Banks Can’t Keep Playing Defense on Postal Banking

As momentum builds for offering expanded financial services via the U.S. Postal Service, the banking industry to date has responded with flat opposition.

Banks argue that the post office isn’t set up to take deposits, workers don’t have much experience offering financial services products and the agency has enough issues it needs to address already — all solid points. Yet while playing defense may work in the short term — even if Democrats win the White House and Senate in November, it would be a tough fight on the Hill to enact a postal banking bill — it doesn’t feel like the smart play.

There is an opportunity in postal banking, one that the industry would do well to seize before banks competitors do. Credit unions are already circulating a plan that would allow them to bid to open branches at nearby post office locations. JPMorgan Chase & Co., meanwhile, has been quietly negotiating with the U.S. government about putting ATMs at post office locations.

If both smaller institutions like credit unions and JPMorgan, the nation’s largest bank, see the possibilities in post offices, banks should too.

The push for postal banking is only going to increase
Banks may not agree, but on some level, offering banking services at post offices makes sense. Many foreign countries already do it successfully and the U.S. itself offered them from 1911 to 1966 (It largely ended because banks could offer higher interest rates). A growing number of progressives see postal banking as a potential solution to the roughly 55 million un- and underbanked Americans. The Postal Service is both popular and trusted, making it an attractive alternative to check cashers, payday lenders and yes, even banks.

Many Democrats have embraced the idea, including Sens. Elizabeth Warren, D-Mass., and Kirsten Gillibrand, D-N.Y. Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee has his own version of postal banking that involves the Federal Reserve and the creation of digital currency. Even the campaign for Democratic presidential candidate Joe Biden has endorsed postal banking.

Those ranks are only likely to increase as economic disparities in the country sharpen. And while Democrats may not have the votes right now, that could change if they eliminate the filibuster or as Americans look for more help during the economic fallout of Covid-19.

Post offices are just about everywhere — including places banks aren’t
Despite budget cuts, there are more than 31,000 post offices in the U.S. To put that in perspective, Wells Fargo & Co. currently has the largest branch network in the country, with nearly 5,500 branches. As of 2019, there were about 77,500 bank branches in the U.S. overall.

But consumers can ignore bank branches, especially when they don’t have an account. Branches are also absent in so-called “banking deserts” that lack a significant financial institution presence. By their nature, post offices are geographically diverse, close to most communities and likely to have a lot of foot traffic.

If the government offered expanded banking services in all 31,000 USPS locations, it’s easy to see why banks view that as a huge threat. But if community bankers could compete for the right to open a branch or put an ATM inside their local post office — similar to how many already do in Walmart stores — it becomes a chance to expand their customer base.

To be sure, any bidding or proposal process would have to be open and balanced, designed to ensure big institutions like JPMorgan couldn’t muscle out community banks. But if bankers develop their own plan, they could make sure such a process is part of any final deal.

Banks can solve some postal banking problems
Bankers are right to note the many practical difficulties if the Postal Service gets involved in the financial services space. Personnel aren’t trained and already face a crush of duties. It’s not even clear postal banking would bring in the profits that its supporters hope for, precisely because they would be limited in what services could be offered and fees charged.

But adding a bank to the equation could help address at least some of these issues. There’s no need to train additional personnel since bank staff would be on hand. Banks also have experience in offering low-cost services and could be explicitly encouraged to do so by federal regulators. In short, it could become a win-win, where banks and post offices work hand in hand to help serve low- and moderate- income consumers.

Whether bankers embrace this idea or come up with their own, they would do well to join the debate. Either they help steer the outcome to a solution they can support — or run the risk of watching a big bank, credit union or the federal government gets there first.

How Digital Tools Can Create Consumer Confidence

The coronavirus’ challenges offer banks an opportunity to reassure shaken consumers and help them reestablish a sense of control.  

Consumers are concerned about protecting the health of themselves and their families and, increasingly, the impact Covid-19 could have on their financial well-being. Unemployment is at its highest level since the Great Depression; approximately 50 million U.S. workers have filed for unemployment since March. One survey found that 38% of individuals report checking their account balances more frequently than before the pandemic — a clear sign of anxiety around finances.

Banks are uniquely situated, as already-trusted partners, to provide the peace of mind and assurances that consumers desperately seek during these anxious times. Consumers will build loyalty toward those institutions that help them feel aware and in control of what’s happening with their money, even in virtual spaces.

A few ways that banks can increase confidence as consumers increasingly rely on digital payments include transaction alerts, increasing contactless payment limits and giving spending insights, including recurring transactions.

