Is Your Bank Ready For Customer 3.0

The banking industry is in the midst of a significant shift in customer behavior fueled by new channels, new competitors and new shopping behaviors. Today's customer is hyper-connected, highly informed and demanding a highly personalized approach with regards to communication, product development and customer service.

These customers cannot be defined by a specific age or income category or geographic parameter, but by their ability (and desire) to adopt and apply new technologies to meet their banking needs.

Say "Hello" to Customer 3.0.

Customer 3.0 begins their bank and credit union product shopping experience at their desk, in their car or on their couch, relying on friends and family reviews and published reviews across social media channels. Instead of walking into a local branch office and sitting down to open an account during banking hours, these customers purchase their banking services much like they purchase music, books or other products . . . online, 24/7.

As Brett King highlighted in his book, Bank 3.0, the new customer doesn't 'go to' their bank or credit union or rely on a physical distribution network. Banks and credit unions need to find and effectively engage customers who are mobile-first and have vast choices and a 'want it now' attitude. This paradigm shift in the balance of power between banks and the customer positions Customer 3.0 as a power player who is firmly in charge of their personal buying process.

To find and engage with Customer 3.0, financial institutions need to transform their back office and delivery networks and begin to think like the new customer. They need to understand that the competition is not just other traditional banks or even the digital-first 'neobanks'. Instead, we are competing across all of the touchpoints used by Customer 3.0, where experiences are shaped by the latest in retail, gaming, search and mobile technologies.

In a just released research report, Say Hello to Customer 3.0, Accenture discusses the transformation of the banking customer over time and the need to move from being a financial facilitator to becoming a part of the ecosystem where Customer 3.0 interacts. The report also discusses the need to move from mass marketing techniques to a highly personalized approach that takes advantage of both structured and unstructured data to improve the overarching customer experience.

Defining Customer 3.0

Unlike the customer of the past, Customer 3.0 is not defined by traditional demographics like age, income, geographics or gender. Instead, they are defined by the way they leverage new technologies to meet their individual needs. Digitally astute, mobile-first and socially connected, Accenture found Customer 3.0 to have some generally common attributes. I provide my take on what these attibutes mean to bank product managers and marketers:

• Highly Informed: Customer 3.0 leverages the information available on the internet more than any previous generation. They use comparison sites and associated apps to gather insight about the banks and products they want to purchase before a bank even knows they are shopping.
  
  The change in bank shopping behavior was discussed in my previous post, Digital Shopping Has Transformed the Bank Purchase Funnel, and more generally in the Accenture report, Energizing Global Growth: Understanding the Changing Consumer. Customer 3.0 starts (and sometimes finishes) their bank shopping experience in the digital world.
  
  My Take: Traditional media is no longer enough for acquiring or cross-selling the new customer. The importance of digital marketing tools, such as retargeting, must become part of ever bank and credit union marketers tool kit.

• Price Sensitive: Saving money and/or 'getting a deal' is more important to Customer 3.0, who places an emphasis on a fair value exchange as opposed to simply buying on brand name or convenience alone.
  
  My Take: While Customer 3.0 is price sensitive, they will pay for a product that saves time and/or money in the long run. Banks and credit unions should not view this attribute as a message that 'free is better', but as an opportunity to build services that can be differentiated. This also bodes well for merchant-funded rewards if the offers are targeted and easy to use.
• Socially Connected: Today's social networks provide a double edged sword for financial institutions. While serving as a platform for sales, social media also is a platform for bad news, poor reviews and complaints to travel faster than ever to more people than ever before.
  
  My Take: Banks and credit unions need to be highly responsive to customers who use social media to air their grievances. It is usually best to respond publicly using the same channel the customer used to provide public closure.
  
