 7,357 at year end 2011.
2020 projections show only
4,490 banks remaining.
The consolidation of credit
unions is even more
dramatic — virtually a straight
line 27 straight years.
There were 15,193 in 1984
but only 7,094 at the end of
2011. This number will drop
to 3,500 in 2020.
Source: David Kerstein Peak Performance Consulting Group
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
14. 2020 U.S. Banking Landscape
Banks/CUs
+/- < 8,000 institutions; more dynamic
+ focus on partnering/industry level applications
+/- smaller branch footprint/market niche focus
+ mobile/untethered; + contextual proximity focus
+ checks racing toward zero; Cash digitized/mobilized
+/- focus on service/experience/efficiency gains
+/- new revenue streams around payment/merchants
Fintech Providers
+/- additional consolidation +/- competition for clients
- larger barrier to entry + sources for start-up funding
+/- innovation seeking new revenue opportunities
+ security, simplicity, automation key drivers
Consumer/Businesses Client Experience
- Pressures to replace non-interest income = fees
- efficiencies reduces ‗free‘ or ‗reward‘ product focus
+ instant payment & money management options
+/- mobile / social connectivity + purchases =
contextual marketing, personalization
+/- product/revenue innovation (directed @ POS)
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
15. engagement banking is a new
marketing, sales and service model that deploys technology to
achieve both customer intimacy and scale.
Michael Degnan, SapientNitro
Engagement Banking Lead,
Financial Services Center of Excellence
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
16. ―Banking is now
something you do,
not somewhere you go.‖
Brett King
Bank 2.0 and Branch Today, Gone Tomorrow
Founder, Movenbank
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
17. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
18. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
19. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
20. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
21. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
22. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
23. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
24. ‘Why do you think
you can work in the
financial industry?’
That’s exactly why
we’re going to do so
well—the financial
industry is built
around blockers
and people
saying no.”
Jack Dorsey
New York Magazine March 2012
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
25. “I’ve finally cracked it.”
Steve Jobs
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
26. “I skate to where the puck is going to be,
not where it’s been.” Wayne Gretzky
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
27. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
28. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
29. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
30. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
31. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
32. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
33. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
34. 1
2
3
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
35. 1
2
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
36. 3
4
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
37. Contextual/Semantic Search 2
1
4
3
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
38. ―(U.S.) Financial institutions lost
at least $873M, conservatively,
in potential revenue, as 5.8 million
customers attempted - and failed –
to open accounts online‖
Javelin Strategy & Research — ―2011 Online Account Opening:
Faulty Process Hobbles FIs in the Battle for Customer Acquisition,
Profitability and Retention‖ Oct 2011
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
39. Online Banking
Bill Pay
Services
Aggregation / PFM 1.0
A2A / Online Only
P2P / Online Only
Mobile Banking
Tablet Banking
1.0
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
40. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
41. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
42. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
43.
44. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
45. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
46. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
47. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
48. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
49. Branding
Removed
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
50. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
51. Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
52. can we change enough?
Bank 2.0 Webinar Series
10 Key Trends From the Community Banking Trenches bradley @leimer
7 March 2012
53. Bank 2.0 Webinar Series
10 Key Trends From
the Community
Banking Trenches
7 March 2012, 10:00 PST
Call to Action
Take one idea you had during this presentation and let me know how
you will improve your bank, credit union or financial application.
While we only had time to cover a short list of topics today, if you see additional trends that matter
to your business, contact me to discuss.
W 510.741.3565
M 510.684.1041
About Bradley Leimer
Bradley Leimer leads online and mobile strategy
bradleyleimer@mechanicsbank.com for the California based Mechanics Bank. He
brings additional perspective from time leading
marketing and business development teams in
@leimer the credit union industry and through a decade
driving big data and database marketing analytic
services for national and regional bank clients.
linkedin.com/in/leimer You can see his thoughts on engagement banking
and social channels on American Banker, his
blog, and other financial industry sites.
http://bit.ly/pT2MVL
Editor's Notes
Greetings from the San Francisco Bay Area … thank you for tuning in to our webinar today, and thank you to Backbase for hosting this ongoing Bank 2.0 series. I have really enjoyed my conversations with many of you in the growing social community of banking professionals, industry analysts, and fintech providers. In case you’re only familiar with me through my Twitter content, I’ve been in financial services for over fifteen years, almost twenty years now, driving data-driven marketing and technology solutions for banks and credit unions, first from the outside, and now from within. I’ve worked with data from over 6,500 financial institutions, ranging from a 1000 member credit union to our largest banks. One thing you wouldn’t know about me is that I grew up an airline family.