Alerts and insights help consumers feel more in control of their financial situation. Consumers have shifted their spend toward debit cards and checking accounts as they seek to limit accidental overspending and avoid debt. Monthly insights can give them a quick view of their spending by merchant type and location. Making it easy to see where card data is stored online, and with which merchants, allows consumer to review their recurring transactions and easily remove cards from accounts and merchants they are no longer using. 

Increased credit limits help consumers feel like they have more options for safe and contactless payments. With rising infections, lockdown and social distancing causing a drop-off in travel, social events and eating out, online commerce and contactless transactions are increasingly replacing cash transactions.

While Covid-19 accelerated the uptick in the use of these digital payment methods, many Americans may continue these new habits post-pandemic. As many consumers remain reticent to venturing out of their homes for errands, visits to branches for service requests have migrated to bank contact centers. To manage this increase in the number of requests to call centers, banks should encourage consumers to handle everyday requests themselves through online and mobile self-service tools. Doing so will allow phone support to prioritize in-depth items that require personal support.

For example, providing precise and detailed transaction information to consumers on their mobile apps will reduce the numbers of queries and false disputes raised with contact center staff through misunderstandings or confusing transaction details. Other digital capabilities that banks can offer range from simple card controls — like turning a card on and off, or resetting a PIN — to more advanced features, such as disputing a transaction or applying for a new account.

Consumers now tend to expect similar easy-to-use experiences across all of their apps. With tech companies like Amazon.com and Google setting the bar high, it is essential that financial institutions also offer robust features and intuitive design. The past six months have brought with them a dramatic acceleration in digital payments, and financial institutions should grasp the opportunities to continue to be the trusted and reliable pillar on which their account holders lean.

The 10 Most Successful Financial Advertisers Right Now


advertising-11-23-18.pngFinancial institutions have long struggled to stand out in the marketplace and build their brand.

This is because they offer very similar products and services to consumers. But a clear strategy and well-defined corporate culture—and a story told with an effective advertising campaign—can help prospective clients understand what makes a bank special.

We’ve put together a list of banks that do that well.

To identify successful advertisers in the banking space, Bank Director focused on two key metrics: number of impressions—how many times a company’s ads were viewed on TV—and the average estimated cost per impression for each brand. This second metric is weighted to account for peak vs. non-peak advertising times. Together, the two metrics reward a balance between brand reach and an effective use of ad dollars.

Each metric was ranked, and the final score represents an average of the two ranks. In cases where the average of the two was a tie, the bank with the most impressions earned the higher score.

Credit unions and lenders that compete directly with banks are included, along with retail and commercial banks.

Bellevue, Washington-based iSpot.tv, an analytics firm that uses smart televisions to track ad activity, provided the data. The measurement was based on national ad activity from Jan. 1 through Sept. 10, 2018.

The ranking doesn’t account for the creativity of each bank’s advertising, but a compelling, creative ad with clear messaging can be effective in achieving the bank’s strategic goals.

Fifth Third Bancorp was savvy with its ad dollars, at $0.12 per 1,000 impressions, and placed second in the ranking. Its ad campaigns during the time period generated 442 million impressions.

The most buzz for the regional bank came from is its “Fee Sharks” ad, part of the “Banking a Fifth Third Better” branding campaign.

“The overall goal of [the Fifth Third Better] campaign is to build the Fifth Third Bank brand,” says Matt Jauchius, the bank’s chief marketing officer. “We believe that a stronger brand leads to growth and profitability for the bank overall.”

The campaign has been effective, resulting in a 21-percent increase in brand consideration over a roughly one-year period. Brand consideration is a metric Fifth Third and other companies use to measure the likelihood customers would consider the brand the next time they’re looking for a particular product or service. In banking, that tends to be whether a customer would consider the institution for their primary banking relationship—usually a checking account.

“Effective advertising needs to be rooted in a truth about the brand itself,” says Robert Lambrechts, the chief creative officer at Pereira & O’Dell. The San Francisco-based advertising agency worked with Fifth Third on the brand campaign.

“Find the thing that is true about your brand,” he advises. “[Be] honest with yourselves about who you are [and] what you want to do.”

The Fifth Third team found ties between its core value to go above and beyond and the bank’s unique name: Fifth Third employees give more than 100 percent—166.7 percent, to be precise—to help their customers.

Ads like the fee shark are quirky, memorable ways to highlight products, services and features—like fee-free ATMs. All the ads in the branding campaign feature a plucky young woman clad in a blue suit, with a Fifth Third pin and distinctive glasses, who serves as a brand ambassador and a proxy for the bank’s employees. She communicates the brand promise: that the bank works hard to meet the customer’s needs.