  From a sales perspective, using social media for 'likes' and 'friending' is not enough. Social media should be leveraged for proactive and measurable sales efforts when possible (see Financial Brand's review of Navy Federal Credit Union's Facebook $200 million selling effort here). Channels like YouTube have also been used successfully to promote, educate and reinforce positive customer experiences.
• Trust Their Peers: Customer 3.0 is not shy. They are very comfortable receiving and sharing reviews on social networks and within apps wherever possible. Sites like BankRate, My Bank Tracker, Find a Better Bank, in addition to Facebook and Twitter provide the online platform to provide reviews, advice and opinions instantaneously. Recent research reinforces this trend with 14 percent of customers trusting advertisements while 78 percent trust peer recommendations.
  
  My Take: Monitoring recommendation and review sites should be part of the job of marketing and the customer experience areas of the bank. In addition, much like restaurants and retailers, banks and credit unions should seek positive online reviews from satisfied customers as part of daily social interactions.
• Self-Promotion: Aligned with the above attribute, Customer 3.0 will publish and promote themselves, their opinions and their decisions through social channels (myself included) while many other customer groups are much more shy about their daily activities.
  
  My Take: Some banks are proactively monitoring the social network activities of their customers not only to gauge satisfaction and to build a more robust profile but also to determine who may have the strongest 'social clout'. Moven may have the most public social monitoring feature with their CredScore. With a close eye on privacy issues, the ability to determine a customer's social influence can be a powerful marketing tool going forward.
• Instant Gratification: Influenced by the impact of online books by Kindle, music via iTunes and simple bank account opening by GoBank, Simple, Moven and PNC's Virtual Wallet, Customer 3.0 can be accurately described as the 'now' generation. They want to be able to open accounts, transact business, talk to customer service and view their financial position quickly, easily and in real time.
  
  My Take: Innovation in the eyes of Customer 2.0 may not be in the form of more features and functions, but simplified capabilities that occur seamlessly. From simple account openings to seeing balances without needing multilayer authentication (GoBank Balance Bar), to instant mobile receipts (Moven), banks and credit unions need to remove complexity from everyday banking, allowing customers to bank where, when and how they want.
  
  The recent innovations by Mitek Systems using the camera functionality on a phone for mobile deposits, mobile billpay, mobile account opening and most recently, mobile balance transfer exemplifies the importance of instant gratification.
• Security Unconscious: Despite all of the talk about public discourse around privacy and security, Customer 3.0 does not seem to be nearly as concerned about viruses, spam or phishing attacks, uploading and downloading more digital information than any other group. This comfort extends to their confidence in doing banking transactions online or on a mobile device.
  
  My Take: For Customer 2.0, the need to emphasize safety and security is less of an issue when wanting them to try new online and/or mobile services. That said, this security could be short lived if a major breach occurs within the banking industry. In addition, the comfort with sharing personal information allows financial marketers greater access to insight that can be used for improved targeting, product development and communication.

Engaging Customer 3.0

To better engage Customer 3.0, Accenture recommends that financial institution become ubiquitous, melding into the digital ecosystem where Customer 3.0 already interacts. This is a 'pull' as opposed to 'push' environment, where banking develops products, services and content the customer seeks as opposed to being sold.

The expectations are not being set by historical banking organizations, processes and products but by other more progressive industries that have already embraced digital real-time transactions, robust 'big data' insight, geolocational capabilities and new ways to communicate through offline, online and social channels. 

The retail industry has set the bar high for developing a single customer view and removing product silos. They also have made the customer aware of the new 1:1 marketing potential and the ability to listen and interact with customers on their terms, providing products and services that add value and enhance daily life.

Below is a great narrative on the expectations of Customer 3.0 and the interrelationship between what they expect from banking compared to what they are already receiving from other companies they like and admire.

To improve engagement with Customer 3.0, there are seven barriers that must be addressed that are inextricably linked to the banking industry's current operating model:

1. Trust: While progress has been made to build trust within the industry, Customer 3.0 doesn't differ from other customers when it comes to making choices between different banks and credit unions. They turn to friends, family and their extended virtual community. Banks that avoid customer 'surprises' and improve transparency will benefit.
   
   
2. Advice: Progressive Insurance exemplifies the way a financial institution can provide an unbiased perspective with their comparison shopping tool. Likewise, banks can provide tools that are unbiased as well as content that can help educate customers. American Express does this well with their Open Forum and many banks have developed educational blogs around financial planning, etc.
   