My father worked at United Airlines, from the mid 60’s, and for his entire career, spanning more than 35 years. Travelling was seen as a privilege back then. Everyone dressed up, and it seemed pretty special just to be flying.
There were plenty of open seats, piano lounges, and direct flights to places like Omaha. You were served actual food. And it wasn’t too bad actually.
But over the course of a few decades, I think we all noticed that the airline industry was changing. Between de-regulation, rising fuel prices, low cost carriers, labor disputes and strikes, there were pressures to cut costs and reduce services. United and the other airlines started looking much different than before. Many brands simply disappeared. After the 9/11 tragedies, it looked like the entire industry was headed toward bankruptcy.
But we all still needed to fly. The airline industry has since rebounded.We see new partnerships, new technologies, and energy efficient engines that transport across the world.Air travel itself didn’t change, but everything about it did. Now let’s talk about the banking industry. I can tell you from the trenches, it’s an exciting time to be in financial services. Maybe a little too exciting.
As our own industry pulls out of this great recession, something feels, well…different. Disruption is accelerating the need for efficiency and agility to meet these changing demands. That’s our first obvious trend: the need for agility.Agility to respond to changes in everything from consumer behavior to technology. Agility to respond to regulation, consolidation, and new partnerships. We’ll need to be more in tune with future trends, and how they impact our model.
How do you view the outlook for community banks and credit unions?It really depends on who you ask (and maybe even who you follow). Some voices in community banking make it seem like we are heading toward the equivalent of a ‘banking spring’ … customers are outraged, and moving away from the big banks in droves. It’s a mini-revolution!
Community banks, and especially community credit unions, have done everything they could to leverage Bank Transfer Day, Move Your Money, the Bank of America debit card feeasco and ‘movements’ like Occupy Wall Street. But how much did we really grow? Initial reports of 6.9M customers moving to smaller institutions don’t look accurate. It might be just 10% of that, as most big bank customers simply moved to another big bank. And despite industry surveys continually reflecting a gap in satisfaction rates between big banks, it seems like convenience and technology trumps service. The reality is that we’re not growing at the same rate. Not even close.The fact is that most community institutions are trying to emulate many features of our national and regional competitors, in terms of technology, channel, and services. If we are just emulating and not innovating, how will this demonstrate agility, and ensure that we’ll continue to grow? Other industry voices seem pretty confident in their ability to keep up.
Chase continues to build out it’s nationwide branch network, especially in markets like California, and plans on doubling efforts to serve wealthier, more profitable clients in each market (Chase’s focus is on households with deposits > $100K, and they plan on continuing efforts to shift unprofitable clients toward electronic channels). But these segments can be profitable, and we need to meet their needs and match their change in behavior to serve them. What’s the outlook for the rest of us?
We now see a slow, somewhat erratic recovery, but the last quarter showed some very good numbers.If we can grow from this over the next several years, this means some room to expand our investment in more interesting technology, as well as some room to pivot our business model to focus on profitable market niches in our community, new segments, new strategies, new revenue, and new partnerships. Renewing focus on product innovations to help us grow as we come out of this deep recession. Improving our financial outlook, that’s a good trend toward becoming more agile, more responsive to changes in technology and customer behavior. But shouldn’t we have been focusing on adjusting our business model and investing in technology during this downturn? That’s what our larger competitors have done. Will it matter in the long term?
By the end of this decade, it’s projected that there will be 40% fewer banks and 50% fewer credit unions in the U.S.So what can we do? Well, for one thing, you might want to start learning HTML5, or how mobile payments might impact your revenue. Or at least learn how to brew really good coffee. People love good coffee. Fintech providers that cater to community banks and credit unions should take note, as your market for potential clients in the U.S. is about to be cut in half over the next decade. You need to help us prosper, just as we can work with you to understand our customer’s needs. Build more agile technology, focus on end user testing, and learn from the great fintech development that is happening. And above all, we need you to ship product enhancements. Now. If we don’t prosper, you might be faced with the prospect of competing for business the likes of Bank of America and Chase instead of a community bank or credit union. Unless you also have a platform that also goes direct to consumer, we’ll need to work together. Let’s dive into these numbers from David Kerstein a bit more.
