The success of a bank’s merchant services program lives or dies by the support from branch staff.
While offering competitive rates and top-notch customer service is important, those things won’t make a difference if bank branch staff isn’t discussing merchant services with customers. Programs suffer without the support and enthusiasm of staff. Here are some best practices on keeping branch staff engaged in merchant services promotion.
Set Goals A bank should employ a top-down directive from leadership that emphasizes the importance of cross-selling merchant services during customer interactions. It is imperative that the directive includes clear, attainable goals for branches and employees. “Goals are the fuel in the furnace of achievement,” writes development consultant and author Brian Tracy.
Goals help motivate branch staff to sell these services. Leadership also needs to track performance and offer recognition. If staff gets the impression that set goals are not followed up on, it can be incredibly demoralizing.
Empower Your Sales Staff Employees may hesitate to sell products they have not been fully educated on. But the growing popularity of online banking means it’s important that branch staff capitalizes on every opportunity to cross-sell. It may be the only chance they have to speak face-to-face with a prospect.
Executives need to make sure that bank staff is trained up on all products and services. They can do this through role-playing exercises of different situations that focus on improving communication skills and preparing for curveball questions. This is one of the best ways to prime employees for productive conversations with prospects.
Implement an Incentive Campaign Managers should encourage staff to stretch for sales goals through an incentive campaign. These campaigns can include referral bonuses, sold-product goals, raffle campaigns and more. Some merchant services providers may sponsor incentive campaigns for their partner banks. Additionally, incentive campaigns aren’t limited to employees; banks should consider incentivizing existing clients through referrals.
Provide Ongoing Training Payment card technology is constantly changing. Executives need to provide branch staff with tools that will help them stay up-to-date on current trends and industry changes. One way to do this is through a portal that is regularly updated with new resources and information. It is vital that executives cultivate an environment where branch staff feels comfortable asking for additional training or information.
The success of a merchant services program rests on the shoulders of a bank’s branch staff. Executives must make sure they equip their front-line people with all the tools and knowledge they need. The investment of time and resources up front will pay dividends in the future. Every win for branch staff is a win for the bank.
Banks can use customers’ search queries to create a more efficient, optimized user experience.
Most marketers rely on search engine optimization to drive traffic to their website, missing a crucial opportunity to optimize searching on the site itself. But on-site search optimization is a critical component of search and self-service for customers, and is a way that banks can create a better experience for users.
Search engine optimization, or SEO, focuses on attracting new visitors to a website. On-site search optimization addresses the existing and returning traffic base—a bank’s current customers and prospects. This approach helps them find helpful and relevant content once they are on the site, which is as important as getting them to the website or mobile application in the first place.
A growing percentage of customers use digital channels to interact with banks and require intuitive search and easy-to-find support information. Banks will benefit from delivering superior on-site search functionality with actionable support answers on their websites and mobile apps.
Transforming a bank’s website, mobile or online banking applications into a true digital support center involves more than a simple search bar. Search terms and activity can be used to inform the support content strategy, while monitoring customers search queries ensures a bank is providing the most sought-after answers across its digital and mobile channels. This continuous process directly impacts an institution’s customer experience, service levels and operational efficiency.
The top 25 search terms across banking websites in 2019 included:
1. Routing Number
10. Direct Deposit
19. Mobile Deposit
2. Overdraft Protection
3. Order Checks
12. Address Change
4. Skip Payment
13. Loan Rates
22. Stop Payment
5. Online Banking
14. Debit Card
6. Wire Transfers
15. Check Card
7. Credit Card
25. Bill Pay
8. Open Account
17. CD Rates
9. Account Number
Customers’ search patterns in a bank’s digital and mobile channels differ the terms used in a search engine platform such as Google or Bing, according to data from SilverCloud. Searches on banking websites and apps average 1.4 words per search, compared to four on search engine platforms. On Google, people search for “the best checking account for me;” on a banking website, they use broader terms like “online banking.”
Two factors drive this search behavior. First, banking consumers are already on the desired site, so they use more narrow search terms. Second, financial terminology can be confusing and unfamiliar. As a result, customers who lack knowledge of specific banking terms tend to use broader search terms to home in on exactly what they need.
