How Many Mobile Wallets Are Too Many?


mobile-wallet-12-22-15.pngFor many years, the mobile wallet landscape was filled with small niche offerings that tested some important ideas, but never really gained much national traction. However, over the past 15 months, four major players have introduced their wallets and the tipping point for widespread mobile wallet adoption appears close. Apple Pay, Android Pay, Samsung Pay and Chase Pay have extended the technology and functionality of those early wallets and have started to close the gap on a wallet that would deliver value to the trifecta of stakeholders: consumers, merchants and the wallet providers.

Should every bank be preparing to support one or more of the existing mobile wallets? CG sees five prerequisites for widespread adoption of mobile wallets.

  1. Better security. Consumers have well documented doubts about the security of mobile payments versus more traditional payment methods. Mobile wallets must implement improved authentication processes (e.g., biometrics, account number tokenization) to allay these fears as the price of admission.
  2. More large-scale mobile wallet providers. The recent addition of providers (including Chase Pay) offers the market a wide range of mobile wallet options and a key move toward critical mass for merchant acceptance.
  3. More smartphones. By 2020, there will be 6.1 billion smartphones in the global market (most with biometric security features). That’s a stark difference from the 2.6 billion smartphones in today’s market—most of which do not have biometric capabilities.
  4. More merchant acceptance of contactless payments. Many of the new terminals that merchants are implementing support both contactless payments and the EMV chip.
  5. A good reason to keep using the mobile wallet. The new wallets either have or are planning to implement rewards programs into their product, which will give consumers a compelling reason to habitually use their mobile wallets.

Each of these prerequisites to mass adoption is trending in the right direction, which means every bank should be working to support one or more of the large mobile wallets as part of their future strategy.

Many banks seem content to support the provisioning of their card accounts into Apple, Android and Samsung. The announcement of Chase Pay at the payments-focused conference Money20/20 in Las Vegas in October sent shock waves through the 10,000 conference participants. If Chase felt it needed its own proprietary wallet, will other large banks follow?

The decision to invest in a proprietary wallet should be based on three key elements in each bank’s strategic direction.

  1. Does the bank have a customer profile that wants a mobile wallet offering and would that group prefer a proprietary wallet over a large national wallet like Apple or Android?
  2. Does the bank have the internal resources or external partnerships required to develop and sustain a wallet in a very dynamic environment? (The wallet of 2020 is likely to be very different from the wallet of 2016).
  3. What are the banks’ competitors inclined to do and how will their actions affect the banks’ customers?

Each bank must consider its own strategic differentiation when determining whether to build or borrow. What distinguishes it in the marketplace and how might that change in the future? What will draw new customers to the bank in the next five or ten years?

One feasible strategy is to let others pave the way in developing new products and then figure out when and how to offer them to your own customers. It’s an approach that can minimize risk without necessarily jeopardizing the reward.

The bottom line is, mobile wallets are coming. (We really mean it this time.) Most banks must allow their card accounts to be provisioned into at least some of them. Some banks (but not most) should offer a proprietary wallet, but only if it fits into their larger strategy. Add the wallet to fit your strategy; don’t change your strategy to fit the wallet. Focus on your strategic differentiator and ensure that most of your future effort and investment are focused on the differentiator and not spread across all the possible initiatives in which you could invest (including wallets).

CFPB Takes Aim at Class Action Waivers in Arbitration


arbitration-11-30-15.pngOn October 7, 2015, the Consumer Financial Protection Bureau (CFPB) announced that it is considering proposing rules that would prohibit companies from including arbitration clauses in contracts with consumers. This would effectively open up the gates to more class action lawsuits in consumer financial products such as credit cards and checking accounts.

In March 2015, the CFPB released its Arbitration Study: Report to Congress 2015, which evaluated the impact of arbitration provisions on consumers. The CFPB conducted the study as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Among other things, the study concluded that:

  • arbitration clauses “restrict consumers’ relief for disputes with financial service providers by allowing companies to block group lawsuits;”
  • most arbitration provisions include a prohibition against consumers bringing class actions;
  • very few consumers individually pursue relief against businesses through arbitration or federal courts; and
  • more than 75 percent of consumers in the credit card market did not know if they had agreed to arbitration in their credit card contracts.

