How Can Your Bank Tap Into the Internet of Things?


internet-of-things-3-28-17.pngThe Internet of Things (IoT) has officially moved beyond hype. IoT is now well known and defined—basically putting data-gathering sensors on machines, products and people, and making the data available on the Internet—and companies are already using IoT to drive improvements in operational performance, customer experience and product pricing. Gartner predicts we’ll see 25 billion IoT data-gathering endpoints installed worldwide by 2020.

While IoT is delivering on its promise in a wide range of industries, many bankers are still struggling to find the value in finance, an industry largely built on intangibles. We see two primary IoT opportunities for banks:

  • Direct use of sensor data (location, activities, habits) to better engage customers and assess creditworthiness.
  • Partnering with companies that manufacture or integrate sensors into products to provide payment services for device-initiated transactions.

Engaging customers and assessing creditworthiness
Like most businesses, your bank can simply use IoT to understand—and serve—customers better. Banks are already implementing smart phone beacon technology that identifies customers as they walk in the door. Customers who opt in can be greeted by name, served more quickly and generally treated with more personalized care. You can also take advantage of sensor data outside of the bank to market more relevant services to customers. For example, data from sensors could […]

This content was originally written for FinXTech.com. For the complete article, please click here.

Why Community Banks Need to Embrace Social Media


social-media-3-10-17.pngSocial media allows banks to appeal and engage with millennials, who constitute a quarter of the U.S. population.

Banks are actively stepping into the social media game by creating Facebook pages, Twitter accounts and YouTube channels to reach the masses with company updates, money management tips and education. IBM suggests that banks need to use social media not only for outreach—but customer service as well. The tech giant notes that millennials are more apt to air their grievances via social media than call a bank directly and wait on hold. Banks can use their twitter accounts as a customer sounding board and to address issues directly?thus, keeping customers happy and their money in the bank.

Social Media Data for Underwriting
It is projected that in 2015, there were 26 million credit invisible consumers in the United States alone. About 8 percent of the adult population in the country have credit records that can’t be scored based on a widely used credit scoring model. Those records are almost evenly split between the 9.9 million that have an insufficient credit history and the 9.6 million that lack a recent credit history.

While large financial institutions are heavily focused on serving the credit-eligible population across the country, community banks play a critical role in the welfare of those left beyond the borders of eligibility. The opportunity to expand access to financial services in communities with an ineligible population is a critical step towards financial inclusion in those communities.

Social media channels are gaining an important role as alternative sources of data on credit eligibility. Who you know matters (especially in defined communities), and companies like Lenddo, FriendlyScore, ModernLend and credit scoring solution providers are leveraging this idea with the use of non-traditional sources of data to provide credit scoring and verification along with basic financial services. Social media also gives lenders an insight into how an applicant spends their time, which can be used as an alternative way to indicate someone’s financial trustworthiness, expanding opportunities for banks to reach new categories of customers.

While loan officers at megabanks apply impersonal qualification criteria without regard to individual circumstances, community banks are initially better positioned to benefit from the use of social media channels to get to know their customers even closer than they already do.

As emphasized by the team at Let’s Talk Payments, a source of information and research online about emerging financial services and payments, the following are some of the tangible opportunities for banks embracing social media data for creditworthiness assessment:

  • The opportunity to capture a new customer segment
  • Differentiated customer experience
  • Strengthening the existing underwriting process
  • Enhanced fraud prevention
  • Stronger engagement with the community

Given the scale of credit invisibility in the country, an innovative approach to potential customer profiling in communities where banks operate could serve as a competitive edge for those banks. Social media data can be used to extend loans to previously ignored groups in the population, improving household resilience and building stronger ties between community banks and their immediate communities.

Social Media is About Relevancy and Accessibility
There are two elements to relevancy and accessibility: an opportunity to gather feedback to improve products and services and the opportunity to increase accessibility and transparency to customers.

“Customer feedback is indispensable for any business that wants to grow, and the same holds true of community banks. Social media interactions are your doorway to customer conversations and feedback, which can help you fine tune your business. Tapping into online conversations on social media should shed light on customer problem points, helping resolve issues before they escalate,” said Jay Majumdar, vice president of sales at ICUC, a social media management services company.

Ignoring conversations about your bank on social media is a dangerous path—it removes control over the message and brand image, and it damages your reputation as a customer-centric business. It’s especially damaging for community banks that are dependent on community loyalty and long-standing relationships with customers. Jill Castilla, president and CEO of Citizens Bank of Edmond, echoes this point, saying that “social media is not about putting a message out there and leaving it. It’s a conversation.” She also emphasizes that “social media is about relevancy and the accessibility that you expect from your hometown community bank. It’s a tangible way that our community can see we’re living up to be the community bank you used to think about. That’s what social media allows us to achieve.”