There are five takeaways for banks that are interested in how top search terms can help them grow more efficiently:
Banks need to deliver a better customer experience. Having a strong on-site search engine allows customers to service themselves in a way that is easy, fast and efficient.
Strong search could reduce call center volume. Having robust content, frequently asked questions and support answers allows customers to get answers without needing to contact call center agents.
Provide support as mobile adoption increases. Customers will have more questions as banks introduce more self-service options, like online account opening, mobile deposit and online bill pay. Banks should anticipate this and have support answers in place to facilitate faster adoption.
Create opportunity and invite action through search. Banks can drive deeper customer engagement into various product offerings by writing actionable support answers. For example, the answer for a search query for “routing number” could include information about what customers can do with a routing number, like set up direct deposit or bill pay. This approach can increase the likelihood they take such actions.
Banks can do more with less. The more that customers use self-service digital and mobile channels and find information that addresses their queries, the fewer employees a bank needs to staff customer service centers. Institutions may find they can grow without adding a commensurate number of employees.
Banks should review their digital channels to ensure they are providing support content that addresses the ways customers seek information. Content around general search terms needs to be robust. Executives will need to keep in mind that most search terms require 10 or more custom answers to address the transactional, informational and navigational forms of customer intent.
Forty percent of retail checking relationships are unprofitable, so crafting retail checking accounts that deepen customer relationships, drive deposit growth and enhance the bottom line is a challenge faced by most financial institutions. How can bank leaders tackle this issue? In this video, StrategyCorps’ Mike Branton shares two common mistakes banks make regarding their retail checking products. He also shares his thoughts on enhancing the appeal of checking products and explains technology’s role as a deposit driver.
Branches play an important—but changing—role in the typical bank’s retail strategy. Increasing digital adoption may make consumers more apt to deposit a check using a smartphone camera than through a teller, but they still want to visit a branch for advice: A Celent survey published in May 2018 found more than three-quarters of customers want to meet a banker face-to-face to discuss a topic in-depth. Very few—just 12 percent of millennials—say branches are unnecessary, and prefer all-digital interactions.
And that has many banks evaluating whether to expand their branch network, even in today’s digital age. In Bank Director’s 2018 Technology Survey, 54 percent of responding executives and directors said their bank plans to add branches.
Before you move forward with building or acquiring your next branch, here’s what you should keep in mind.
Understand how the role of the branch fits within the institution’s overall delivery channel strategy, advises Jim Burson, a managing director at Cornerstone Advisors. “Start with, what are your growth objectives as an organization, and then second, how do you envision the role of the various channels supporting that growth objective.”
These goals will differ by bank. Burson says one of his clients prizes a branch’s “billboard value”—it lets customers know the bank is physically located in their market. That CEO values a big sign and a tiny lobby. “That’s a very clear objective for a branch. So, when they [build] new branches, if they can’t get the signing ordinance they want from a community or they can’t get the visibility they want when people are driving down the street, it’s off the table—that location is gone,” says Burson.
Before purchasing property and breaking ground on a new branch, a feasibility study should be conducted, advises John Smith, chief executive officer of retail banking consultant DBSI. Understand the deposit and loan opportunities within a desired market, and if there is room to gain market share for your bank.
“Every market we go into, we look at it strategically,” says William Stuard Jr., the CEO of $1.1 billion asset F&M Financial Corp. The branch should be within an hour or two of the bank’s headquarters in Clarksville, Tennessee, so the footprint is easy to manage.
Geographic expansion starts with a lending team. “We don’t go in and just get a building and try to start from scratch,” says Stuard. The bank’s Hendersonville, Tennessee branch started as a mortgage office, then a loan production office before the bank built a full-service branch in the town’s growing commercial area in 2017.
Taking an incremental approach to branch expansion appears to be a common method for testing the viability of a market.
William Chase Jr., the CEO of Memphis, Tennessee-based Triumph Bank, with $784 million in assets, says starting out with a loan production office helps the bank get into a market faster. “It’s a lot easier to go through the process of finding some nice office space and get an LPO approved,” he says. “Time is money.” And a full-service branch takes time to build.
He also credits commercial real estate expertise on the board with making smart financial choices on property.