Fifth Third uses internal and third-party data to better understand what prospective customers want, how to motivate them, and when and where to place the ad effort—whether that’s on TV or radio, in print, on a billboard or on social media.

JPMorgan Chase & Co. topped the ranking, generating more than 5 billion impressions and spending a little more than an estimated $7 per 1,000 impressions—the fifth most cost-effective of the financial institutions examined in the ranking. The bank has run a number of TV spots in 2018. The ad with the most impressions—“Michaela’s Way,” featuring ballerina Michaela DePrince—promotes Chase QuickPay, which includes the real-time payments solution Zelle.

Donna Veira, chief marketing officer for Chase’s consumer banking and wealth management divisions, told AdAge: “We looked at all of the day-to-day, practical ways in which our customers are using QuickPay and brought those to life.”

Other spots show how easily tennis star Serena Williams uses the bank’s cash-free ATMs, or promote the bank’s business solutions and investment advice.

Most Successful Financial Advertisers

      # of Impressions Estimated cost per 1,000 impressions
  1 JPMorgan Chase & Co. 5,371,208,561 $7.36
  2 Fifth Third Bancorp 441,698,444 $0.12
  3 Citigroup 3,862,125,267 $13.44
  4 PNC Financial Services Group 1,400,939,671 $12.64
  5 Capital One Financial Corp. 545,702,921 $12.56
  6 Regions Financial Corp. 210,530,040 $12.29
  7 PenFed Federal Credit Union 144,093,408 $1.77
  8 Purepoint Financial
(division of MUFG Union Bank, N.A.)
46,254,915 $1.11
  9 SoFi 1,477,462,492 $15.60
  10 Ally Bank 1,495,976,740 $16.20

Data source: iSpot.tv

2018 L. William Seidman CEO Panel



Former FDIC chairman and Bank Director’s publisher, the late L. William Seidman, advocated for a strong and healthy U.S. banking market. In this panel discussion led by Bank Director CEO Al Dominick, three CEOs—Greg Carmichael of Fifth Third Bancorp, Gilles Gade of Cross River Bank and Greg Steffens of Southern Missouri Bancorp—share their views on the opportunities and threats facing banks today.

Highlights from this video:

  • Reaching Today’s Consumer
  • Front and Back-Office Technologies That Matter
  • Competitive Threats Facing the Industry
  • The Future of Community Banking

 

A New Risk on the Horizon


How should your bank’s compliance program adapt to the new demands of The Consumer Financial Protection Bureau?  In this video, Wolters Kluwer’s Christina Speh offers some best practices for creating a customer-centric compliance program and implementing it from the top down.

Highlights include:

  • Creating a culture of compliance
  • Preparing for the change—shifts in standards and practices
  • Empowering internal staff

Click on the arrow to start the video.


In Search of the Perfect Checking Line-Up


perfect-score.jpgMany bankers are nobly searching for the perfect consumer checking line-up: One that connects better with customers, is more financially productive, differs dramatically from the competition and meets the changing needs of customers.

In that search, there are a lot of factors to consider, including macro and micro market segmentation, an array of home grown ideas and third-party solutions, a myriad of consumer buying trends and personal preferences, plus a lot more too lengthy to mention. It’s enough to make your hair hurt.

So, is there such a thing as the perfect consumer checking line-up? And if not, what should you focus on to get as close as possible to the perfect checking line-up?

From my standpoint, there’s not a perfect line-up today that every bank can “plug and play.”  Rapidly changing technology, evolving consumer behaviors, individual financial requirements of a particular financial institution, and most recently the fluid checking-related regulations all make a perfect line-up impossible.

To get close to the ideal of a perfect line-up, I suggest you subscribe to an “easy as 1-2-3” way of thinking, deciding and then doing.

The first 1-2-3 will work no matter your financial institution’s situation because it is consumer-centric and not bank-centric. So start your thinking here and you’re on your way:

  1. Understand how consumers really choose a checking account.
  2. Make the line-up as simple as possible to make it easy to buy and sell.
  3. Make the products as good as you possibly can so you’re not only competitive but also have at least one account your customers will happily pay for.

Once you have these as your guiding principles, let’s focus on each one individually.

