2. What we know – Market characteristics
Outlook for US Banking industry is cautiously optimistic
• Lagging growth due to economic uncertainty
• Eurozone instability
• Regulatory challenges
• Increased competition for limited dollars
3. What we know – Market characteristics
• Loan growth in Community Banks has slowed overall but is
showing slight increase for 2Q 2012
– Primary source of lending for small businesses and farms
– 21% of the banking industry in terms of assets, community banks
with less than $10 billion in assets made 58% of outstanding bank
loans to small businesses in 2011.
• Overall industry consolidation fewer banks hold more
deposits
8. What we know – Market characteristics
• Top five technology concerns:
– Regulatory compliance is top concern
– Data security
– Systems’ availability and recovery
– Fraud detection and mitigation
– Managing the pace of technological change
9. What we know - Branches
• New branch performance has been modest
– About half the median deposit volume of established branches
• In- branch transactions are down
– 7600 per month vs. 10,200 in 2007, average decrease - 25%
– Affluent areas down more than those in mass market or senior
heavy markets
• Yet, branch is still the dominant sales channel
– 95% new accounts
– Also preferred for buying products, financial advice, making
deposits and problem resolution
10. What we know - Branches
• Location convenience is number one consumer selection
attribute
– 45-55% cite as number one reason for bank selection
• Branches are primary form of awareness building
• Advent of online and mobile banking does not make
branches less important – just adds to consumer options for
convenience
12. What we know – Customer Insight
• Satisfaction is high or relatively high on all channels but mobile
• Yet,
– 45% have changed banks – up from 38% YAG
• 5% plan on it
– 58% have more than one bank – up from 49% YAG
• 23% have three or more
– Fewer than 30% of satisfied customers go to their current bank for
additional products
• Most say change for lower fees or higher rates
– yet research indicates that is true only when there is general dissatisfaction
with the bank
13.
14. What we know – Customer Insight
• Trust finally increasing
– Although fewer than one in four Americans trust financial firms…
– Overall 51% of customers say their confidence in the banking
industry has fallen, vs. 55% in 2011 – an improvement
• Trust in small community banks increased from 51% to 55%
in the most recent quarter of 2012.
17. What we know – Customer Insight
• 68% would provide the bank with more personal information
if it helped the bank in recommending a better account or
service
• Only 42% believe the bank adapts products and services it
offers as one’s financial needs change
– 41% aren’t sure
21. What we know – Mobile Banking
• High number of smartphone users show a greater self-
service propensity, for example with flight check-in.
• Among these customers,
– 11% use smartphone apps
– 5% use texting for mobile interactions; and
– 6% use a mobile browser to access their bank
• Smartphone apps are used most frequently to
– check account balances (74%)
– transfer funds (47%).
– 18 percent use a smartphone to make deposits.
23. What we know - Branches
• Branch closes outpaced opens in 2010, 2011
– Yet net decline only 1600/118000-
– The majority of those reductions were merger related.
• Fewer start-up Banks
– 170 in early 2000, five in 2010 and 0 in 2011
• Yet, even in the recession, more institutions added than
reduced branches
33. What we know – Online Banking
Move to multiple distribution channels
• 38% exhibit a strong overall orientation to the online banking
channel
• 18% of consumers meaningfully include mobile banking in
their financial interactions
34. OPPORTUNITY
• Need better cross-sell training
– Median cross-sell ratio – 2.2 products per household
– Half of all accounts are only one product
• Both stats unchanged in the past 15 years!