   
3. Location: Financial institutions need to find more ways for the digital experience to provide many of the benefits of the physical experience. Customer 3.0 is reluctant to visit branches except for the most complex purposes, so the development of significantly better tablet applications that are tactile and more robust is a great place to start.
   
   
4. Loyalty: Loyalty is harder than ever to secure since most banks are followers as opposed to leaders and have become more of a commodity or utility as opposed to being differentiated. To build stronger loyalty, innovation will become more valued and the ability to provide services beyond traditional banking will be rewarded.
   
   
5. Price: Customer 3.0 is very aware that it is less costly to serve digitally than through a physical location, but is willing to share the benefits of this lower cost delivery. Unfortunately, serving digitally is not always less expensive, so improved customer education and the ability to generate fees from value-added services will be important in the future.
   
   
6. Time: Finding ways to serve Customer 3.0 at a time that suits them is not difficult for many transactions, but finding a way to serve this segment when interaction is needed is not as easy. Live customer support through digital channels will become an important differentiator.
   
   
7. Relevance: The collaboration with non-financial providers to stay relevant will become more important since Customer 3.0 wants their financial provider to be inextricably linked to their everyday lives. Location-based rewards, improved P2P capabilities, etc. are the foundation for this needed relevance.

Attracting and Retaining Customer 3.0

To attract and retain Customer 3.0, banks need to come to the realization that change is needed. They need to embrace the need to innovate and undergo a overhaul of the way they do business as Brett King highlighted in his book, Bank 3.0 and is done by Chris Skinner in his newest book, Digital Bank: Strategies to Succeed as a Digital Bank (interview with Chris Skinner here).

According to Accenture, banks need to engage with Customer 3.0 on their terms by:

• Redefining their business model
• Engaging whenever, wherever Customer 3.0 desires
• Changing the way products are created
• Utilizing technology to gain greater insight into customer behaviors
• Delivering innovative experiences
• Rewarding loyalty

In other words, to defend share of wallet from organizations like PayPal, Walmart, Visa, MasterCard, Google, Apple . . . , banks will need to collaborate with the customer in a way that assists with new product development, service and channel experience. In short, banks need to move from being a financial facilitator to becoming part of the digital ecosystem where the customer interacts.

The question becomes, can traditional banks and credit unions remake themselves for an environment where the customer has all of the power?

Additional Resources

Say Hello to Customer 3.0 - Accenture (2013)

Digital Shopping Has Transformed the Bank Purchase Funnel - Bank Marketing Strategy (2013)

Bank 3.0: Why Banking is No Longer Somewhere You Go But Something You Do - Brett King (2012)

Enhancing the Banking Customer Value Proposition Through Technology-Led Innovation - Accenture (2011)

Digital Bank: Strategies to Succeed as a Digital Bank - Chris Skinner (2013)

Energizing Global Growth: Understanding the Changing Consumer - Accenture (2013)

From Free to Fee: Monetizing Mobile Deposits

Is your mobile banking channel a cost center or a profit center?

If your answer references that your mobile channel is 'saving you money' by diverting transactions from more costly channels, then I need to ask you how much you have reduced your CSR team, your teller staff and/or closed your branches as a result of mobile banking use?

You can generate revenue from your mobile channel, however, by building new pricing models that include fees for value-added services. As part of a new monthly series, 'From Free to Fee', I will be discussing revenue opportunities from several emerging financial services beginning with today's post on mobile deposits.

I am not the first to propose that banks and credit unions take a harder look at mobile banking from a revenue perspective. In fact, in May, 2011, Jim Bruene, publisher of the Online Banking Report and the NetBanker blog and founder of Finovate, proposed that new pricing models could propel online and mobile services to the next level in his Online Banking Report entitled, 'Creating Fee-Based Online Services'. He stated, "Unlike the $35 debit card overdraft fee, there are rational and understandable reasons for charging fees for value-added online and mobile services."

