Why Checking Products Matter More Than Ever


checking-4-17-19.pngThe battle is on among all banks to acquire new customers and their low-cost deposits. The key to winning the battle for low-cost deposits is owning the primary banking relationship and, in particular, the consumer checking account relationship.

The checking account is the central way consumers identify “their bank.” It is the only banking product that consumers use daily to navigate the intersection of their life and their money.

If this navigation is smooth, your bank is in the best position to collect even more deposits, loans and fee income.

Banks that understand this best have been successful at capturing primary banking relationships, which in recent years have been the four biggest U.S. banks. They are the ones investing the most to continue this trend and defend their success.

If you’re a community bank or even a regional one, a recent AT Kearney survey detailed the ways you are being attacked.

  • The four biggest banks (Bank of America Corp., JPMorgan Chase & Co., Citigroup and Wells Fargo & Co.) have 40 percent of the U.S. consumers’ primary banking relationships. Superregional banks have 19 percent. The remaining 41 percent is split between other institution types, with credit unions at 14 percent, community banks at 12 percent, regional banks at 8 percent and relatively new direct banks like Marcus and Ally already at 5 percent.
  • The four biggest banks are collectively budgeting more than $30 billion in technology investments, about one-third of which is on digital banking around the checking account.
  • Digital channels drive 35 percent of primary banking relationship moves, while branches only drive 26 percent. The Big Four banks are capturing 41 percent of consumers that do switch their primary relationship. Superregional banks are capturing 28 percent. This leaves 31 percent for everyone else, and the new digital-only banks have 11 percent of that remainder.

Big Banks Rule
The reality is the biggest banks have the upper hand. The resources they are investing in digital platforms to maintain and increase market share can’t be replicated by community or regional banks.

But let’s not confuse the upper hand with the winning hand. Community and regional banks can fight back, because there is a chink in the armor of big banks.

While the digital experience provided by the four biggest banks may be superior, a review of the actual product benefits their consumer checking accounts provide isn’t that impressive. They are as ordinary as the checking accounts at most other banks.

Their checking lineups, terms and conditions are complicated with significant product overlap. They mask this weakness with an allure in the marketing and digital delivery of these ordinary benefits.

When smaller banks discuss growing consumer retail accounts, they talk more about acquisition pricing and marketing strategy, and not enough about first improving and simplifying products and lineups. Many banks start by spending on the promotion of unappealing, undifferentiated checking products at the lowest price in a confusing lineup. This isn’t a winning battle plan.

Smaller banks should first make their lineup simple for consumers to understand. The best practice here is a good, better, best methodology, which we have previously discussed in my article, Use Good/Better/Best for Checking Success.

While doing this, why not offer checking products as good, modern and different as you can afford?

Nontraditional Benefits Work
Recent research by Cornerstone Advisors, titled “Reinventing Checking Accounts,” shows how positively consumers respond to switching to checking accounts that include nontraditional benefits like cell phone insurance, roadside assistance and pharmacy/vision discounts alongside traditional benefits.

These nontraditional benefits are central to consumers’ lives away from the bank but can be captured in their checking account.

There’s no debating the importance of acquiring new checking relationships in gathering low-cost deposits. While the biggest banks dominate currently, are investing heavily in technology and paying handsome incentives to attract even more new customers, smaller banks can attack where these big banks are vulnerable.

Don’t fight them toe-to-toe with a complex lineup of look-a-like checking products. That’s a losing battle. Instead, focus on the appeal of a simple lineup and products that competing banks don’t offer. That’s a battle worth fighting, and one that can be won.

Enhancing Shareholder Value



Bank stocks have taken a dive in late 2018, and bank boards play a key role in the strategic decisions driving shareholder value. Scott Sommer and Steve Williams of Cornerstone Advisors explain the issues impacting shareholder value in 2019, including technology.

  • Bank stock trends
  • Focus on fintech
  • Board decisions

Fix Your Leaky Onboarding Funnel


onboarding-1-16-19.pngCustomer acquisition is top of mind for most banks and their boards.

This usually translates into new, slick marketing campaigns. These campaigns mean enlisting your advertising agency to cut through the clutter, which is increasingly difficult to do. Or you could look to mine more near-term customers right from your own website and the online account opening process.

More and more banks are onboarding new customers by enrolling them through their website. This process is rife with opportunity. According to The Financial Brand, 40 percent of online bank account applications were abandoned due to a long or complicated enrollment process.