– A customer who has one product will stay for about 18 months
• Two or more and the average jumps to 4 years
• Three products- 6.8 years
– Forrester Research 2009 Report adults own 8.2 products on
average but no more than 2 or 3 at any one institution
35. FIVE STAR BANK OPPORTUNITY
Look for
additional ways
to maximize
revenue
39. OPPORTUNITY
• Develop more customer focused product and service
offerings
– Transparent pricing and service options
– Offer segmented levels of customer service
– Move from multi-channel to omni-channel distribution
– Make low-cost digital channels customers’ preferred choice
• Encourage customer self-service
– Shift marketing from “push” to “pull”
– Develop flexible loyalty programs
– Prioritize investment on critical customer interactions
– Use innovative technology to deliver the retail bank of the future
– Maximize power of consumer advocacy
40. FIVE STAR BANK -OPPORTUNITIES
• Technology enabling lower staffing costs
– Teller cash recyclers
– One key safe deposit boxes
– Video
– Remote image capture
– Computer advancements – size and efficiency
42. Checking Account Competitive Analysis
Bank First Niagara First Niagara First Niagara First Niagara First Niagara Community Bank Community Bank Community Bank Community Bank
Account Type Pinnacle Plus Pinnacle Checking Choice Checking eChecking Student First Completely Free 50 & Better Interest VIP Free Interest Wall Street Checking
Checking Checking Checking Checking
Monthly $25, waived w/min $15, waived w/min $9.95, waived w/min $3.00 none none none none $8
Service Chg. balance balance balance, or maintain
direct deposit,
complete 10 POS
purchase
transactions per
month
Minimum $5,000 or $50,000 $1,000 or $25,000 $300 or $5,000 none none none none none $1,000
Balance combined deposits, combined deposits, combined deposits,
loans (excluding loans (excluding loans (excluding
mortgages), credit mortgages), credit mortgages and credit
card balances & card balances & card balances)
investments investments
ATM Fees Unlimited free in Unlimited free in No fees at First No fees at No fees at First Did not disclose Did not disclose Did not disclose Did not disclose
U.S., unlimited U.S., unlimited Niagara ATMs, two First Niagara Niagara ATMs,
reimbursement of reimbursement of free non-First ATMs five free non-
other banks’ fees other banks’ fees Niagara transactions First Niagara
per month transactions per
month
Opening $500 $50 $50 $25 $50 $50 $50 $50 $50
Deposit
Key Features Tiered interest rates, Tiered interest rates, Free first order of Unlimited Free debit card, FREE Internet and FREE Internet and mobile FREE Internet and FREE Internet and mobile
free overdraft discounts on loan standard checks, check writing, monthly mobile banking, banking, competitive mobile banking, banking, higher interest rates
transfers, free and line of credit unlimited check monthly eStatement unlimited check interest, unlimited check competitive interest, with balances of $2,500 or
cahiers checks, free rates with autopay, writing, choice of eStatement writing, no per check writing, no per check unlimited check writing, more, competitive interest if
checks, free annual free checks, free paper or electronic charge, customer charge, customer no per check charge, balances falls below $2,500,
financial check-up annual financial statement purchases checks, purchases checks, customer purchases unlimited check writing, no per
check-up ATM/Debit card ATM/Debit card available, checks, ATM/Debit card check charge, customer
available, free gift for free gift for opening acct. available, free gift for purchases checks, ATM/Debit
opening acct. opening acct. card available, free gift for
opening acct.
43. Checking Account Competitive Analysis
Bank Five Star Five Star Five Star Five Star Bank of Castile Bank of Castile Bank of Castile Bank of Castile Bank of Castile
Account Type Type 1 Type 2 Type 3 Basic Banking Welcome Select Checking Plus Priority 55 Student Checking True Advantage
Checking
Monthly None if write less $8.00, waived w/min $15, waived w/min $3.00, waived none $5, waived w/min $7, waived w/min balance none $10, waived w/min balance
Service Chg. than 5 checks per balance OR receive balance OR receive if perform less balance
month and receive eStatement AND eStatement AND have than 8 debits
Estatement (50¢ for have direct deposit, combined consumer per month
each check written in OR perform at least deposit balances of (50¢ for each
excess of 5) 12 Check Card $15,000 OR have debit in
transactions OR combined consumer excess of 8)
perform 3 bill pay deposit and loan
transactions OR write balances of $25,000
less than 5 checks (with at least $5000 in
deposits) OR perform
at least 25 Check
Card transactions
Minimum none $2,000 average $5,000 averge ledger none none $1,000 $100 none $5,000 average combined
Balance ledger balance balance deposits or $25,000
outstanding loan balances
ATM Fees No fees at Five Star No fees at Five Star No fees at Five Star No fees at Foreign ATM Foreign ATM Unlimited free foreign ATM Unlimited free foreign Four free foreign ATM
ATMs ATMs, four free non- ATMs, unlimited free Five Star transactions not transactions not free transactions ATM transactions transactions per month
Five Star non-Five Star ATMs free
transactions per transactions up to
month $2.00
Opening Did not disclose Did not disclose Did not disclose Did not Did not disclose Did not disclose Did not disclose Did not disclose Did not disclose
Deposit disclose
Key Features First order of 25 First order of 50 Interest bearing acct, First order of First order of 50 Pays interest, first order Interest bearing, free Free Internet banking with Free checks for life, pays
standard checks free, standard checks free, free standard checks, 25 standard checks free with of 50 checks free, free checks for life, free Internet bill pay, free True preferred rates on savings and