Consumers choose an account based on their buyer type. So here’s the second 1-2-3, the three types of buyers:

  1. A Fee Averse Buyer – This buyer wants free checking if it’s available or the cheapest account you offer.
  2. An Interest Buyer – This buyer wants the best yield possible on their deposits and expects a market yield or above market yield.
  3. A Value Buyer – This buyer wants the best account at your institution, is most focused on account benefits and is willing to pay for the account if there’s a perceived fair exchange of value.

Your branch bankers’ product knowledge or your online merchandising message will play a significant role in helping customers decide which type of buyer they are. Top-performing retail financial institutions know this stone cold. They don’t automatically assume nearly every customer is a fee adverse buyer because they’re not. About 50 percent are. Value buyers make up about 40 percent. And in today’s interest rate environment, about 10 percent are interest buyers.

Once you understand how your customers choose checking accounts, what type of accounts should you offer and how many? The answer is the third 1-2-3. For line-up simplicity and ease of buying and selling (and the sanity of your customer and your branch banker), there are only three types of checking accounts you should offer:

  1. A No/Low Fee Account
  2. An Interest-Bearing Account
  3. A Value-Based Account

Of course, the most common no-fee account in today’s market place is unconditionally free checking. However, more and more institutions are now offering  free checking with conditions, that is, free if a simple condition is met, like getting e-statements instead of paper ones or keeping a minimum balance. If this condition is not met, then there’s a penalty fee, which is sometimes modest and at other times extremely penal for the value received.

For the interest account, customers still want as much interest as they can get (which isn’t a lot these days) and feel like the higher the balances they keep in the account, the higher the interest rate should be. Here we find a tiered-rate account with interest beginning at a stated (reasonable) balance level rather than from the first dollar. This rewards and encourages higher balances for these buyer types while letting you manage your interest expense.

The value account is one that’s not as easy to design. Having only basic checking services and charging fees for them is risky. So there is the need to enhance the value account beyond the most basic checking services. And consumers have stated in studies and in their buying actions that they will happily pay for selected non-traditional checking account benefits. (See my earlier article on BankDirector.com, “Getting Bank Customers to Happily Pay Fees.”)

If designed right, this value account can generate significant, customer-friendly revenue of at least $75 per year from about 40 percent of your customers.

So while there’s not a perfect line-up that’s an easy “plug and play” into every financial institution, you can get very close to it and produce great results by following the guidelines mentioned above.

Meeting the Needs of the New Financial Consumer: A Snapshot of Six Customer Segments


FD-WhitePaper1.jpgConsumers have a lot of options when choosing a bank or credit union. To be successful in today’s highly competitive environment, financial institutions must creatively and innovatively meet their customers’ needs and expectations. However, consumers are not a homogenous group—and attitudes, behaviors and expectations related to desired products, communication tools and service vary dramatically.

Even more challenging for financial institutions, consumers are rapidly evolving in their use of technology. As consumers increasingly use technology in their day-to-day lives, many expect the convenience of high-tech tools from their banks and other financial institutions. At the same time, a persistently weak economy, the widespread erosion of savings and investments, and the lending crisis have fundamentally altered many consumers’ mindsets. Especially among baby boomers—the backbone of financial industry growth over the last 25 years—confidence in financial institutions and a willingness to engage in carefree spending appear to be things of the past.

So, how can financial institutions best meet the needs of a diverse and evolving consumer base? To find out, First Data and Market Strategies International jointly conducted an online survey of 2,000 U.S. consumers. The “New Consumer and Financial Behavior” study looked at consumers’ attitudes, behaviors, desires and technology adoption. The results revealed six distinct consumer segments, providing financial institutions with valuable insights into opportunities and challenges associated with different types of customers.

By understanding the needs and expectations of different consumers, financial institutions can:

  • Determine which types of consumers are most valuable.
  • Target products, technology and tools at specific customer groups.
  • Improve customer retention through targeted customer loyalty programs.
  • Better service customers by meeting their needs and expectations for products, services, communication and technology.

This white paper is the first in a series of four based on results of the “New Consumer and Financial Behavior” study.

About the Study
The “New Consumer and Financial Behavior” study was conducted jointly by First Data and Market Strategies International, a market research consultancy. During March 2011, 2,000 banked consumers (who have at least one account at a financial institution) completed an online survey of their attitudes, behaviors and expectations pertaining to their primary financial institution, as well as their adoption of related technology. All respondents were individual or household financial decision-makers recruited from the uSamp opt-in online panel of U.S. adults. For purposes of analysis, respondents were grouped into six consumer segments using a sophisticated and robust segmentation approach that combines demographics, attitudes, behaviors and values to create comprehensive, instructive consumer profiles. A full description of the research methodology is included on p. 13.