How Can Your Bank Tap Into the Internet of Things?


IoT.png

The Internet of Things (IoT) has officially moved beyond hype. IoT is now well known and defined—basically putting data-gathering sensors on machines, products and people, and making the data available on the Internet—and companies are already using IoT to drive improvements in operational performance, customer experience and product pricing. Gartner predicts we’ll see 25 billion IoT data-gathering endpoints installed worldwide by 2020.

While IoT is delivering on its promise in a wide range of industries, many bankers are still struggling to find the value in finance, an industry largely built on intangibles. We see two primary IoT opportunities for banks:

  • Direct use of sensor data (location, activities, habits) to better engage customers and assess creditworthiness.
  • Partnering with companies that manufacture or integrate sensors into products to provide payment services for device-initiated transactions.

Engaging customers and assessing creditworthiness
Like most businesses, your bank can simply use IoT to understand—and serve—customers better. Banks are already implementing smart phone beacon technology that identifies customers as they walk in the door. Customers who opt in can be greeted by name, served more quickly and generally treated with more personalized care. You can also take advantage of sensor data outside of the bank to market more relevant services to customers. For example, data from sensors could alert your bank when a customer’s car goes into a repair shop; after the third service call, you might offer the customer an auto loan for a new car. This type of tailored service and marketing can change a customer’s relationship with your bank dramatically: Pleasant experiences and valued information are a time-tested path to loyalty.

IoT sensor data can also supplement traditional methods for predicting creditworthiness and protecting against fraud, especially for customers with little or no credit history. For example, if a small business HVAC contractor applies for a commercial loan, you can request access to data from shipping and manufacturing control sensors to track the flow of actual product into buildings. This can help the bank confirm how the business is doing. For product manufacturers, you can track and monitor goods, including return rates, and if the return rate is high the bank can adjust the loan pricing and decisions accordingly. Leveraging alerts on credit cards and processed payments can provide information about where and how often an individual or business is making purchases, providing clues about creditworthiness without requiring access to detailed credit card records. In short, with billions of sensors all over the world, IoT will offer you more data that can help you assess creditworthiness and prevent fraud.

Providing payment services for device-initiated transactions
To illustrate the potential of IoT, proponents often cite the “smart” refrigerator, which senses when a household is low on milk and automatically orders more. Similarly, in the commercial space, sensors can automatically trigger a call for maintenance when a piece of equipment is due for service. In these device-initiated transactions, your bank could partner with the providers to offer payment services as an integrated component of the IoT package.

On a more local level, as small businesses begin to take advantage of IoT sensors to automatically reorder supplies—paper, toner, medical supplies, salon products—your bank can tie payments into the IoT-triggered reordering system. In addition to broadening your market for payments, being part of this solution can strengthen attachment to your bank among small businesses in your community.

Start with the end in mind
This is undeniably an exciting time in banking. Between fintech offerings and IoT applications, it’s tempting to move quickly for advantage, but we all know that investments are far more likely to pay off when you treat the process with rigor and resist the urge to grab bright shiny objects. IoT is no different: Before you start buying systems and aggregating data, know what problems you’re trying to solve and what data you’ll need for the outcomes you want to achieve. In banking, the most promising returns on IoT investment are likely to be found in improved customer experiences and marketing effectiveness, reduction in loan default and fraud, and growth in your payments business. But with all the dramatic changes unfolding, who knows what innovations might be ahead—your bank might find opportunities for IoT no one else predicted.

 

Contributed by: John Matley, Principal, Deloitte Consulting LLP;Akash Tayal, Principal, Deloitte Consulting LLP;William Mullaney, Managing Director, Consulting LLP

Going The Distance: Top Four Social CEOs


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How many bank CEOs actively engage with their communities through social media? Bank Director found that few truly do, but spending a few extra minutes online can have positive results for their institutions. Bank Director identified four CEOs of North American banks who make the most of their personal social media platforms, focusing on those who have more than 1,000 Twitter followers, tweet several times a week and engage with customers and the community, or who currently use LinkedIn’s publishing platform (more than 6 times in the past year) and average more than 5,000 views per published post. Few bank CEOs even come close to meeting these criteria: Bank Director identified just 7 who have more than 1,000 followers on Twitter, but not all have conversations with their followers and community. For LinkedIn, just one CEO meets the criteria.