In his report, not only did Jim provide an historical perspective as to why and how banks and credit unions continually end up giving away their services, he provided 33 different services that could generate a fee and offered a perspective on the acceptance level by eight different customer segments.

In my post, I am going to try to tackle the opportunity for charging a fee for mobile deposits . . . even if your institution currently does not charge for the service. I will be referencing several research reports to provide rationale, especially a recently released pricing optimization study produced by Market Rates Insight entitled, Growth and Revenue Potential of Emerging Financial Services. This 168-page study covers 13 different emerging financial services, with insights into fee optimization, targeting, institutional differences and bundling options (I reviewed this study in a recent blog post).

I will also provide implementation and marketing recommendations based on my travels across the country and my work at New Control Direct and Digital. 

Note: A audio podcast of a 'Breaking Banks' interview by Brett King of Jim Marous and Dr. Dan Geller from Market Rates Insight around how and why banks should generate revenues from value added services is available for download here.

Moving From a Cost Savings to Revenue Generation Perspective

Many banks are under substantial pressure to reconsider the economics of retail banking, especially given the decline in net interest margins and the reduced income from sources such as debit interchange and overdraft fees. While there has been a slight rebound in deposit service fees lately, many fees are associated with services on the decline (mortgage refinancing).

Net Interest Margin for Banks with Assets > $10B

Aggregate Deposit Account Service Charges for Banks with Assets >$10B

There is no doubt that cost cutting has and will play a role in the effort to offset these reductions in income. But how much more can costs be cut without an impact on customer service or falling behind in the race for advancements in innovation and technology?

Another option is to have more customers pay for services that were previously 'free' like checking accounts. This strategy has been implemented by many banks over the past few years as evidenced by the decline in institutions offering free checking today (39 percent) compared to 2009 (76 percent) according to Bankrate, Inc. Many banks have also increased their overall service charge structure as well as the requirements to avoid fees.

The strategy of increasing fees on these basic services comes at a cost, however. According to the J.D. Power and Associates' 2012 U.S. Bank Customer Switching and Acquisition Study as well as a study conducted by the Deloitte Center for Financial Services, these types of fees lead to defections. 

A better option may be to build a new fee structure around emerging financial services that bring added value to the customer. Similar to options available when you purchase a car, these new fees could be singular line items and/or could be bundled into 'value packages' that the customer could select. The key is for financial institutions to no longer race to the 'free' finish line, but to assess a logical cost for benefits that bring a value to the consumer.

So, how big is the opportunity for generating additional revenue from mobile RDC?

Mobile Deposit Marketplace Potential

According to recent research by Mitek Systems, more than 12 million mobile users have made deposits exceeding $40 billion using their mobile device. In fact, four of the top banks in the country have reported extraordinary volumes of mobile deposits when considering the relative infancy of this service.

• Bank of America: 1M/Week
• JP Morgan Chase: >3M in May
• Wells Fargo: 1.4M in May
• PNC Bank: 450K/Month

The percentage of the largest financial institutions offering mobile remote deposit capture has almost tripled in the past two years, with 64 percent of the top 25 retail banks offering mobile deposit in 2013, up from 48 percent in 2012 and 22 percent in 2011, according to Javelin Strategy & Research. 

In addition, according to research from community bank mobile app provider, Malauzai Software, Inc., the usage of mobile deposit varies from organization to organization. Best-in-class financial institutions have approximately 20% of their active mobile banking end-users making deposits monthly and the average bank or credit union has 10% of active end-users making mobile deposits monthly. Average usage increases to 15%-17% of active end-users when looking at activity over a longer, 90-day period. 

The growth in mobile deposit use is not expected to subside any time soon either. In a June 2013 Celent survey of US internet active consumers, mobile deposit was the second most highly valued capability surveyed, with two-thirds of smartphone users ranking the capability “highly valuable” (6 or 7 on a 7-point scale). Among those surveyed, mRDC was more highly valued than person-to-person payments (54%) and the emerging capability to enroll a new bill payee using the phone’s camera (46%) which a handful of banks offer.