Bassett, Nebraska-based Sandhills State Bank, with $242 million in assets, seeks to fill in the gaps in its sparsely populated area in Nebraska. When big banks pull back from the market, “it offers a great opportunity for community banks to fill that vacuum and pick up more deposits,” says CEO David Gale.
The bank’s current investors bought what was then a $28 million asset bank in 2010. The bank’s initial expansion occurred by sending lenders into new markets. These lenders’ first offices were, in fact, a pickup truck. “Our first three branches in 2010 out of the gate were built around lending talent and started out as loan production offices out of their pickups,” says Gale. Once lenders hit $5 million in loans, the bank would add an office in the market. At $10 million, they would open a branch and hire more staff.
Recent expansion has occurred through acquisition: Bank of Keystone in 2016, and in early 2019, the bank will purchase three western Nebraska branches from Western States Bank. At that point, Sandhills State Bank will reach $310 million in assets.
The pending branch acquisition (which is awaiting regulatory approval) will help the bank diversify its agricultural loan portfolio and acquire more deposits to fuel its loan growth. Like many in the industry, the impetus on deposit growth makes a branch acquisition more attractive than starting out organically with a lender in the market—though Gale does express a preference for organic growth.
Bank leaders hungry to acquire branches need to pay attention to opportunities in their markets. Gale has worked to build relationships with other bank CEOs, and this directly led to the the bank’s upcoming branch acquisition. In today’s competitive M&A market, bank CEOs need to be proactive to position their bank to pick up branches.
Improve the branch experience.
More consumers would switch banking providers over a poor branch experience (47 percent) than a poor digital experience (36 percent), according to the Celent survey.
When asked about specific branch experiences that would prompt them to switch, 68 percent cited ill-equipped banking associates, 55 percent long wait times and 49 percent impersonal service, meaning the bank doesn’t know the customer or understand what they need. Wealthier customers are even more sensitive to these oversights.
Some banks are solving this problem by adopting a universal associate or universal banker model.
“[Create] a relevant environment where you’re viewed as a place to get advice from,” says Smith of DBSI. “Today’s financial institutions are primarily still transactional.”
Because universal associates are capable of doing more for the customer—from service to advice—the customer has a better experience, and the bank can reduce its headcount in the branch. The universal banker model can also present a better career path for the employee, which should result in lower employee turnover.
But to make it work, universal associates should be properly trained, and the branch should be designed to make the most of the new model.
At Triumph Bank, universal bankers are “empowered to do almost anything that a customer would need,” from cashing a check to opening an account to financial planning options, says the bank’s human resources officer, Catherine Duncan. “We’ve got people that want to stick around and want to grow with the company. You empower them to make decisions … it keeps them engaged, it keeps them feeling valued.”
In addition to training these employees, the bank created an manual that serves as a go-to guide for any questions the associate might have, so they don’t have to run to a supervisor or another employee, and instead can help the customer confidently and immediately.
Triumph’s newer branches are designed without teller rows, and universal associates greet customers at the door.
At Sandhills, a lightly-staffed model works better in its sparsely populated market. The bank leverages technology to reach its rural customers—mobile adoption exceeds 50 percent, says Gale, which is on par with JPMorgan Chase & Co.—and you won’t find a drive-thru lane. “We want to talk to our customers,” he says.
Branch transformation initiatives should align with the bank’s overall objectives for its branch network, says Burson. And banks should evaluate their branches—old and new—to determine they’re meeting these goals. Too frequently, a branch is built, and the business case for that expansion isn’t revisited. “They don’t manage to the objectives,” he says. And that’s a big mistake.
When Radius Bank started working with small fintech companies a couple of years ago, the management team knew it would have to accept a certain amount of risk. After all, young startup companies don’t have the five years of audited financials and other assurances that reduce the risk associated with partnering.
“We decided in the company that we were going to have to take some risks as it related to working with fintechs, and we were going to have to find alternative solutions to what are being, I guess, prescribed as best vendor risk management strategies,” said President and CEO Mike Butler at Boston-based Radius, a privately-held bank with $1.1 billion in assets.
Brooklyn, New York-based Alloy was in its relative infancy when Radius engaged it to digitize its customer onboarding process, a critical move that aimed to make the process more efficient and reduce drop-offs.