The advantages and disadvantages of pre-dispute arbitration provisions in connection with consumer financial products or services—whether to consumers or to companies—are fiercely contested. Consumer advocates generally see pre-dispute arbitration as unfairly restricting consumer rights and remedies. Industry representatives, by contrast, generally argue that pre-dispute arbitration represents a better, more cost-effective means of resolving disputes that serves consumers well. With limited exceptions, however, this debate has not been informed by empirical analysis. Much of the empirical work on arbitration that has been carried out has not had a consumer financial focus.

As a result of the study, which allegedly contains the first empirical data ever undertaken on the subject of arbitration clauses, the CFPB is currently considering rule proposals that would:

  • ban companies from including arbitration clauses that block class action lawsuits in their consumer contracts, unless and until the class certification is denied by the court or class claims are dismissed by the court;
  • require companies that use arbitration clauses for individual disputes to submit to the CFPB all arbitration claims and awards (which the CFPB may publish on its website for the public to view) so that the CFPB can ensure that the process is fair to consumers and determine whether further restrictions on arbitrations should be undertaken; and
  • apply to nearly all consumer financial products and services that the CFPB regulates, including credit cards, checking and deposit accounts, prepaid cards, money transfer services, certain auto loans, auto title loans, small dollar or payday loans, private student loans, and installment loans.

Critics have found the CFPB’s data and conclusions leave something to be desired. An abstract of a report authored by researchers at the University of Virginia School of Law and Mercatus Center at George Mason University finds that the CFPB report “contains no data on the typical arbitration outcome—a settlement—and it is these arbitral settlements, and not arbitral awards, that should be compared to class action settlements. It does not address the public policy question of whether, by resolving disputes more accurately on the merits, arbitration may prevent class action settlements induced solely by defendants’ incentive to avoid massive discovery costs. It shows that in arbitration, consumers often get settlements or awards, are typically represented by counsel, and achieve good results even when they are unrepresented. In class action settlements, CFPB reports surprisingly high payout rates to class members and low attorneys’ fees relative to total class payout. These aggregated average numbers reflect the results in a very small number of massive class action settlements. Many class action settlements have much lower payout rates and higher attorneys’ fees.”

Needless to say, businesses with arbitration clauses prohibiting class actions wait anxiously for CFPB’s final rules on this subject matter. Is there any doubt what the final rules will contain? We think there will be restrictions on the use of arbitration clauses that prevent consumers from initiating class action lawsuits in contracts for consumer financial products or services.

The Battle Is Back On for Checking Customers


As I was driving to a meeting the other week listening to the radio, I heard back-to-back commercials from two different banks about checking accounts. The first was a super-regional bank promoting that they would pay me $250 to move my checking account to them. The second, one of the mega banks (a top five bank in asset size) promoted a similar message but upped the incentive to $300 to switch.

When I got home later that day, I found a direct mail offer from another mega bank upping the incentive to $500.

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I looked closer at the conditions of these incentives and found a similar nuanced strategic objective. These banks (and a few others I found online making similar offers) are clearly not returning to the days of “open a free account, get a free gift.” They aren’t looking for just consumers willing to switch their account to a free account with no commitment other than the minimum balance to open requirement (usually less than $50).

Rather, they are looking for those willing to switch their relationships that require a certain level of funding and banking activity (direct deposit, mobile banking activation, etc.) to earn part or all of the cash incentive. And these banks aren’t offering a totally free checking account.

Recognizing this as the objective, I perused a major online marketing research company to look for competitive responses from community financial institutions and found hardly any similar monetary offers. Those that were similar were mainly promoted just on their respective websites.

So what do these large banks know about these types of offers that community financial institutions don’t know (or deem important enough) to mount a credible competitive response? Reading and listening to presentations made to stock analysts by big bank management reveal that they know they can simply out market smaller community financial institutions, which don’t have or want to devote the financial resources for incentives at these levels.

They also know these smaller institutions’ customers, namely millennials, have grown disenchanted with inferior mobile banking products, and are looking for superior mobile products that the larger banks typically have. They are capitalizing on a growing attitude taking place in the market regarding consumers who switch accounts — 65 percent of switchers say mobile banking was extremely important or important to their switching decision, according to a survey by Alix Partners.