“Mobile deposit, the ability for consumers to quickly and easily deposit checks using their smartphone or tablet cameras has become a must have for banks as consumers increasingly adopt a mobile lifestyle,” said James DeBello, CEO of Mitek, San Diego.

Mobile Deposit Customer Profile

According to the Spring 2013 Raddon Financial Group National Consumer Research, mobile deposit is currently done by 7 percent of households, with 21 percent of Gen Y households using the service and 30 percent of higher income (>$50,000) Gen Y households using mobile deposit.

Indexing the age, income, balances and behavior of the mobile deposit user against all households (index=100), a mobile deposit user is younger (by 14 years), has a higher income and loan balance, has an average checking balance, and provides interchange income that is higher than the norm. Not shown is the fact that these households have average mortgage, equity and credit card balances.

  

Mobile deposit users, as expected, index significantly higher than the average household as to their likelihood of opening a new checking account online, and are more likely to use mobile payments, apply for a loan online, use a prepaid card and even make a payment through social media.

Bottom line, mobile deposit users are heavy users of all mobile services . . . or heavy users of mobile services and heavy mobile deposit users. The research also found that these customers use the branch at a rate that is 66 percent of the average customer.

Mobile Deposit Revenue Opportunity

One of the selling points of mobile banking has been the reduced costs of delivery of the channel. Estimated cost of in-person or call center delivery is quoted as roughly $4.00, with the cost of a mobile transaction being quoted as $.19. Even if we assume that these are accurate estimates of the fully loaded costs of each channel, an assumption that there is a 1:1 offset of transactions is definitely faulty.

Taking these assumptions one step further, if we assume one transaction per month, some quote a cost savings of close to $50 per mobile customer per year. This is highly unlikely (as presented by Bob Meara, senior analyst from Celent in a recent blog post).

While it is definitely easier to assume the cost savings above and to simply sell 'free', this leaves a great deal of potential revenue on the table based on recent research from Market Rates Insight. In the report, Growth and Revenue Potential of Emerging Financial Services, executive vice president and author of the report, Dr. Dan Geller, provides evidence of the willingness of consumers to accept 'value-added fees. In other words, while increasing fees on traditional services such as checking accounts will be seen as punitive and met with resistance (and potential defection), there is an opportunity to sell emerging financial services such as mobile deposit either singularly or as part of an enhanced service bundle.

In the study, both the importance of mobile deposit and perceived value of the service were measured. In the case of mobile deposit (13 emerging services were evaluated in the study), this evaluation was able to illustrate that more could be charged for a premium level of service (such as same day availability) while a lower fee could be charged for slower availability.

According to the study, 56 percent of consumers who did not already have the service found mobile deposit important to some degree. The average value consumers place on this service is $2.63 per month, while the 3.5 percent who found the service extremely important would pay $5.60 per month as shown below.

Mobile Deposit - Level of Importance (MRI, 2013)

Mobile Deposit - Distribution of Monthly Value (MRI, 2013)

The MRI Study also provided these distributions for different types of institutions (national, regional, local and credit unions).

Demographic Variances

From the perspective of demographics, it was interesting that the importance of mobile deposit was stronger for females (72.8%) than for males (64.9%) but that males were willing to pay significantly more on average for mobile deposit per month ($3.89) than their female counterparts ($1.82).

In addition, as would be expected based on the Raddon Financial Group research noted above, the importance of mobile deposit as well as the willingness to pay for the convenience decreased with age, while the importance and willingness to pay increased with income (specific details of these values are available in the report).

Potential for Bundling

Market Rates Insight (MRI) also developed revenue optimization scenarios for 26 different bundles of emerging financial services. Of the 26 bundles, four included mobile deposit as part of the service combination. These bundles included:

• Mobile Deposit with P2P Payments (optimal value of $8.38/mth)
• Mobile Deposit with Credit Score Reporting (optimal value of $8.57/mth)
• Mobile Deposit with Billpay, Low Balance Alerts and Prepaid (optimal value of $10.04/mth)
• Mobile Deposit with Payment Protection (optimal value of $9.23/mth)

While the development of optimal bundles would differ by customer composition, type of institution and competitive scenario, an analysis such as the one below combining mobile deposit with P2P payments illustrates how the analysis was performed for each bundle. As can be seen, while total revenue could increase with the addition of more services, the incremental revenue would actually decrease due to cost of offering and lower customer acceptance of an expanded bundle.