free bill pay, no 10¢ cash back for 10¢ cash back for checks free, direct deposit or Internet banking with banking with bill pay, free Rewards Visa debit card CDs, savings on mortgage
annual fee for Visa every Check Card every Check Card free bill pay, ACH credit, free bill pay, free True True Rewards Visa debit application fee, discounts on
Check Card transaction over 25, transaction over 25, no annual fee Internet banking Rewards Visa debit card home equity and personal
$10 credit toward $20 credit toward safe for Visa Check with bill pay, free card loans, free Internet banking
safe deposit box, up deposit box, up to $10 Cars True Rewards with bill pay, free True
to $5 credit toward credit toward each Visa debit card Rewards Visa debit card
each wire fee, free wire fee, preferred CD
bill pay, free money & installment loan
orders rates, free bill pay,
free money orders
Editor's Notes
Ernst and Young Global Consumer Banking Survey 2012 “The customer takes control”
650,000 joined credit unions since Sept. 29, 2009. $4.5 B in new deposits per Credit Union National Association after BOA $5 debit card feeFebruary 2009 study from Independent Community Bankers of AmericaBank Call ReportsFeuer, Alan. “The Bank Around the Corner” The New York Times. December 23, 2011Keenan, Charles, “In Search of Wallet Share,” American Banker, March 1, 2010Roose, Kevin. “Amid Wall Street Protests, Smaller Banks Gain Favor” NYTimes.com, November 3, 2011
Cmb Consumer Pulse, “The New Banking ValueProposition. How Technology is leveling the playing field for credit unions and threatening the big banks.” August 2012
Independent Community Bankers of America.“2012 ICBA Community Bank Technology Survey Results”, www.icba.org
5 yr. old median deposits of traditional branches was $19M vs. $38M for more mature branches. Only 17% had more than $40M after 5 years$35-50M standard demand for branch capital investments.Bancography, “Branch Briefing: The Branch in the Age of Automated Banking”, 2012Novantas LLC 2010 National Consumer survey
Bancography, “Branch Briefing: The Branch in the Age of Automated Banking”, 2012
Satisfaction: 90% Branch, 62% Call center, 83% Internet, 39% mobileErnst and Young “The customer takes control Global Consumer Banking Survey. 2012”Mcorp Consulting, “Changing the Stories Bank Customers Tell Themselves: Why They Leave, and How to Keep Them”, 2009
Only 9% feel their confidence has increased in the past year72% those feeing less confident say due to bonus cultureChicago Booth/ Kellogg School Financial Trust Index, Wave 16. October 12, 2012, http://financialtrustindex.org/Trust in national banks rose by five percentage points to 28 percent since the last report. Ernst and Young Global Consumer Banking Survey 2012 “The customer takes control” Mcorp Consulting. “Changing the Stories Bank Customers Tell Themselves: Why They Leave, and How to Keep Them.
Ernst and Young “The customer takes control Global Consumer Banking Survey 2012”
Ernst and Young “The customer takes control Global Consumer Banking Survey 2012”
Ernst and Young “The customer takes control Global Consumer Banking Survey 2012”
“Emerging Technologies In Retail Banking: The Long Road Ahead | The Financial Brand: Marketing Insights for Banks & Credit Unions”, Oct. 25, 2012 http://thefinancialbrand.com/25875/bank-and-credit-union-technology-trends/.
Pew Internet. “Smartphone Research: Infographic”, September 7, 2012
eMarketer. “Consumers Readily Adopt New Mobile Banking Tools” Oct 17, 2012
Bancography, “Branch Briefing: The Branch in the Age of Automated Banking”, 2012Schafer, Lee, “More banks will find that bigger is better”, Star Tribune, November 6, 2012Banks and credit unions built more than 5,000 new branches per year in 2005, 2006 and 2007, and branch inventories increased by 3,000 units(net of closures) in each of those years. Although the pace of construction slowed significantly during the economicdownturn, Half of the net 1,600 unit decline arose from just two institutions, Wells Fargo and Bank of America. Wells Fargo’s reductions mostly reflected closures of overlapping branches from its acquisitions of World Savings and Wachovia Bank. Bank of America’s reductions represented a long overdue rationalization of a franchise that had evolved from numerous acquisitions over the prior two decades. Eighty percent of the net decline in branch inventory was impounded in just eight banks: the aforementioned Wells Fargo and Bank of America, plus six other institutions eliminating overlapping branches inherited in mergers, including PNC (following its acquisition of National City Bank); BB&T (Colonial Bank); BBVA Compass (Guaranty Bank); and M&T Bank (Provident Bank).$2.5 Million for a new freestanding branch- new branch gro
Ernst and Young “The customer takes control Global Consumer Banking Survey 2012”
57% due to high fees35% poor ratesErnst and Young “The customer takes control Global Consumer Banking Survey 2012”
58% of customers have more than one bank vs. 49% YAGCustomers with three or more banks grew from 16% to 23%Of those who multi-bank, 33% say it is to get the best rates and lower feesErnst and Young “The customer takes control Global Consumer Banking Survey 2012”
Ernst and Young “The customer takes control Global Consumer Banking Survey 2012”
Ernst and Young “The customer takes control Global Consumer Banking Survey 2012”
Ernst and Young “The customer takes control Global Consumer Banking Survey 2012”
Cmb Consumer Pulse, “The New Banking ValueProposition. How Technology is leveling the playing field for credit unions and threatening the big banks.” August 2012
2010 Novantas Branch study
Bancography, “Branch Briefing: The Branch in the Age of Automated Banking”, 20125 yr. old median deposits of traditional branches was $19mm vs. $38 for more mature branches. Only 17% had more than $40M after 5 years35-50 standard demand for branch capital investments.