Radius and Alloy are the winners of Bank Director’s FinXTech Startup Innovation of the Year, one of three annual awards that recognize successful collaboration between banks and fintech companies. The awards were announced at Bank Director’s FinXTech Summit, held in May in Scottsdale, Arizona.
Butler says the relationship with Alloy came after another fintech company, Mantl, suggested they meet after Mantl had revamped the bank’s online banking interface.
Before partnering with Radius, Alloy had been largely focused in the credit arena, working with credit card companies to make application review more efficient. When the Alloy team met their counterparts at Radius and realized that the firm’s model could apply in a retail banking channel, they jumped.
“We love companies that get passionate about our challenges. When somebody can come to us with a high degree of passion and energy, that’s a lot of due diligence right there when somebody wants to do that for you and do it well,” Butler says.
Radius did review Alloy’s financials, but also relied on references from other companies that had worked with the firm, which smoothed the bank’s concern about the risk of working with young startup.
“Prove it to me in a weekend that you think you can get this and how can you do it,” is how Butler describes the early relationship building dynamic.
What the technology does is combine multiple data points associated with typical retail account applications into a single platform and decision engine, reducing the cost and time that was associated with the old onboarding process.
Prior to Alloy’s system being integrated behind Mantl’s interface, often 30 to 40 of every 100 applications could be flagged for manual review, which adds time and cost to the approval process, says Chris Tremont, Radius’ executive vice president of virtual banking.
Now, the automated review process has reduced that manual review by a factor of 10 to only maybe three per 100.
“That gives you the magnitude of what this saves for us from what the number of people who were manually reviewing the process to those who are now being done from a technology perspective,” according to Chip Clarke, the bank’s chief data officer, who says Radius typically averages about 1,000 applications per week for standard retail deposit accounts or CD’s, where the technology is used.
From a bottom-line perspective, Tremont says what used to cost as much as $30 to open a single account has been reduced to $10-15.
It’s no secret that banks have been focused on their strategy and competitive positions with an increasing focus on growing deposits after years of being flush with deposits in a low-rate economy. But as banks begin to shift strategies with rates on the rise, the impetus has been to continue adding deposits to fund its lending operations. Retail accounts are an easy way to do this, though they can be expensive.
The technology can also be easily adjusted to customize the type of depositor the bank wants to attract.
Butler says the bank hasn’t collected enough data to fully understand the impact of the new feature, but there are clear signs it’s paying off.
“If you believe that the online or virtual channel is a source of deposits over the next three to five years, we have given ourselves a huge competitive advantage over those who haven’t even begun to think about the challenges associated with this segment,” Butler says.
Between February and March 2018, Butler says the month-over-month deposit growth was between 8 and 10 percent. And that trend is expected to continue through the latter half of the year.
“We’re just figuring out how to drive this puppy,” Butler says.
Before he understood banking, David Becker understood technology and its ability to shape the customer experience. Highly attuned to how people would want to bank in the future, Becker started First Internet Bank in 1999, now a $2.4 billion asset institution in Fishers, Indiana. In his 35 years working in financial services technology, Becker has created five companies listed in Inc. magazine’s 500 fast growing companies and continues to engage in philanthropic initiatives to support the economic growth of central Indiana.
When you first told people you were starting a branchless bank, what reaction did you receive?
Nearly 20 years ago, I had an idea to create a bank that lived entirely online. At the time, I had three financial services software companies. Today, we would call them fintechs. My experience as a service provider to the financial services industry, and my years as a consumer and business bank client, gave me deep insight into how banks worked, and, candidly, how they could improve.
How did bankers react? I initially presented my concept to a traditional bank, explaining how a bank could build a nationwide business with an all-online presence. After the presentation, though, the bank’s CEO rejected our concept. He claimed computers weren’t fast enough and the alleged consumer wouldn’t buy in. Essentially, he said it couldn’t be done.
Fortunately, consumers did not share the same skepticism. What’s unique about our story is that this online banking model was born following a focus group with my friends and neighbors. I asked them about how they’d prefer to bank. The ideas flowed. Eighteen years and $2 billion in assets later, we have demonstrated the success that can follow when you remain focused on the customer.
What lessons did you learn working in the technology sector that later helped you as you were growing First Internet Bank?