So by out-marketing and out-innovating retail products, larger banks know the battle is on to attract profitable or quick to be profitable customers, traditional ones right down to millennials who never set foot in a branch, by offering an attractive “earned” incentive to move and providing better mobile products along with a wider variety of other retail products and services.

Now community bankers reading this may be thinking, “That’s not happening at my bank.” Well, you better double-check. Last year, 78 percent of account switchers nationally were picked off by the 10 largest U.S. banks (and 82 percent of younger switchers) at the expense of community banks. Community banks lost 5 percent of switcher market share and credit unions lost 6 percent, according to Alix Partners.

And once these larger banks get these relationships, they aren’t losing them. Take a look at JPMorgan Chase & Co. Chase Bank has driven down its attrition rate from over 14 percent in 2011 to just 9 percent in 2014 (an industry benchmark attrition rate is 18 percent). Also from 2010 to 2014, it has increased its cross-sell ratio by nearly 10 percent and average checking account balances have doubled.

With this kind of financial performance (not only by Chase but nearly all the top 10 largest banks), a negligible competitive marketing response from community institutions and a tentativeness to prioritize enhancing mobile checking related products, their cash offers from $250 to $500 to get consumers to switch accounts is a small price to pay.

Combining this with well-financed and marketing savvy fintech competitors also joining the battle to get customers to switch, the competitive heat will only get hotter as they attack the retail checking market share held by community institutions slow to respond or unwilling to do so.

So community banks and credit unions, what’s your next move?

Where the CFPB’s Faster Payment Vision Falls Short


NACHA-8-24-15.pngOn July 9, 2015, the Consumer Financial Protection Bureau released its “vision” for faster payment systems, consisting of nine “consumer protection principles.”  The principles build on concerns about payment systems raised by CFPB Director Richard Cordray in a speech last year. These well intentioned principles pose a number of practical problems and ignore the inherent interdependence of consumer and commercial benefits as payment systems evolve.

Background
The CFPB’s nine principles stake out a bold policy stance aimed at ensuring that faster payment systems primarily benefit consumers. The principles are:

  • Consumer control over payments;
  • Data and privacy;
  • Fraud and error resolution protections;
  • Transparency;
  • Cost;
  • Access;
  • Funds availability;
  • Security and payment credential value; and
  • Strong accountability mechanisms that effectively curtail system misuse.

Release of these principles follows initiatives by the Federal Reserve System, The Clearing House, and most recently NACHA, through its same-day ACH rule approved in May, to promote the development of faster payment systems.

Practical Concerns with the CFPB’s Faster Payment Systems Principles
The CFPB’s principles undoubtedly deserve consideration, and few industry participants would disagree with them at a high level. Though reasonable in theory, certain goals articulated by the CFPB may prove impractical, counterproductive, or unduly optimistic in practice. Here are four examples:

Data and Privacy
The CFPB generally wants consumers to be “informed of how their data are being transferred through any new payment system, including what data are being transferred, who has access to them, how that data can be used, and potential risks[,]” and wants systems to “allow consumers to specify what data can be transferred and whether third parties can access that data.”

This amount of disclosure and degree of consumer control is unrealistic for routine payment transactions, unnecessary in light of current and evolving security measures and fraud and error resolution protections, and likely to thwart the goal of faster payment processing.

Transparency and Funds Availability
The CFPB expects faster payments systems to provide “real-time access to information about the status of transactions, including confirmations of payment and receipt of funds” and to give consumers “faster guaranteed access to funds” to decrease the risk of overdrafts and non-sufficient funds (NSF) transactions.

Here and throughout its principles, the CFPB expresses its desire for faster payment systems to benefit consumers immediately. Implicit in this goal is a rejection of staged implementation of consumer protections, as in NACHA’s same-day ACH rule where same-day funds availability for consumers follows same-day settlement of debit and credit transactions. Additionally, real-time access to information about transaction status seems costly and unhelpful until consumers can act upon such information in real time.

Cost
The CFPB envisions affordable payment systems with fees disclosed to allow consumers to compare costs of different payment options.

