Apparently, bank directors are a very worried bunch. Nearly 20 members of Bank Director’s membership program responded to the question posed in last month’s newsletter: “What worries you most about the future?” We’ve compiled a word cloud that shows which words came up most often in bank directors’ responses, followed by direct quotes.
When Wal-Mart Stores Inc. announced its partnership with Pasadena, Calif.-based Green Dot Corp. to launch the online and mobile-only banking alternative GoBank, the retailer was also placing its bet on where the future of banking is heading. But with all its other financial ventures up to this point still in place, like in-store branches and prepaid debit cards, Walmart is keeping a hand in all possible outcomes.
Not only is GoBank designed with modern features that would be appealing to any consumer looking for more advanced mobile banking, the account is low cost and open to almost anyone over 18 with i.d. verification. This makes the account extremely attractive to customers who simply aren’t satisfied with their current bank relationship or have limited access to traditional banking.
Data from the annual Consumers and Mobile Financial Services report published by the Federal Reserve shows that people who are unbanked (do not have a bank account) make up 11 percent of U.S. consumers, while the underbanked (minimal access to bank services) make up 17 percent. And according to data from statistician Nate Silver’s web site, Fivethirtyeight.com, states with higher percentages of unbanked households are home to more Walmart stores. Since Walmart’s traffic is more likely to have a high concentration of unbanked and underbanked customers, GoBank allows the retailer to seize the opportunity to help those people get banking products, which helps GoBank’s business grow and allows people to spend more money in Walmart stores.
“GoBank is breaking down the barriers to traditional banking and brings the benefits of a FDIC-insured checking account that’s loaded with features to a large segment of Americans,” said Green Dot CEO Steve Streit in a statement.
The move to launch GoBank now gives Walmart the opportunity to target consumers from three different angles—the traditional branch, prepaid cards and GoBank—in order to appeal to the underbanked or now, any modern bank customer.
Traditional Branches The retailer is already offering traditional branches in nearly 40 percent of its U.S. stores. With more than 700 branches in Walmart, Woodforest Bank, headquartered in The Woodlands, Texas, has the largest presence out of the total of more than 1,600 in-store banks. Woodforest serves the underbanked with its trademarked Second Chance Checking, created to give people who would typically be denied a traditional checking account the opportunity to open one.
Prepaid Cards Just two years ago, Walmart partnered with American Express to launch the Bluebird prepaid card as another alternative to traditional debit and checking accounts. The prepaid cards have functionality very similar to a traditional debit card.
In Walmart’s October 2012 press release for the launch, American Express group president Dan Schulman (who was recently named the new CEO of PayPal) stated its purpose: “In an era where it is increasingly ‘expensive to be poor,’ we have worked with Walmart to create a financial services product that rights many of the wrongs that plague the market today.”
GoBank Walmart isn’t necessarily bidding GoBank against Bluebird or its in-store branches, but rather, it is opening up even more options for underbanked customers who want to use mobile banking. The Federal Reserve found that in the U.S., 49 percent of the unbanked and 64 percent of the underbanked has access to a smartphone.
GoBank has features more advanced than basic mobile banking. For example, its Fortune Teller feature can become a budgeting resource for customers’ shopping decisions. You simply enter how much an item costs, and the Fortune Teller is able to instantly tell you if you can afford it or not based on the budget you set. “Remember that time you won the lottery? I don’t either,” is one message you can expect from the Fortune Teller, along with lots of humanized language that’s a refreshing update from standard bank formality.
To open a GoBank account, customers buy a $2.95 starter kit at Walmart. Instead of paper checks, customers can use online bill–paying services. There are no minimum balance requirements and no overdraft fees. Plus, customers have access to 42,000 free ATMs throughout the country. The $8.85 monthly fee is waived with a direct deposit of $500 or more each month.
Of these three ventures, the financial industry will keep an eye on which survives in the long run and becomes Walmart’s go-to product.
Competition is heating up in the world of business banking. New entrants such as Square, Wal-Mart and PayPal are serving notice to traditional banks—evolve or die—and the board has taken notice. Business banking sales is now a board-level issue.
In order to compete with non-banking competitors, banks need to be able to consistently recommend and sell products through any channel to truly understand potential sales and profitability.
American National Bank of Texas, Comerica Bank, Sovereign Bank (now known by its parent’s name, Santander), SunTrust Banks, Central Bank and Rockland Trust are just a few of the banks that are using Ignite to improve their sales process so that it is consistent and measurable.
Ignite’s solution consists of product recommendation guides and robust analytics. Recommendation guides personalizes a customer’s banking experience. It can be used directly by the customer on the website or via a mobile device or by banking personnel in the branch and call center as an interactive tool to provide a consultative, direct touch experience for the customer. The recommendation guide conducts a needs assessment by asking a series of questions to understand the prospect’s current situation. The guide uses the collected information, banking thresholds, and eligibility analytics to evaluate the responses to recommend product bundles to meet the specific needs of the customer. Recommendation guides help banks:
Shorten the sales cycle by automating selling, cross-sell and up-sell opportunities.
Create a consistent multichannel sales experience—whether online, mobile, at the branch, or in the call center.
Produce high quality leads by using demographics, bank eligibility and bank-defined thresholds, in real-time, at the point-of-sale.
Increase the average number of accounts opened.
Decrease user frustration by making banking products easier to find and select.
Increase customer loyalty to obtain a three-product loyalty threshold.
Easily integrate credit risk management solutions including Salesforce, FIS Customer Relationship Management, and Avidian Profit.
Increase customer profitability.