I’m not sure you need any regression analysis to see the trends in these charts. All you need is a ruler really. 2020 projections show a drop from 14,000 to less than 8,000 institutions. This is why we need to grow, to become more efficient, and to really consider what we can learn from new models. What other trends are happening in the industry?
Are banks and credit unions under $1B in assets going to be part of that industry equation? Longer term, what about institutions under $10B, $50B? Even the FDIC is thinking about defining ‘community banking’ differently. Maybe we should too. Are we already in an era of “bank 2.0”, or “engagement banking”, as some call it? Let’s define these models a bit.
Mike Degnan at Sapient Nitro says the banking model is changing. It hinges on our ability to collect new and old forms of customer data, turn that data into insight, and disseminate that insight into actionable sales and marketing activity. We need to tap into channels and messaging that align with, and are enhanced by, our customer’s behavior. At the center of this is a strong user experience. I would say these ideas ring true across all industries as we shift to a digital economy. So how else is our model changing?
Brett King proposes that a major and disruptive shift is occurring to banking’s distribution model. Banking is now something you do, not somewhere you go. Wasn’t that part of our plan anyway? To move our customers and members away from branch, away from higher cost channels? Isn’t that why we built online banking, bill pay, and features for consumers and businesses to manage their own finances? But something seems different now. Recent innovations in mobile, in payment, are coming from more than just Paypal, payment issuers, and traditional non-bank rivals. Disruption is coming from within established financial networks, and from well funded startups like Square and Dwolla. They are shifting bigger and bigger payment volumes every month, poking into our income streams, and more importantly into the way our customers access and move their money. Can the changes around the utility of “banking” really have the ability to reduce all but a few giants in our industry to a series of dump pipes? Are we going to end up like movies, music, and books? Are we going to simply offer financial advice in 99 cent downloads? What might this engagement banking look like?
Does it look like Simple? New features in their banking application include automated categorical and proximity based tagging, semantic keyword search, a form of real-time social p2p, transaction/tab splitting, and an algorithm to help you understand what is ‘safe to spend’ at any given time. It’s a debit card driven relationship, tied together by a use-on any device application based on simplifying everyday banking. They promise to offer a higher degree of transparency around potential fees (in fact, going out of their way to help you avoid them), and new ways to use data to best enhance your relationship with Simple. What can we learn from Simple? For one, their technology should help drive adoption for their banking partners. We need to say yes when we have the ability to offer our customers technology that resonates, even if it could co-opt our branding. For smaller institutions especially, this is about survival. What else might engagement banking or bank 2.0 look like?
Does it look like Movenbank?Like Simple, Movenbank has been scrutinized for a year now, and it’s not even live. The biggest difference between them and Simple is that Movenbank builds themselves as the world’s first mobile only bank. No brick and mortar, no cards of any kind. Just a mobile app, NFC payments, and additional functions you need to move and track money. Like Simple, it looks like they too may launch as a partner to existing banks. I still wonder, if neither Movenbank or Simple can break through the banking ecosystem, can we still learn something from their model? Well first, their approach to signing up is refreshing. During the initial stages, you ‘request to join’ and wait for an invite. Once that is received, you connect through Facebook, and are asked a series of questions.
Based on your answers, Movenbank then assigns a financial personality which you can refine and share across your network. Not only does this simple process increase engagement, it makes signing up very social. Which is the idea as they draw insights into your profile as well, through reaching into your social graph, and through your connected network. One of their core principles is to base rates, fees, and risk assessment for available credit products around this idea of CRED, which is a combination of traditional scoring elements and a consumer's social media "street credibility."
Movenbank’s queries remind me a little of Hunch’s taste graph which I wrote about in American Banker. It also reminds me of Amazon’ related product cross-sells and “buyer’s of this also bought that”, or even Pandora’s recommendation engine…but they have a singular focus on financial scenarios. The more data you provide, the better the model gets. That has larger implications for automated sales and marketing engines, and is a trend that will continue as we talk about merchant rewards.