The CFPB’s vision of comparative cost disclosures across the ecosystem of available payment options is unrealistic given the existence of competing independent payment systems, multiple payment channels and devices, and varying degrees of intermediation. The total cost to consumers of using different payment systems depends upon many unpredictable variables, making comparative cost disclosures little more than rough, imprecise estimates.

Access
The CFPB expects faster payment systems to be “broadly accessible to consumers,” including “through qualified intermediaries and other non-depositories.”

This principle focuses on unbanked and underbanked consumers. Although broad accessibility should be encouraged, it is difficult to imagine a safe and widely accepted payment system evolving in which banks would not be heavily involved in the origination and receipt of transactions. Indeed, payment systems that have evolved independent of banks—such as virtual currencies—pose substantial consumer protection concerns.

Implications of the CFPB’s Principles
CFPB Director Cordray emphasized that “the primary beneficiaries” of faster payment systems should be consumers and the CFPB’s principles reflect this view. Creating faster payment systems is an enormously complicated industry-driven undertaking, the cost of which is borne by industry participants. As such, faster payment systems must offer tangible benefits to industry participants, not just to consumers, if they are to succeed. The CFPB’s principles would be more effective if they expressly recognized the need to balance consumer and commercial benefits.

Further, the CFPB may intend to use its principles as a chokepoint for policing consumer protection features in evolving payment systems. We hope the CFPB’s adherence to these principles does not become rigid and overzealous or threaten to derail useful payment system improvements before they get off the ground.

Creating a Sales Culture in Today’s Banks



Why does your bank need a sales culture? Challenges from other institutions—both traditional banks and nontraditional competitors—are putting a lot of pressure on the bottom line. Banks with a defined plan and direction will stay relevant amid the competition.

In this informative video, Mitchell Orlowsky of Ignite Sales discusses a successful sales culture and how good executive leadership can lead to success by addressing these questions:

  • What is the number one challenge banks have today when it comes to their sales culture?
  • What are the costs if they don’t address these challenges?
  • What are the steps to creating a better sales culture?
  • What results should you expect?

Making Interest Checking More Interesting


Retail-banking-6-26-15.pngFor consumers, having an interest checking account these days is, well, uninteresting.

Financial institutions only pay a few basis points of an interest rate at most, which requires a significant balance to generate meaningful interest income to customers. Even high-yield checking accounts average just 1-2 percent, but with qualifying balances capped around $10,000, customers annually make barely enough to go out for a nice dinner for two.

What can your financial institution do to make interest checking more interesting? In most cases, you can’t afford to pay a lot more interest than you’re paying today. And while you understand that, many customers don’t (just ask them).

So you have to think differently about what a checking account that pays interest delivers to customers. 

The essence of interest checking is that it lets your customers experience “making money on their money.” When this happens, it increases personal net worth. With increased net worth, customers now have more effective purchasing power (in terms of reinvesting and spending capacity).

When you think of interest checking as just “making money,” here’s a typical case of what your customer experiences today: The average balance of an interest checking account from StrategyCorps’ CheckingScore database tracking nearly four million checking accounts is almost $12,546. Earning two basis points of annual interest, the account makes the customer a whopping income of about $2.50. Not a great financial or emotional experience for your customer.

However, when you think of extending the essence of an interest checking account to include providing money-saving benefits, the financial and emotional experience a $12,546  average  balance checking customer has is much more relevant and meaningful.

So what are these money-saving benefits that can be offered in a checking account and how much can they typically save? Our experience in providing in-store local merchant discounts easily generates at least $10 per month for places everyone spends money—the dry cleaners, auto maintenance shops, restaurants and grocery stores. Offer travel-related discounts on hotels, rental cars and theme parks for an annual trip, and at least $100 can be saved. Add discounts for prescriptions and vision care, and saving another $50 is not difficult. And providing in-demand services like cell phone insurance ($120), roadside assistance ($70) and identity theft protection ($120) to replace what nearly one in three consumers already pay directly to companies providing these services, and that’s another $310 in total savings.

Now let’s compare customer experiences. A traditional interest checking account rewards a $12,546 DDA customer $2.50 in interest income. A modernized interest checking rewards the same customer with $2.50 in interest income and $580 in easily realized savings on things that a customer spends his/her hard-earned money on every day, resulting in $582.50 of effective yield or about 4.6 percent instead of .02 percent.