Read the full article here on BankDirector.com.

The Big Banks’ Latest Trends in Mobile Banking


mobile-banking-9-10-15.pngBig banks have been committed to working out their mobile strategies over the past two years and are now unveiling the dramatic results they’ve achieved. According to AlixPartners, big banks controlled 67 percent of the primary banking relationships by the second quarter of 2014, while credit unions had 14 percent. Mid-size banks controlled 11 percent, community banks 4 percent and all others at 4 percent. Plus, 78 percent of people who switched accounts went to a big bank, while only 8 percent went to a credit union and the remaining 14 percent to a community bank, mid-size bank or other. It’s an even bigger gap with young people—82 percent of these switchers went to a big bank, while only 7 percent switched to a credit union, and 11 percent to a community bank, mid-size bank or other. The study also shows that in 2014, 65 percent of the people who switched accounts said that mobile played a role in their decision to switch.

Chase Bank, for example, is one of the biggest retail banks in the country and has seen massive gains in retention and customer engagement, along with a steady loss in attrition and branch expense. Over a four-year period, the number of products and services per household has gone up, and attrition rates have fallen to an astonishing 9 percent this year. According to Chase, mobile app users have increased by 20 percent in the past year, mobile QuickDeposit by 25 percent, mobile QuickPay by 80 percent and mobile bill pay by 30 percent.

Not only are these great things for retention, but they are also business strategies that are saving the bank money. Today at Chase, 10 percent of all deposits are made via mobile. Over a seven-year period, teller transactions have been cut in half, driving a tremendous cost reduction. Since 2010, Chase has cut out over $3 billion in costs.

For the past two years, Chase, as well as other top big banks, including Bank of America, Citi, Wells Fargo and U.S. Bank, have been offering the top five mobile services—mobile banking, mobile bill pay, mobile deposits, ATM/branch locator and P2P payments. The list is growing, as three new services have recently become a standard for all of these banks—Apple Pay, pre-login balances and mobile-friendly websites.

Apple Pay
By January of 2015, 300 financial institutions had been approved for Apple Pay, and in April, that number jumped to 2,500. Today there are about 375 active financial institutions using Apple Pay, 250 of which are credit unions.

Mobile payments have a slow usage growth though—only 0.5 percent of people in 2014 with near-field communication (NFC) equipped phones were doing mobile payments regularly, meaning they did at least one mobile transaction per month. According to Deloitte, that number is forecasted to jump to 5 percent by the end of 2015.

Pre-login Balances
All five of the top big banks now offer the ability to check your balance without logging into mobile banking, and it’s a feature that is proving to be one more way to drive engagement and remove a barrier to mobile usage. Customers using Citi’s Snapshot, for example, sign in to mobile banking three times as often as those who don’t.

Mobile-Friendly Websites
Google announced in May of this year that there are now more Google searches on mobile than there are on desktop computers, a trend that greatly influences how people are making decisions to buy products.

In about six out of 10 cases, when people are shopping for bank products, they’re doing online comparisons, meaning banks now have to anticipate the growing percentage of website traffic coming from mobile. Currently, about 15% of banks’ website traffic is coming from mobile, which will only continue to grow.

Not only did Google announce the state of mobile search, but also starting in April, they’ve put a requirement in place that if your website is not mobile friendly, they’ll move the placement down on Google’s search results.

Of the top 10 banks, every single one has a mobile friendly website. Four out of the top 10 credit unions have passed the mobile friendly test.

As customers are flocking to digital services, the big banks are growing stronger. Credit unions and community banks can stay competitive, though, by continuously training their team to have a mobile mission and being disciplined enough to innovate constantly.

When Was the Last Time You Really Listened to Your Customers?


5-5-14-sutherland.pngE-commerce pioneers like Amazon and Zappos have trained customers to expect all of their providers, including their banks, to wow them at every point of contact. Channel usage, whether you are talking about branch, mobile or online banking, is one of the hottest and most debated topics in the banking community.

Is it possible to provide all the latest digital platforms yet still fall short in customer care? Yes. In fact, many banking experts argue that call center usage will increase as customers lean on contact centers as a digital help desk. Are there times when a customer needs a real person to listen to and resolve his problem? Absolutely—even if it means personally visiting a branch.

Findings from Gallup’s latest U.S. Retail Banking study underscore this point. Querying customers on their channel usage, one of the key themes that emerged was that the BRATMO trifecta—branches, ATMs and online banking—still defines the core of day-to-day banking.