Using the social graph within financial services, beyond ad targeting, is a trend that will continue. Our customers are opening up their social and taste graphs in new ways all the time. Look at Pinterest, and the additional data around personal taste that could be used for modeling behavior down the line.The idea of providing value in return for sharing this type of data will move forward in our industry. As will gaining insights into adding elements of gamification, reward unlocks, leveling up, and matching pricing and service features through additional social influence. There are other related trends of interest in these new models.
Shedding additional transparency around customer privacy is a trend we should all strive for. Recently, users across Google’s sites were told they were unifying not only their privacy policy, but their collection of personal data. That’s a goldmine of personal information…but they appeared to be very clear about how they were going to collect it, what they used it for, and most importantly how to opt-out. Chris Skinner at the Financial Services Club pointed out that banks might follow suit in their approach to privacy. I tend to agree with that sentiment. With the creation of the CFPB, I also wouldn’t be surprised if we saw additional guidelines around privacy disclosure standards that move beyond what we saw in Gramm-Leach-Blileyin 1999. Additional regulation is a trend that almost goes without mention. There’s another trend that we need to discuss if we are truly looking at an engagement banking model.
Security is probably the most important trend to discuss. Whether you believe that community banking’s base model has to change or not, this is where financial applications of any kind still need to resonate with their clients: maintaining trust is at the heart of our business. And while most surveys I’ve seen illustrate that customers are not completely comfortable with a social banking login, shopping sites and other content providers are really starting to leverage this ubiquitous accessibility. As payment and related apps leverage personal and proximity data…it may one day be a disadvantage if we do not. Just as we need to be very transparent around how we use personal data, if we venture into areas like a simplified social login, we need to develop additional processes to enhance our end point security, pattern recognition, and transaction control points. As the complexity of sharing and protecting data for consumers grows, we need to trend toward greater transparency as we change our policies. While we see a lot of blogs in financial services, we don’t see always see them advocate a point of view around topics like technology standards and privacy. While it’s important to share stories about institution’s work with the community, you shouldn’t be afraid to talk clearly about issues like privacy and security, and how you will use your customer data. After all, it’s fast becoming part of your new business model.
Jack Dorsey, who’s company Square is now processing $4B in payments a year, had this to say about the financial services industry: “Square is going to be successful because the financial industry is built around blockers, and people saying no.” If you listen to any point I’m making today, make sure it’s this one: We need to start saying yes a whole lot more.
Partly due to this guy and his little gadgets.
Apple is now the world’s biggest company by market cap…they could become the first trillion dollar company. They’ve done this by an organization wide obsession to detail about product and experience, and a mixture of really good marketing that defies conventional wisdom about consumer behavior (skate to where the puck is going to be, not where it’s been – Wayne Gretzky). They have disrupted or created new industries around computers, interfaces, photography, movies, music, mobile phones, and changed the way we consume (and even more importantly, how we pay for content (240 million people on iTunes, 25 billion apps and counting –that’s a lot of micropayments). What else are people doing differently now?
We have seen a fundamental shift of consumer expectations. Apps, social, and mobile functionality have us all seeking additional choices, more personalized experiences, we need to be much more in tune where clients behavior will take them next…we need to be agile. Nearly half of mobile sales are now smartphones. Social media sites consumed almost a fifth of our digital time last year. Americans doubled the amount of digital video we watched last year, and with an improved iPad launching today and a reboot of Apple TV looming, this trend will only grow.
Over 25 billion apps have been downloaded from the Apple store alone, and total apps across all platforms represented a 300% increase over the year before. With the rise of the smart phone and tablet, and the rapid appization of the desktop (and many think TV as well), we need to focus on building experiences that scale across the four screen spectrum. Build it once, optimize on all. Mobile is also disrupting traditional sales funnels, financial services included. Smartphones have become our most-valued shopping companion, and tablets are the perfect couch companion for making financial product decisions and close digital sales. What other consumer behavior trends do we need to pay attention to, tangible ones that we can impact?
Our customers and prospects still need to find us (and our apps). In my conversations with other institutions, SEO efforts are improving and producing better natural search results, but paid search placement is becoming more crowded as Bank of America and super-regionals target more specific territories. We see also see a long term trend an active pursuit of ad placement that span across web properties. As we actively pursue prospects with our ads, we’ll be focused on social ad spend on sites like Facebook, which displayed 1 out of every 4 digital ads last year. This focus on extending our brands further into digital will continue to be a trend as mobile ad opportunities continue to take off. If ALL we learn from consumers is that they share content and are app focused, what else should we be doing in response to these trends?