Said another way, to earn $582.50 with a .02 percent interest rate would require an average balance of just over $2.9 million, which isn’t realistic except for very few customers per financial institution. But wouldn’t it be a positive experience if many more of your customers could feel like they were being offered a product that provided the potential reward to be treated like a multi-million dollar relationship customer.

Granted, a customer has to use these benefits to earn the savings yield, but all of these benefits have mass market appeal with spending situations that are frequent and common. They also are delivered via a mobile app or a website, which are the preferred channels that your customers want to bank with you anyway.

If you’re wondering how to improve the user experience of your interest checking customer, pay them as much interest as you can afford so they’re able to make as much money as possible, but also provide the tools to let them save as much money as possible on things they have to buy. Until interest rates recover to levels to generate material amounts of interest income, the money-saving ability of these kinds of benefits will make interest checking more interesting.

Smart, top performing financial institutions are already successfully employing this to retain and grow interest checking customers. If you want to keep your interest checking uninteresting, then keep paying your $12,546 checking balance customer $2.50 in interest.

Putting the Retail Back in Retail Checking Design


mobile-rewards.jpgAsk bankers how they go about designing their retail checking products and most will answer with much more of a focus on the checking part than the retail part. Don’t get me wrong, the checking part is essential. The account has to be operationally secure, reliable and accurate in terms of supporting transactions and related information. However, customers have overwhelmingly shown they aren’t willing to pay for just checking. To be different, to generate much needed fee income and to really change the game of checking, banks must focus more on the retail part of retail checking. Here’s why.

With mobile and online banking growing rapidly, customers’ face-to-face interaction with bankers is becoming less frequent. As a result, customers’ experience with and connection to the bank is more tied to their direct interaction with their checking product and what that product delivers. Plus, the checking account continues to be critically important as the primary fee income vehicle on the retail banking side.

This begs the question, how does your bank design its retail checking accounts to be so relevant and engaging to your customers that they will gladly pay a fee for them? This is where the retail focus in the design of your checking products comes into play—your bank has to deliver to your customers a more meaningful and emotional experience with the product itself. It seems like the banking industry has talked forever about being retailers. Yet, very few banks apply basic retailing principles to product design. Even fewer have been willing to commit to doing what they need to do to experience the success of top retailers. For the last decade or so, it was easy to understand why—free checking and overdrafts were the gift that kept on giving, so thinking about retailing in regard to product design and relationship-building took a back seat.

To learn how to incorporate retailing to make your checking accounts more relevant and engaging so that your customers willingly pay for them, just take a look at the best retailers outside the banking industry. The online shopping websites LivingSocial and Amazon make incredible emotional connections with their customers yet rarely interact with them face-to-face. The customer relationship is almost entirely defined through the design of the product and the value it delivers. In most cases, the only interaction with the customer is by email.

So the next question begging to be answered is what retailing best practices are naturally transferable to incorporate into your checking products? There are many possibilities, but there are primarily three that easily fit into the design of a checking account and aren’t so costly as to make the monthly fee non-competitive. These three are local, mobile and social.

First, nearly every geographical market today is promoting the local mindset—thinking, supporting, buying local, etc. Banks already know this power of local as they already classify themselves as community banks (even the mega-banks employ this positioning). So it is very logical to extend this role to becoming a community connector. This means connecting your consumer customers who buy things locally with your small business customers who are looking to grow their sales.

Second, mobile delivery of banking products/services is here to stay. Banks that think like a top retailer already know that three of the top four ways consumers want to use their mobile phones involve shopping and coupons. (The Federal Reserve reports on “Consumers and Mobile Financial Services,” March 2012 and March 2013, provide a wealth of information about how consumers want to use their mobile phones, not how banks think they want to use their mobile phones.)

So combining these local and mobile best practices into a checking benefit like a local merchant discount network that delivers the discounts via a customer’s mobile phone is not only a difference maker but a game changer. Think about it—your retail customers talking about how their checking account saved them money on purchases and your small business customers seeing how your bank helped grow their business. Plus, it’s already proven that your customers will gladly pay a monthly reasonable fee to get access to attractive local merchant discounts, around $6 per account.