Data collected using Ignite’s recommendation guides, web traffic, product eligibility, bank threshold criteria, as well as from a unique and specialized banking database developed from over three million data points on purchasing behavior is used to produce customizable reports that are presented in secure, customizable, graphical, interactive, and easy-to-use dashboards. These reports can be run weekly, monthly or quarterly and help banks:
Determine lost profitability.
Understand profit gap. Ignites’ profit gap analysis will show you what was sold, what could have been sold based on the customer’s eligibility, potential profit, and the resulting profit gap per product.
Manage sales effectiveness in the branch, online, and within the customer service center.
Justify and target marketing spend.
Rockland Trust Finds Success with Analytics Rockland Trust implemented Ignite’s solution both online and in their branches as part of their overall omni-channel strategy. Rockland had been looking for tools to help their branch sales staff sell more effectively to business clients. With Ignite’s solution, Rockland increased new business account openings significantly within the first three months.
Rockland has also learned that most business prospects qualify for up to seven income-generating products. Ignite’s analytics performs a real-time analysis, during the consultation, that matches Rockland’s products with business customer needs and eligibility. This can be done on a computer or a tablet and gives the branch sales staff the information they need immediately at their fingertips so that they can provide a higher level of service for their customers. As a result, Rockland has seen an increase in cross sales at the initial account opening when using the tool.
“At Rockland Trust we’ve been meeting the financial needs of the business community for more than 100 years and we’re constantly searching for ways to enhance our service,” said Jane Lundquist, executive vice president and director of retail banking, business banking and home equity lending at Rockland Trust. “We looked for a solution that would help our branch staff effectively identify all the services that could benefit business clients. Ignite’s recommendation guides and analytics proved to be the tool that works best.”
Rockland was able to see measurable results within 90 days of implementation.
Banks increasingly face competition from outside the banking industry.
Facebook is already a licensed money transmitter, enabling the social media giant to process payments to application developers for virtual products. The retail juggernaut Wal-Mart Stores Inc. launched Bluebird in partnership with American Express Co. late in 2012 so users can direct deposit their paychecks, make bill payments, withdraw cash from ATMs and write checks. Customers also have access to mobile banking, which includes features like remote deposit capture and person-to-person (P2P) payments. As of August 2013, 1 million customers used Bluebird, according to Walmart Director of Communications Sarah McKinney. Wal-Mart’s Sam’s Clubs also offer small business loans through a non-bank Small Business Administration (SBA) lender. PayPal, which is owned by eBay, Inc., also has gotten into the business of P2P payments.
An audience survey of 120 bank directors and senior executives at Bank Director’s Growth Conference on May 1 found that many felt that their institutions are at least on par with their peers in the industry when it comes to innovation through technology, and just 17 percent said that their bank lags behind. However, the vast majority, at 91 percent, revealed concerns about non-banks entering financial services.
Community bankers aren’t alone in their concerns about competition from unregulated entities. Just days after the audience survey May 1, Jamie Dimon, CEO of JPMorgan Chase & Co., told the audience at the Euromoney Saudi Arabia conference in Riyadh that he sees Google and Facebook specifically as potential competition for the banking giant. Both offer services, such as P2P, that could chip away at income sources for banks. But the regulators could play a role in dampening these innovators’ ability to compete. “There’s no way that Google wants to be a regulated bank,” he said.
Perhaps Google and Facebook won’t pursue a future as regulated banks, but will partner with banks instead. CaixaBank, based in Spain, announced a partnership with Facebook on May 5 that will allow the bank’s customers to view account balances and transfers through their own Facebook profile or the bank’s Facebook page. Users can also make small donations to charities of up to 15 euros (about $20) to charities affiliated with the bank. CaixaBank plans to offer P2P payments through Facebook in the near future.
Half of the attendees surveyed at the Growth Conference said they would be open to a partnership with a financial technology firm. Wilmington, Delaware-based The Bancorp Inc., a financial services company with $4.7 billion in assets, offers private label banking to partners who sell services under the partner’s brand, including PayPal and Simple, which was recently acquired by Banco Bilbao Vizcaya Argentaria (BBVA).
Would your bank consider partnering with or acquiring a fintech firm?
Bill Roop, CEO and president of $1.1-billion asset Alpine Bank & Trust, headquartered in Rockford, Illinois, thinks the banking industry could see an increase in these types of partnerships. “You’re going to see a growing awareness of the different ways that you can touch a customer, and I think the industry has to be very open to partnering and working together to share the wallet…while also maximizing the benefit to the customer,” he says.
Regulations are often cited as constraints on a bank’s ability to innovate, but more attendees at the Growth Conference cited technology investment, at 42 percent, or the vendor relationship, at 31 percent, as greater barriers to innovation.
A little more than one-quarter of the audience blamed regulations for the lack of innovation in the industry. Regulation is just part of a banker’s life, says Roop. “Hire the appropriate individuals as you can, be sure you’re compliant with what the laws are, but our job is to serve the customers.”
The survey also found that one-third of attendees sit on bank boards with at least one member who has technology expertise, and almost half said that their board doesn’t have a technology expert but needs one.
As many community banks rely on core processors for customer-facing technology solutions such as mobile and online banking, the vendor can make or break an institution’s ability to innovate, and determining and investing in the right technology while still running an efficient institution can be a challenging balancing act for community banks.
“I’ve tried to weigh all these products and services out there. Yeah, I’d love to have all [of] these things but there’s a cost to that, and our cost is spread among $140 million in assets and two branches,” says Jim Marshall, CEO and president of blueharbor bank, which is based in Mooresville, North Carolina, and uses all lowercase letters in its name to convey a more contemporary approach to banking. “That’s one of the challenges of a small bank.”