I know I’ll be disappointing some by not diving too much into social media, but it’s such an obvious trend and shift in how we will approach important aspects of our business in the next decade. Social channels have opened up many opportunities to learn and connect with our customers, both consumers and business, but so many of us are doing it wrong. While I think many brands are really starting to leverage social well, we must focus these channels toward larger strategies around growth and efficiency. The alternative, programs that are initiated and then abandoned, simply erode customer trust in our institutions, and demonstrates our inability to truly understand these technologies and larger changes in behavior. Let’s talk about a trend in social we’ll be seeing more of. Barclays announced the Ring MasterCard, run by a virtual cardmember community where cardmembers collectively can see the card's financial statements, and can influence decisions about how the card is managed and serviced. The cardmember community can then share any profit generated and work with Barclays to determine future features of the product. Amex just launched Amex Tweets, which allows you to automatically tie rewards when you sync your twitter account and tweet out hashtags like #AmexWholeFoods which will give you $20 off if you buy $75 or more at the store.These examples illustrates the linking our efforts in social to providing tangible benefits to match behavior, and create rewards for the entire community, including our merchant partners. I’ll point your toward some great resources from Christophe Langlois, and the Financial Brand to help spark some serious conversation at your institution. There’s more work to be done.
The presentation layer for many community institution’s technology stack often consists of a single website and several flavors of online banking. There’s very little personalization tied to the user’s visit or profile. But this is changing rapidly. We are seeing more need (and benefit) from increased targeting, as well as more engaging designs leveraging scalable full screen imagery, iconography, and interesting transitions through jQuery and HTML5. In the past year, we saw major renovations in the U.S. at sites from Citi, Bank of America, and US Bank. These sites focus much more on the user’s needs, and less about the way the bank silos its business units. We also see trends toward a renewed focus on producing content that is more engaging, more localized (less generic imagery), and more frequently refreshed. The key is a consistent user experience across an FI’s main site, and integrating that look and feel on through to your secure site. With weaving multiple vendors together, that’s rarely an easy task. We still have to address consistent user experience issues, such as presenting content that works in all browsers, all OS’s, and increasingly important, we have much work to do to optimize our content for our growing activity from mobile and tablet visitors.
More community bank’s like ours are extending their brand reach (and sales opportunities) through segment based microsites, sites for social customer advocacy, as well as single product landing pages with clear calls to action – and this is happening for more than just email campaigns. It’s all about the sale, and the connection to the presenting an appropriate offer in context. This activity will be directed more and more toward mobile and proximity applications during the next decade.
A good example of content focus around the user experience, client advocacy, social integration, and the sales funnel is USAA.
Visiting the USAA site, we see a flexible login that more resembles Facebook that the typical bank, as well as a growing trend toward super navigation, resembling their site map. You also see life events as more of a focus.
Once into an actual product on USAA’s site, you see the benefits clearly called out, as well as updated comparative data to similar accounts at other FIs. If community institutions think they are more competitive, this is where they should put some focus. We have to also talk about their Amazon-review like feedback mechanism as well.
USAA’s product and service ranking engine comes from a company called BazaarVoice, and leverages client reviews, more in-depth client advocacy stories, as well as client to client help through a FAQ engine. Brilliant, and it’s a trend we’ll see more of. People expect to see reviews on all types of sites now, they want to comment as well, and they make purchase decisions based on them. And it’s also SEO friendly, and instantly shareable across social channels. How do our sites stack up?
Contextual, semantic, or real word search moves our sites beyond the simple search box most of us have. KLM’s site uses a RightNow application to take real word search to provides contextual results, with many options to satisfy a site visitor if they have a question. This, combined with growing examples of client to client driven FAQs like that on Intuit’s tax sites, are examples where community institutions can improve both sales and self-service. It’s also an example where we need to pull the best from the web from any vertical outside of financial services. If we help a site visitor find what they are looking for, they might just be ready to purchase. Let’s make it easier for them.