This leaves the social best practice. To be clear, we’re not talking about social media. What we’re referring to is purposeful communication that is unexpected, unselfish and engaging. The typical social experience of checking customers is they open an account and the bank doesn’t meaningfully communicate with them again until the customers have some type of issue or problem, or they come back in the branch. Smart retailers already know the power of purposeful communication, sending periodic emails to customers that make offers that usually save them money or at least recognize them as valuable customers.

If you want to put the retail back in retail checking, then study up on how other top retailers are using the local, mobile and social best practices and determine how your bank can incorporate these features into your checking accounts. Doing so will make your checking accounts different, change the game for your consumer and small business customers, and provide ample customer-friendly fee income that every bank needs.

*This article has been updated from an earlier version.

Video Banking: Folly or Foresight?


touchscreen.jpgThe past several years have not been kind to the retail banking business model. Low net interest margin, depressed lending demand, significantly eroded fee income and higher compliance costs have all contributed. Moreover, steady migration of branch transactions to self-service channels has been eroding branch foot traffic. The result is typically higher branch transaction costs and declining sales results. What is a bank to do?

The “Branch of the Future” May be Emerging

While substantive branch transformation remains a rarity in North America, there appears to be a growing consensus that the status quo is unsustainable. Celent couldn’t agree more! To understand the state and likely evolution of North American retail banking, Celent fielded surveys in July 2010 and again in July 2012. In 2012, considerably more institutions indicate intentions to make modest to sweeping changes in branch configuration.

Institutions appear to be eyeing a variety of approaches. Some (55 percent in the 2012 sample, up from 24 percent in 2010) see enterprise wide branch design changes likely. An equivalent percentage (57 percent, up from 48 percent) see ultra-low-cost designs in the mix. These small, highly automated outlets may replace some existing branches, while others may be built instead of more expensive traditional designs in new markets. A common objective in contemplating redesign supports a sales/service rather than transactional model (66 percent up from 58 percent).

Source: Celent survey of NA FIs, July 2012, n=132

None of this is going to be easy, and banks are wisely being cautious about what to do and how to do it. What has changed over the past two years, however, is the growing number of banks contemplating branch channel initiatives. In the July 2012 survey, more than a third of banks and nearly half of credit unions surveyed expect significant changes in size, capacity, technology and staffing over the next five years. About a third expected more modest changes, and only about one in five surveyed financial institutions expect their branch networks to remain mostly the same over the next five years. We are witnessing a tipping point.

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Most branch transformation initiatives seek to achieve the dual objectives of cost reduction and improved sales effectiveness. But, branch transformation, whether modest or significant, doesn’t itself suggest the use of video. Is video banking going to be a good idea? Celent is bullish on the use of personal video conferencing in banking applications. But before defending this assertion, let’s first look at the variety of ways video can be used to accomplish these two objectives.

Video Tellers. Video is being used at drive-through locations and in branch lobbies and vestibules alongside transaction automation technology to provide a low-cost alternative to the traditional teller experience. Credit unions have taken the lead in the use of video tellers both as a replacement of traditional teller roles and as a way to augment traditional teller arrangements. Some financial institutions have used video kiosks (a.k.a., personal teller machines, or PTMs) in de novo branch designs while employing live branch personnel inside the branch to engage customers with needs that go beyond simple transactions.

Video SMEs. In contrast to using video to support routine (teller) transactions, some banks and credit unions are using desktop video conferencing applications to connect customers with subject matter experts (SMEs) such as lending officers and specialized customer support personnel. Consumers could also be connected to SMEs via desktop videoconferencing as part of an online banking experience.  Thus far, the prevalent use of video SMEs has been among smaller and rural branches as a way to provide cost-effective service delivery.

The business case for video banking has been demonstrated in many financial institutions, while in others, those still piloting, the jury has not rendered a verdict. Those with successful implementations have seen benefits that may surprise you.