Ernst and Young “The customer takes control Global Consumer Banking Survey 2012”
Spitler, Rick. “Reimagining Retail Banking” Novantas Review, October 2012
Novantas LLC study cited in Spitler, Rick. “Reimagining Retail Banking” Novantas Review, October 2012
Give customers more flexibilityMake pricing and service promises transparentPricing is critical to customer satisfaction, but most customers have no idea how much they pay each year. Transparency over pricing and service promises is vital if banks are to deliver something customers value. It is also critical for banks to rebalance fee structures to achieve the clarity and sustainability demanded by regulators and investors.Offer segmented levels of customer serviceCustomers should have the option to buy into certain products and services, as well as the ability to earn upgrades through loyalty, whether in terms of longevity, share-of-wallet or the value they generate.Move from multi-channel to omni-channel distributionCustomers care more about convenience than about channels. Banks need to look beyond multi-channel toward a fully integrated banking experience that combines the advantages of physical branches and in-person interactions with the information-rich digital channels. Omni-channel distribution leverages customer data gathered from branches, website visits, social media and elsewhere. Marketing offers are customer-segment specific, rather than channel specific, and allows customers to purchase a product inone channel that they had researched or seen promoted via another channel.Help customers to shape their experienceEncourage customer self-serviceBy regaining influence over customers’ decisions, banks can manage their own revenue moreeffectively. To do so they need to improve how they provide information and advice. Banks need totarget self-directed customers and encourage greater self-service through financial planning tools,demonstrations of “how people like you are investing,” or ranges of product and pricing bundles.5Shift marketing from “push” to “pull”The growing importance of word of mouth and the waning power of direct selling have implications forbanks’ marketing strategies, which need to shift from push to pull. Banks should aim to recruit theirsatisfied customers as advocates. They also could recruit online affinity groups as marketers by lettingthem select and shape the communications they receive.6Develop flexible loyalty programs*Banks need to capitalize on customers’ growing enrollment in loyalty programs, especially in emergingmarkets like India (48% in 2012 versus 26% in 2011). Most customers want financial rewards. Althoughcostly, such rewards offer huge potential benefits in loyalty and advocacy. Banks should tailor programsfor affinity groups and let customers choose rewards based on their value to the bank.Make low-cost digital channels customers’ preferred choiceBanks should encourage customers to use digital channels whenever possible. Banks should determinewhich services customers want to handle through branches and encourage — not force — othertransactions to move to digital channels, using price incentives, if necessary.8Prioritize investment on critical customer interactions†Customers identify a number of bank interactions as particularly important. Banks that focus operationalimprovements on these areas will optimize the resulting impact on attrition, dormancy and loyalty. Theywill also achieve a benefit in terms of their costs to serve. Banks recognize the importance of operationalinvestment, but they will need to carefully target their limited capital spending budgets for maximumeffect on customer satisfaction.9Use innovative technology to deliver the retail bank of the futureThe use of cutting-edge technology is vital to all of the other implications we identify. This includesbreaking down silos, creating omni-channel distribution, developing innovative rewards for loyalty andgiving customers the ability to personalize their products and services. Technology can also help tomaintain intimacy as customers move towards digital banking and greater self-service. To achieve this, banks will need to partner with technology innovators.
Source?
Combines Self Service with personal interaction from a teller at a distant location- could be the branch, office or home.Reduces labor expense- allowing staff at the branch to really focus on the customer development instead of routine transactionsImage capture via scanner lets checks and documents be accessed remotely. Next step is to offer even more services than collecting deposits and giving out cash- opening accounts and answering questions 24/7Can even offer high end wealth management services(ATM Marketplace.com, “Video Banking and the Future of the ATM Industry” 2009, Sponsored by uGenius Technology)