Functions like customer on-boarding and automated cross selling have to match web 2.0 flexibility and simplicity. Community institutions lose far too much business on their sites. We make it too cumbersome for new clients, we don’t leverage our secure channel for quick checkout for existing clients, and we aren’t optimizing these experiences for mobile and tablets. The larger trend will be making these processes as quick as checkout at Amazon, making them platform agnostic, and leveraging tablet forms with signature at point of sale and remote selling opportunities. These efforts should increase efficiencies in growing our customer base, but we need to aggressively pursue account opening models with a variation of funding.
Let’ dive into the authenticated channel for a bit. While the majority of community institutions have online banking, far less offer bill pay, and ancillary services like integrated account opening with funding, estatements, aggregation, PFM, or external transfers to other FIs or people via A2A or P2P. We need every function, in every application, customizable and modularized, and available at the segment appropriate level. The interface will move toward one platform and admin for both consumer and business, and will eventually remove the need to call out functions like ACH, wires, and bill pay. All clients want to do is move money. Let’s help them do just that. Let’s talk about a couple of features.
Community banking’s P2P functions should more prevalent, should consolidate contacts from a variety of sources including social, they should offer more personalized limits, more options to transfer on credit, and this all needs to be mobile and proximity aware. Whether that’s NFC or another technology or Proxsense, we’ll see that sort itself out. A2A functionality and aggregated account data should work hand in hand with primary account data, should be presented together, and allow for easy and immediate transfers to all owned or authorized accounts. The national banks are building networks and partnerships to offer these capabilities – will community banks take part in this?
Banking and PFM, or aggregation meets web 2.0. … Where to begin. We have more players than ever before, and the space is really evolving into a better data driven cross sell application. New tools are being added all the time. As PFM integration places its data and toolset front and center within online banking, we’ll hopefully see more adoption. But we need to work toward additional functionality and integrated a2a transfers within PFM accounts, actionable alerts, and the use of proximity data and semantic search. This development will continue.
There are also still lingering issues with PFM data consistency. Users want better auto-categorization, and consistent data connectivity. Whether the provider is using Yodlee, OFX, some form of screen scraping, or other API, we need better data for our clients. We also need to see some improved interfaces. Intuit markets consumer direct Mint, and uses the platform to cross-sell Ally Bank and other financial brands in display ads to its 6M+ users, as well as deploying integrated merchant rewards. Mint also has a fairly interesting tablet app. Their direct to community banking PFM, FinanceWorks, doesn’t integrate with their merchant rewards yet and does not have an iPad or mobile app. Why not just market Mint as your PFM and allow for cross transfer of data to your FI clients? As a client, I’ll give Intuit some credit that they are working to improve these interfaces….but welcome to community banking. What about business tools?
We don’t have time to get into business tools, or the lack of innovation in cash management, or corporate banking solutions, but overall we need to see much better platform agnostic tools for our biggest business clients. For mid-sized businesses, we’ll certainly see more bank 2.0 development in merchant services, payroll, payments. For small business, why not seek better integration with platforms like Xero and Indinero? What about mobile banking, tablet banking?
As for mobile banking, a recent survey from American Banker Executive found that 42% of banks currently offer a form of mobile banking or mobile payments. And among those that don't, 40% have firm plans to offer them within the next 12 months. 87% expect to strengthen customer ties byhaving mobile apps. 71% cited competitive pressure. Top concern: security at 77%. What services did they want to launch with? 77% balances & transactions; 73% said text alerts, 64% said mobile funds transfers and 58% said the ability to set up recurring bill payments. Half (49%) said cost was an issue. You saw Simple’s safe to spend and proximity search…we’ll surely be seeing a trend toward more engaging features, like truly actionable notifications, proximity based rewards, safe to spend. We’re seeing some great mobile development from around the globe, from Europe to Asia to the States. One of the better interfaces I’ve seen comes from a company in Chile. We’ll be seeing some great stuff in the next five years. How about an notification that shows your financial position for that day, with all aggregated accounts, and your up to date stock performance for your investments? After yesterday’s market, what about a move to cash button if the market is tanking? Let’s move on to tablets.