Consider the credit-card customer who, concerned about recent massive security breaches at retail outlets, decided to get her card reissued with a new number. She tried ordering a new card online but couldn’t find the tools to complete the task. A live chat window opened, and the customer learned that getting a new card would take about a week. Anxious about being without her primary card for that long, however, she stopped by her local branch and talked to a live person, who sent her a card by express mail — it arrived in two days. The happy customer, in turn, raved about her positive experience on Facebook.

What did it cost that card issuer to provide the empathetic agent who had the authority to immediately spring for the express-mail cost? And what did the issuer gain in the loyalty not only of that customer but also the positive social media buzz she generated? Research continues to find that people trust peer recommendation far more than they trust advertising.

Listening to Customers
Anticipating and responding empathetically to customer needs can take many forms. Consider the following approaches:

  1. Instill a culture of customer service. At Zappos, customer service isn’t a silo; it’s the mission of every employee. The company backs that pledge by providing every employee with at least a month of customer-service training. Empower your contact center agents with the ability to provide inquiry resolution that’s quick, accurate and easy to access.
  2. Tune in to social media. More banks are monitoring social media posts to respond directly to customers and to gain valuable insight into their own and competitors’ strengths, weaknesses and opportunities for innovation. The best social media outlet is the one the bank commits to supporting 24/7, says Joseph J. Buggy, senior vice president and chief strategist at Sutherland Global Services. “If the bank has a Facebook page, you’d better staff it. If you have a Twitter account, it better be active and quick. If you’re not as responsive as your competitor, the customer who asked the question will move on,” Buggy explains.

  3. Conduct surveys and other market research. To ensure alignment, customer-centric banks engage in ongoing market research at all levels. And while surveys have their place, don’t stop there; qualitative research and user forums provide insight into how you can do a better job.

  4. Offer incentives for customers to suggest new products and services or to help beta-test them. Everybody loves free samples, and customers who feel part of your innovation team will be quick to tweet about their experiences. Initiatives like MyStarbucksIdea, where Starbucks takes suggestions and comments from customers online and through social media, shows that your organization can gain unvarnished feedback and access to your best customers’ social networks for little cost.
  5. Complaints? Bring ‘em on! A customer who takes the time to express her dissatisfaction possesses a wealth of market intelligence. Promote multiple channels that make it easy for disgruntled customers to talk to you versus publicly griping about the issue on Facebook. Whether it’s a live agent or a live chat online, explore all the options for swiftly escalating problem calls to the next level. Follow up with customers to ensure a satisfactory resolution.

How your bank listens to customers may be the single most important factor in your capacity to gain ambassadors and champions for life.

For more information on this topic, see Sutherland’s white paper “The New Age in Customer Service.”

What Can Banks Learn From Call of Duty?


1-22-14-sutherland.pngAs banks begin to look outside their industry for innovation, the gaming industry has interesting ideas that could apply to banking. For both industries, it’s important to create a personalized experience where customers can help themselves. The gaming industry, specifically Activision Publishing Inc.’s Black Ops/Call of Duty, continues to expand on its use of digital and social media communication. Call of Duty/Black Ops uses social media in a holistic way through teasers, communications, monitoring, responding, and even mobile advertising with viral sharing. It has paid off for Activision. In November 2012, Activision’s Black Ops II set an all-time gaming record of $500 million in sales in one day. The success has been partially attributed to an ad with partners MEC and Millennial Media, which enabled the use of a mobile device’s built-in camera along with social media access. The “Call of Duty: Enlist” ad asked gamers to become a black ops agent with Millennial Media’s photo shoot media feature embedded in the ad.  Viewers of the ad could simply take a photograph of themselves using their phone, click a button to insert their face inside a Black Ops character, and share the photo on Facebook with all of their friends. 

This approach is fun, encourages interaction, makes it personal and inspires viral sharing on social media. Follow this link to see how easy it is.

You may think: So what? The average gamer is a 16-year-old kid, right? Wrong! According to the Entertainment Software Association (esa):

  • 51 percent of households own a dedicated game console
  • The average game player is 30 years old with 36 percent of gamers being older than 36
  • Women 18 years and older represent 31 percent of the gaming market
  • 50 percent have full-time jobs
  • 12 percent work or study part-time
  • 7 percent are homemakers

Not only does the gaming industry use social media for effective communication, gaming is a social environment with many gamers interacting in online communities. The gaming industry is growing rapidly on mobile devices and through social media sites such as Facebook. The banking industry can learn from Activision and accelerate its usage of social media.