Before launching First Internet Bank, I worked in and around financial services for years. I saw an opportunity to improve upon the industry’s shortcomings—primarily improving efficiency and the customer experience, both of which rely heavily on technology paired with a human touch.
What’s helped us grow so quickly is that we’ve recognized that we need talented people who can handle anything that comes in the door. Because we have no tellers, per se, everyone who works on our retail banking team, for example, needs to be trained across multiple technologies to handle multiple functions, from complex IRA transactions to mobile functionality to starting new deposit accounts.
And because we’re using technology like mobile banking and biometrics, to revolutionize the banking process, there really isn’t any limit to our potential growth.
How can bank boards start to adapt an entrepreneurial mindset that allows for innovation?
Because we were a pioneer of the branchless model, we’ve learned to use technology to help us adapt to challenges and reinvent ourselves. Technology enables us to expand our business, enter new verticals to diversify our revenue streams, and serve customers across the country—without a costly branch network.
Technology is an increasingly important part of our business, and there is much to be said about the ways fintech is changing the landscape of our industry. However, I would caution boards against looking to a fintech solution as a quick fix to bring innovation to your organization. If you truly want to foster a culture of innovation, look to your existing team.
Today, our hire is the “dissatisfied banker.” We look for the banker who says, “What if we did this instead?” We want the people who challenge the status quo and offer solutions to help us make it better. At First Internet Bank, we call this our “entrepreneurial spirit,” and it permeates the organization.
Our people are the key to our success. Some are bankers that have finally been empowered to do what they’ve always wanted to do. Others are industry outsiders that we’ve hired to bring new solutions to old problems.
Most banks have been reluctant to offer person-to-person (P2P) payments services, although the market—which the research firm Aite Group estimates has at least $1.2 trillion in annual payments volume in the United States alone—probably deserves a closer look.
Writing in a May 2017 research report, Talie Baker, a senior analyst in Aite’s retail banking and payments practice, argues that a P2P payments capability could be a “competitive differentiator” for financial institutions as they fight for market share in a crowded mobile banking market. And it’s a market that could be heating up as both traditional banks and fintech companies with their own payments offerings jockey for competitive advantage. “The P2P payments market is seeing growth in the adoption of digital payments, and both bank and nonbank providers, including tech giants such as Facebook and Google, are looking for ways to secure a piece of the P2P payments pie,” she wrote.
Most financial institutions offer a P2P option either through the Zelle Network (formerly clearXchange), which is owned by a consortium of banks and launched its new P2P service in June, or Popmoney, which is owned by Fiserv, the largest provider of core technology services to the industry. A total of 34 institutions currently offer Zelle, including the country’s four largest banks—J.P. Morgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and Citigroup. Alternative providers include Facebook Messenger, Google Wallet, Square, PayPal through either its PayPal.me or Venmo services, and Dublin, Ireland-based Circle.
With 83 percent of the digital P2P market share in the U.S., compared just 17 percent for the alternative providers, banks are clearly in command of the space. Some of that advantage is attributable to the industry’s large installed base of mobile customers. “They have a captive audience to start with … and that gives them a one-up on, for example, a Venmo or a Square that don’t have a captive customer base and have to go out and build their business through referrals,” says Baker. However, the banks need to be careful that their big market share advantage doesn’t result in complacency. “Alternative providers are catching up from a popularity perspective and are doing more volume, and banks probably need to step up their game a little bit from a marketing perspective to keep their market share,” Baker says.
Why hasn’t the P2P market grown faster than it has until now? For one thing, P2P providers generally will have a difficult time charging for the service since consumer adoption has been slow. “Checks are free today, it’s free to get money from an ATM, so if [the services] are not free, I don’t know if they’re going to be popular for the long haul,” Baker says.
Another obstacle is the enduring popularity—and utility—of cash. Baker says that many potential users are still comfortable using cash or checks to settle small debts with friends and family—which is still the primary use case for P2P services. “I love being able to make electronic payments personally, I just have found that my peer group is not as up on it,” says Baker, who did not give her age but said she was older than a millennial.