  • Cost savings. Coastal Federal Credit Union centralized all its tellers and deployed 63 PTMs across its network.  Coastal replaced 74 branch tellers and supervisors with 44 tellers, supervisors, and service staff to support its 15 branches, resulting in a cost reduction of 41 percent while expanding branch hours by 86 percent.
  • Improved customer convenience. Multiple PTM implementations are being accompanied by expanded branch hours. Video SMEs can offer expanded offers and shorter (or no) wait times by connecting to an available SME regardless of physical location.
  • Improved sales results. Celent has interviewed multiple financial institutions asserting improved sales results through the use of video banking. In most cases, this occurs through automation—largely removing teller transaction processing and reconciliation activity from the branch environment. Remaining branch staff, freed from the administrative burden, can now be devoted to sales and service. With remaining branch staff more focused on sales and service at Coastal FCU, average sales per full time equivalent (employee) per day increased to 2.4, up 49 percent from 1.6 sales per FTE per day when each branch had tellers.

But, will customers accept video banking? Done well, customer response has been strong, with measurable improvements in customer satisfaction. Customer response appears to be strongest when video banking is introduced alongside meaningful benefits such as expanded branch hours or shorter drive-through wait times.

A few short years ago, this would likely have not been the case. Technology improvements have made video conferencing both affordable and more satisfying. The growth of Apple’s Face Time and Microsoft’s Skype bear testimony. But, just as Skype is not for everyone, video banking isn’t either. Celent expects the topic to remain controversial for years to come. In the meantime however, savvy banks will give the idea careful consideration.

Originally published on December 3, 2012.

The Battle for the Bank Account: And Why the Banks Will Probably Lose


Brett King, best-selling author and disruptor, explores the end-game in the emergence of the mobile wallet and what it means for the humble bank account. With more than 60% of the world’s population without a bank account, with the ubiquitous nature of mobile phone handsets and the increasingly pervasive pre-paid ‘value store’ – will banks still be able to compete? When you can get your salary paid directly onto your phone, when your iTunes account doubles as a prepaid debit card and when you can use Facebook to send money – will there be any need for traditional retail banking in the future?

Does Checking Need a New Name?


6-19-13_StrategyCorps.pngChecking accounts have been around in some form or fashion since 100 B.C. when the Roman argentarii (money changers) issued an early form of checks to their clients. Checking accounts then made their way to the U.S. during the early 1700s as colonists adopted the popular checking system brought over from Europe. Then in the early 1860s, The National Banking Acts laid the groundwork for the national check clearing system.

Yet today, the main reason for calling this account a checking account—the writing of checks—seems to be losing its descriptive accuracy. Checks have been declining in importance and in volume for the last decade or so (down from 16.9 billion in 2000 to 5.1 billion in 2012 per the Federal Reserve). Ask folks 30 years old or younger about checks, and they’ve either never written one (and don’t even know how to write one) or could count the total number they’ve written on their fingers and toes.

As a frequent attendee, exhibitor and presenter at retail banking conferences, I get to talk to lots of bankers and listen to a lot of speakers. While the term checking is still commonly used (and the acronym DDA for demand deposit account, to a lesser extent), everyone in retail banking seems to be struggling with what else to call it. I’ve heard terms like the generic bank account and the slightly more descriptive transaction account and debit account.

However, these names fall as short as the term checking does. The drawback with these alternative names is they are way too bank- and functionally-centric, employing terms generally unrecognizable by the public such as debit and demand deposit.

With alternative banking channels like online banking, online bill pay, mobile banking, mobile deposit and bill pay, smart ATMs and electronic person-to-person payments driving down interaction with real live bankers, the product actually delivering these functions becomes even more the identity and reference point of the customer relationship. The product housing these functions is increasingly the primary connection of your bank customer to your bank. Or as Brett King, the author of the books Bank 2.0 and Bank 3.0, puts it, “Banking is no longer a place you go… it’s just something you do.” And most of the doing relates to typical checking transactions. So the new term for checking must express a more customer-centric purpose of engagement.

But your bank can’t just call it something different and leave it at that. The account must truly be upgraded from ordinary checking delivered in the past. The checking account of today and in the future must deliver much more intrinsic value and convenience than ever before. It must connect with customers better and differently for your bank to be relevant in their lives.

Your customers are already thinking about their checking accounts differently (and using them differently too), so your bank must think about them differently as well, including not only what you call the account but also what it delivers—a relationship-building experience.

Who knows how that will evolve into a new name to replace checking or DDA? Something short, sweet and more meaningful will develop. I have some ideas already on this, do you? If so, let’s compare notes and maybe get this naming issue resolved sooner rather than later!