Think about that. Only six out of 10 prospects who arrive at your site—with the intention of creating a bank account—complete the journey. That’s tragic. It makes more sense to fix that leaky funnel than to spend big on another advertising campaign in the hopes of driving significantly more website or branch traffic.

We know that there are a few places in the online account creation process where banks fall down. Let’s dissect some of these pitfalls.

Identity verification. Thanks to Know Your Customer and anti-money-laundering regulations, banks and credit unions need to impose more rigor to ensure the person creating the account is genuinely that person. Thanks to a steady barrage of data breaches and advanced malware, traditional methods of authentication, such as knowledge-based authentication and two-factor authentication, are no longer in vogue. Increasingly, banks are turning to online identity-verification solutions that require a government-issued ID and a selfie to more reliably verify digital prospects. These solutions can be pretty fast and are capable of completing the online verification process within a minute.

Simple messaging. Banks that provide simple, clear instructions, written in plain English, experience much higher conversion rates. This includes providing a clear rationale for why you’re asking online customers for their ID documents and selfie, and what you intend to do with that information.

Fewer screens. Obviously, the more hurdles you put in front of your customers, the less likely they will make it all the way through the account-opening process. So, if you can reduce the number of screens to identify a new customer from seven to four, that will have a material impact on conversion rates.

Go omnichannel. When it comes to establishing identity online, you want to open up the experience to as many channels as possible. Many identity verification solutions only offer a mobile experience, not allowing potential customers to use their webcams on their laptops or desktop computers. By disabling this channel, you’re eliminating a large swath of potential customers who either don’t have a smartphone or would prefer to complete the process from their laptop.
Being omnichannel also means supporting API-based mobile web and native mobile implementations. For companies looking to cast the widest possible customer acquisition net, including some older generations who may not be comfortable with newer technology, it just makes sense for your identity-verification solution to offer the broadest number of channels to your prospective customers.

No more maybes. Another cause of online abandonment are the longer wait caused by manual reviews. Several online identity-verification solution providers return a “caution” decision when they can’t easily confirm that the customer is who they claim to be.

Every “caution” or “maybe” requires manual review by a team of analysts. There are real costs to manual review. Jumio offers an online calculator to illustrate these expenses. These are real costs to your business, and they create real frustration for your customers.

So, if customer acquisition is job No. 1 for 2019, maybe it’s time to fix your sales funnel and plug the leaks with an efficient onboarding experience—one that optimizes and simplifies the identity-verification experience.

You can do the math. Spend big on advertising with iffy results. Or, create a great online experience that is designed for conversion. You’ll end up with happier customers—and a lot more of them.

Customer Experience In The Micro-Moment Era



In the micro-moment economy—in which customers seek instant, Amazon-like interactions—banks need to quickly gain (and keep) customer trust. Addressing the challenge will require cultural change on the part of traditional financial institutions, along with the implementation of new technology. Eric Hathaway of Zoot Enterprises shares his insights on how banks can strategically approach improving the customer experience.

  • Capitalizing on the Micro-Moment
  • Addressing Customer Experience Challenges

Using Technology to Grow Your Customer Base


For many community banks, continuously communicating with their customer base can be challenging given limited resources and rising compliance requirements. In this video, Michael Tipton of emfluence discusses how using an automated messaging platform for new accounts can help banks cultivate and grow customer relationships.


Five Ways Banks Can Build Mutually Rewarding Customer Relationships


thumbs-up.jpgIf you think about the people in your life that you are closest to, chances are they’re the ones that you’ve shared the most experiences with. Those experiences build the involvement needed to grow relationships—between people and also between people and brands. Because there are few things as personal as money, banking is an industry that has a huge opportunity to engage people in experiences that build lasting and mutually rewarding relationships. Yet it’s a segment that has low satisfaction rates (44 percent were extremely or very satisfied with their bank in an October 2011 Harris Poll).

To better understand the opportunity, we commissioned a study on people’s attitudes toward their bank and most importantly, how they felt their bank felt about them.

One big discovery is the difference between the way people feel about their bank and how they perceive their bank feels about them. About 39 percent of people surveyed feel indifferent toward their bank—they neither like, love nor loathe it. But when asked how they feel their bank feels about them, 54 percent feel their bank is indifferent toward them and another 6 percent feel their bank loathes them. I doubt there are many human relationships that could survive under that scenario.