Social Media is a Channel that Demands More Focus in Banking

There is an enormous perception gap between what consumers rank as their reasons for following companies on social media and why businesses believe consumers follow them, according to an IBM Study, From Social Media to Social CRM. Create messages that resonate with the hierarchy of why consumers are following you.

Consumers number one reason to follow a company is obtaining discounts closely followed by making purchases —tailor your messages with this in mind.

Businesses think consumers “want to learn about new products” but they are wrong—reduce the focus in social media on product knowledge.

Seventeen percent of consumers researching financial services in social media convert to making a purchase, more than any other source of information gathering, according to a Gallup Financial Industry report. Developing a strong social media strategy will accelerate growth.

What Makes a Truly Effective Social Media Model?

According to a Sutherland Global Services white paper, Thinking Social Insights, companies need social outreach specialists that will respond beyond the organization’s owned and controlled forums. They need social media analytics for brand tracking and sentiment analysis, to hear the voice of the customer, for feedback management, for comparison with competitors and for reputation management. Companies should have social media support fully integrated into a customer relationship management program. They should have automated distribution of all social media and drive customer service to social media outlets.

Tim Rondeau, the senior director of customer care at Activision, was quoted on the web site for Salesforce, the data marketing company, explaining that Activision can interact with customers in ways that work for them. “… In addition to taking phone calls, it’s important to expand our communication with our gamers on Facebook and Twitter.” It sounds like a quote for any and every bank; simply swap the word customers with gamers.

Social Media: Every Bank Needs a Risk Management Plan


12-4-13-Crowe.pngWith each passing day, there seem to be more reasons for banks to ramp up their social media activity. It isn’t just the sheer number of people on platforms such as Facebook, Twitter and YouTube. Social media offers banks the potential to engage directly with their most important audiences.

Consider that younger generations, which represent the next wave of bank customers and employees, are the most active users of social media. In fact, a recent Gallup poll found that the average age of a banking social media user is 33 years old.

Connecting with young customers is just one example of the opportunity social media holds for banks. Amid the possibilities, banks’ social media strategies have evolved at widely varied paces. Some organizations have introduced cutting-edge tactics, such as allowing banking through social media sites. Other banks have a Facebook page to monitor and respond to customer comments. Still others are now just beginning to contemplate launching a social media presence.

Regardless of strategy, all banks have one thing in common: They face risks associated with social media.

Assess the Possible Pitfalls

Limiting or steering clear of social media does not provide protection against risk. Your institution might not be very active on social media, but your employees, customers and vendors are.

First, institutions need to know what the potential hazards are. A social media risk assessment is designed to help organizations understand the threats that exist and prioritize the most significant challenges.

This type of review could include a survey to understand how employees use social media for business and personal purposes. Input from across a bank’s departments also is critical to gain a broad understanding of current and desired use of social media.

What Are the Risks?

Typically, the potential risks associated with social media fall into five major categories.

Reputational: This hard-to-quantify risk is one that concerns many executives. Anyone can post negative comments online about an institution’s products, services or staff, and organizations can mitigate reputational risk with advance planning.

Financial: An employee could erroneously release nonpublic financial information, through either an institution’s social media account or the employee’s own personal account. On the other hand, there is a different kind of financial risk associated with missing out on the marketing and business development opportunities that social media can offer.

Information security: This risk can include anything from employees oversharing work-related details via social media to a staff member clicking on a malicious link that threatens the security of an institution’s entire network.

Legal and employment: Gray areas surrounding social media use in hiring and firing decisions should be carefully considered in an effort to avoid lawsuits.

Operational: Many organizations struggle with decreased productivity when employees have broad access to social media during the workday. Increased employee activity on Facebook and other social media websites can also negatively affect network bandwidth.

Mitigate Problems Before They Arise

After conducting a risk assessment, there are several steps that banks can take to diminish the potentially negative effects of social media.

Establish comprehensive policies. Banks should treat social media no different from any other type of communication and should document policies related to social media. At the very least, social media should be included in existing policies, such as acceptable use, marketing/communications, incident response, and information security policies. According to draft guidance from the Federal Financial Institutions Examination Council (FFIEC), financial institutions should have programs in place to identify, measure, monitor and control their risks related to social media.

Implement training. Employees need to understand social media policies and how they apply. Training should be done repeatedly to keep up-to-date information fresh in people’s minds.

Improve upon existing policies. Institutions should determine where there are gaps in social media strategy and should address those risks quickly and strategically.

Clarity Is Forthcoming

The FFIEC is expected to release final guidance on social media policy soon, providing a consistent framework for financial institutions to follow. In the meantime, banks should not wait to assess the risks they face and should take action to mitigate them.