The biggest impediment to the market’s growth, however, is the lack of what Baker calls “ubiquity,” which simply means “being available everywhere, all the time.” Cash and checks are widely accepted mediums of exchange, while most P2P services run on proprietary networks. “All of them are lacking in interoperability, so if we want to exchange money and I am using Venmo and you are using Square, we can’t,” Baker says. Baker points out that this is not unlike how things worked when email was becoming popular in the early days of the internet, where you could only exchange emails with people who shared the same service provider. Of course, a common protocol eventually emerged for emails and Baker expects the same evolution to eventually occur in the P2P space.
Why should banks care about a free service like P2P payments? Baker says that based on her conversations, many smaller institutions “don’t seem to understand that P2P helps drive consumer engagement. I think that P2P services keep them right at the center of a consumer’s life and keeps driving engagement with the banking brand.”
Nichols shares how CenterState interviewed 200 randomly selected potential customers about what they thought about the bank’s pricing and value of its checking accounts. The pricing ranges from a fee of $5.95 to $9.95 per month with a variety of ways to avoid this monthly fee (balance waivers, minimum transactions, etc.) The accounts also have the typical features included—online banking and bill pay, mobile banking and an expanded ATM network. It was also noted that this pricing was lower than competing banks and within the range of 75 percent of banks nationwide. Therefore, the pricing was reasonable and the features, while undifferentiated, were comprehensive.
The feedback from these consumers was that 34 percent of them had negative comments about CenterState’s checking line-up. Clearly, this is a number with lots of room for improvement.
Nichols didn’t go into much detail about the negative comments, but the essence of those comments are similar to StrategyCorps’ own consumer market research about consumers’ attitudes about checking account products.
Fees on Checking Accounts
First, almost unanimously, consumers don’t like to have requirements with a penalty fee structure for not meeting these requirements to access to their own money, especially when those requirements are not fully and clearly disclosed. Very few consumers have a basic understanding of the banking business model, thus don’t understand the business need for these requirements. Even those who do understand banking don’t like these requirements. The reason is the same, they don’t like to pay for access to their own money.
Second, despite the intrinsic value of a consumer checking account—the fact that it’s insured, customers have zero liability debit cards and a myriad of choices on how to bank, including online, mobile, ATM, and in branch, just to name a few—consumers feel it should be “fee-less” to have all this. Why? In short, financial institutions intentionally “sold out” this intrinsic value with free checking. Why pay for these things when they can be had at another financial institution in most cases, literally down the street? Selling out and totally diminishing this intrinsic value was the ante to get to the extremely lucrative source of nonsufficient funds and overdraft (NSF/OD) revenue. While it was the financially right thing to do at the time, the free checking hangover continues to plague financial institutions as they try to get customers to accept monthly recurring account fees to replace declining NSF/OD fees.
How does a financial institution restore the underlying value of a checking account in the eyes of consumers to warrant a more positive perception? At StrategyCorps, what we’ve seen work is NOT to spend time, money and marketing dollars trying to persuade customers that the checking account with traditional bank benefits is worth paying for. Trying to persuade consumers that traditional checking is valuable enough to pay for it, when it has been free for nearly two decades, is a tough proposition.
Instead, spend time, money and marketing on offering new product benefits that consumers will view positively. Which benefits are these? In general, these benefits have to be ones that are already proven in the marketplace that consumers view positively and are willingly and gladly paying for. Examples of these new types of benefits are cell phone insurance, roadside assistance and mobile merchant discounts. Nearly two of every three consumers already view these types of benefits positively enough to pay for them every month (think Verizon, AAA and Amazon Prime). These new product benefits either save consumers money when they have to spend it (effectively making them money) and/or provide protection to everyday items or situations.
So, stop trying to talk your customers into liking your traditional checking account with undifferentiated, traditional benefits they don’t appreciate despite the inherent value of the account. Rather, modernize your checking accounts by adding some new product benefits that are already viewed as valuable.
Many banks aren’t meeting customers’ digital expectations, and could be losing accounts as a result. Kimberlee Mineo of Bottomline Technologies explains why consumers abandon the account opening process and how financial institutions can improve the experience.
Why Customers Abandon Digital Account Applications
What type of fintech lending solution should your bank pursue? Mike Dillon of Akouba outlines what management teams and boards need to know about these lending models, and how each can benefit the bank.