When asked how open to switching banks people were, 30 percent said they are very likely or indifferent/open to switching—that means nearly a third of customers are vulnerable on any given day. A Harris Poll looked even worse for the bigger banks: 46 percent of JP Morgan Chase & Co., 40 percent of Bank of America Corp. and 54 percent of Wells Fargo & Co. customers are extremely or very likely to change their bank. When you consider an American Bankers Association study found that it’s seven times more expensive to replace a customer than to keep them, it seems that the opportunity and the need to build stronger relationships is very real.

Here are five ways banks can build mutually rewarding customer relationships and become a champion for them:

Champion customer needs by focusing conversations on “what they want to do” rather than “what we have to sell you” which just furthers the feeling that the customer doesn’t matter. Banks can rewrite the language used by everyone in the bank to reflect the needs and the power of their customers. One example is Opus Bank. The bank was founded on the belief that strong businesses build strong communities and everything they do supports people with the vision to drive job growth, including their tagline, which is a call to “Build Your Masterpiece.”  

Give people credit for knowing how they like to use their money by creating a culture of choice that allows people to customize their accounts and services.  While many aspects of financial products are regulated, banks could let people choose the other services they value. Where one person might value free wire transfers, another might prefer something entirely different.

Be a valuable resource that champions people’s desire to do something with their money. Think Nike+ for money. Offer financial management tools that help people set goals, track their progress using their account data, and get rewarded for their achievement. This could be a great opportunity to tie in commercial banking partners like retailers and restaurants in each geographic area. We are beginning to see new banks (e.g., Simple) emerge that leverage technology to not just make transactions easier but to actually empower the consumer.

Create communities for customers to share financial advice with each other and with the bank. Banks can show that they embrace customers as people (not just their money) by adopting the behaviors of sociable people, i.e. by being accessible, interested in what people have to say, and providing inspiration to help them achieve what they want to with their money. Regional banks like Umpqua Bank have done a great job of using technology to create a personal touch outside the bank. In contrast to the 98 percent of social media commentary about banks that is negative, theirs is 99 percent positive and almost to the point of fostering a “my bank is better than your bank” pride.

Empower employees to act in the best interest of their customers and reward them based on their personal contributions to the relationships they have. This is particularly important as customers switch to online banking and each interaction takes on more importance.

While creating these kinds of experiences may not directly sell more banking products, they have real business value. They build involvement with your customers and that involvement will lead to deeper relationships that are more mutually rewarding and profitable.

Getting New Customers in Healthcare or Property Management through Outsourcing


hybrid-fruit.jpgHybrid seems to be the new word these days.  Hybrid cars get better gas mileage. Why not apply a hybrid to your business model? As many of you, I grew up hearing that I didn’t need something new every time I asked, and I could make do with what I had.  I guess those core values stuck because I don’t necessarily think that you have to have an all or nothing proposition for your lockbox product offering. You may already have an established customer base with a group of talented people who do a great job—so why would you take all of that and outsource it?  If you have the desire to enter into new markets such as healthcare or property management and don’t want to incur the expense of building out a new facility, an option exists and is in play today.  By taking a hybrid approach, a blended style of outsourcing, financial institutions have more options than ever to consider.

With a hybrid approach, you decide what you want to remain in control of and what you want a partner to help with.  Here are a few examples of hybrid outsourcing to consider:

1. The healthcare market is a large revenue opportunity for financial institutions.  There are hundreds upon thousands of healthcare providers right outside your door, but processing those payments can be complex.  There is everything from high tech scanning and data recognition to fully compliant with HIPAA (Health Insurance Portability and Accountability Act) archive and data exchanges.  Don’t be overwhelmed and walk away from this potential revenue.  By partnering with an organization that has the expertise you need, and will be your product innovator, marketing department, billing and finance and operational arm, you are able to offer a new service to a new customer group without changing anything within your core operations.

2. Accept all payment channels. We all know there are several new and emerging payment channels that customers prefer using—but can your financial institution accept them all?  With an integrated receivables hub, offered through an outsourced model, now you can.

3. Expand your geographical footprint. Do you want to grow your financial institution without the expense of brick and mortar costs?  Your financial institution can gain access to a unique capture network that allows you to capture and process payments from just about anywhere.

By simply adding on to what you have today, a new hybrid approach can give you happier customers, more revenue, expanded geographic footprint and a happy chief financial officer.