I have seen very few live tablet apps for community banks and credit unions, but they’re on the way. Those that do arrive initially are not matching functionality of what’s in online banking, but we’ll hopefully see rapid development as there are some amazing financial apps for investors. What are we waiting for? Certainly not demand. Consumers are already experiencing engaging, feature rich experiences across the app spectrum. Just ask my 2 1/2 year old son, he loves angry birds. As the trend toward apps grows, we’ll also see app releases with base services, where you can either pay to, or level up through behavior to add additional new types of functionality. Pay for social P2P through a tablet? I’d spend a buck on that. Another trend we’ll see in apps…I think the new Microsoft mobile and windows interfaces will surprise a lot of people. Your preferred device in 2020 might not be from Apple or Google. And that’s hard for me to say on the day the new iPad comes out. What’s going on with rewards?
If an abundance of PFM providers was the big story at Finovate a few years back, this past year was the explosion of card based merchant reward programs to replace lost fee and interchange income. While some are direct to consumer, the ones community institutions will be partnering with offer what Harland-Clarke’s Jim Marous calls, “The Loyalty Trifecta” which bring together the benefits of 1) payment and transactional insight, 2) targeted offers and personalized communication as well as 3) mobile offers and payments).
Some of the firms driving rewards include Segmint, Bankons, Truaxis, and Cartera. We’ll be offering Cardlytics through Intuit’s Purchase Rewards - they just signed a huge deal with Bank of America.There is a good opportunity to connect with your local merchants and include them in these programs. Hopefully this trend will have a better ending that Living Social and Groupon for some merchants. At least the promise is more targeted offers based on similar shopping behavior. But like PFM, we’re seeing the need for data analysis, better contextual offer placement, and the next evolution which will be mobile proximity based offer awareness. I also would like to see offers from aggregated data across FIs, and for offers to be tied to other forms of payments. If you want more on this…
For more info on card based rewards,I’ll point you to Jim Marous’s great post last month on his blog, as well as his upcoming panel on mobile rewards at BAI Payments Connect. Aite also has a fantastic paper on insights into the financials around reward programs like these. So, all these trends sound pretty positive, what’s the problem.
Many of us still have applications that look like this. They function, provide general access to account information, but that’s where the engagement stops. We simply must start upgrading our legacy client facing platforms. Time to dust off that RFP community banks and credit unions. Let me know if you need a template.I’ve only got a few more slides left, and only one more elephant in the room.
One of the biggest shifts in behavior that will impact community banks is around payment. As Brett King pointed out in a recent Finextra article, while we’re all busy debating whether the winning mobile payment platforms will use NFC or another proximity technology, we may be missing the point that the behavior of mobile payments has been well established. Customers are taking every opportunity they get to use their mobile devices for payment. PayPal, for example, is projecting that it will process $7 billion in mobile payments in 2012, almost double the $4 billion mark recorded in 2011. Ubiquitous mobile payments are not only possible but almost inevitable. How does this change in behavior going to change the way we think about banking?
Brett King continues: The opportunity for mobile is not the wallet, and not mobile banking, it is re-imaging the utility of banking from a mobile perspective. What is my balance in my accounts, what money do I need? Which account should I pay for this item with? What are the ramifications. Our applications are becoming aware of our habits, and already know our location…it’s like teaching Siri to search for an item like coffee from a particular brand at a particular time. Applications can offer you opportunities for rewards at merchants as you search for things like restaurants, groceries or gas, or from your own preferences from taste or social graphs. Care to see Norah Jones tonight? There are tickets available, and she’s playing down the street. The battle for standards in mobile payments will take a while to sort out, as will the associated battle at the point of sale, but the bottom line is mobile payment is already here. We see it every day in the way we pay for apps, for games, for coffee. Combined with some of the trends we looked at today, and associated changes in our behavior, is it any wonder that banking is changing?
The question becomes then…can we change? can we change enough?Like the airline industry, we’ll most likely get smaller. We’ll see even more regulation, more financial challenges, more technological and behavioral change. This will certainly impact smaller institutions more than larger ones. But the ideals of community banking need to live on. As we address these and other trends, everything from the movement of IT applications to the cloud, the changing demographics of our target markets, or new forms of marketing and communication, our industry will get stronger. Even if our model has truly changed, we need to agree to be aware of the changes around us, and work together as a financial community to improve upon that model to become more agile, and do everything we can to best serve our clients as we evolve. We also need to agree to say yes, much more often than today.
I thank you for your attention today, and look forward to additional conversations as we connect within the fintech community and during the Q and A. Now let’s talk about some of the great solutions Backbase has to offer.