Overall Monthly Fees from Mobile Deposit/P2P Bundle + Add'l Services

Incremental Fees from Mobile Deposit/P2P Bundle + Add'l Services

"One of the most revealing and significant findings from our latest study on emerging financial services is that the principle of diminishing return applies to the bundling of financial services," states, Dr. Dan Geller, the author of the report.

Competitive Overview

Of the top five banks in the US, only U.S. Bank charges a fee ($.50) for each mobile deposit. Fees have been collected since 2010 by U.S. Bank, and while not currently supporting the Blackberry platform, mobile deposits are possible via an iPhone, iPad and Android devices. As with most programs, there are daily and weekly deposit limits.

Regions Bank is the other larger bank that currently charges for mobile deposits. Unlike the flat transaction fee charged by U.S. Bank, Regions has a sliding fee scale based on availability of funds. Immediate availability has a fee 1%-5% of the check amount with a minimum of $5. Overnight availability is $3 and 'standard processing' (two business days) is only $.50 per check. The 'standard' processing is actually faster than any of the 'neobanks' (Moven, Simple, GoBank) at this time. 

"Obviously, customers aren't going to be happy with any kind of cost you throw out there," stated Greg Melville, product owner of mobile products and payments for Regions Bank. "But if you offer a value-added service, such as immediate access to their funds, they have shown that it's something they are more than willing to accept." There was also some negative feedback initially, especially on social media, but very few of the complaints resulted in customers actually leaving the bank.


"FedEx pioneered the concept of higher fees for greater expediency and now consumers are expecting the same option from their financial institutions especially when it comes to mobile deposits," states Dr. Geller.

Jim Bruene, who was one of the first to write a study on the potential for fee revenue from mobile services applauded Regions Bank on their decision to charge a fee, but still believed it would have been better to include mobile deposit as part of a larger bundle with a monthly subscription fee. He also believed the fee structure is overly complicated.

Dave Kaminsky, a senior analyst at Mercator Advisory Group, a research firm focused on the payments industry, explained that users perceive mobile banking's offerings as worth the cost. "Customers tend to look at remote deposit capture or expedited processing as an additional value, so they're willing to pay for it—at least for now."

Many of the other large banks do not currently charge a fee, citing that the value of the mobile deposit customer is higher than average (as shown above), that they are less likely to leave the bank because of this 'sticky' service, that mobile deposits reduce their costs (somewhat debatable) and that there are more transactions that generate interchange income. While each of these arguments may be true to varying degrees, I still believe needed revenue is being left on the table.

The Process of Transitioning from Free to Fee

Despite all of the logic above around the why a  bank or credit union should charge for mobile deposits, the real challenge is in answering the how question without alienating your customers, frustrating your sales teams or negatively impacting the growth potential of mobile deposits. If there is a question around moving from a free to fee strategy, then research your customer base, competitive position, internal capabilities and institutional priorities. If there is not enough rationale around making this transition, maybe now is not the time.

According to James "Alex" Alexander, founder of Alexander Consulting, there are four options available when trying to implement fees when the market (or your current strategy) may be giving services away for free.

1. Don't Do It: With the potential challenges to moving to a fee-based structure, maybe it is better to wait until all impacted parties buy-in. Selling 'free' is easy. Selling 'fees' is hard.
2. Just Do It: This strategy is based on picking a date and letting customers and all employees know that there will be fees from the selected day forward. The upside is that this strategy is simple. The downside is that phones will ring and you need a very strong constitution to decipher the customer (or employee) threats from the reality. The key here is to not make exceptions, because exceptions quickly escalate into more and more fee waivers. If your entire team understands and believes the value proposition, they should be in a position to help stem attrition (there will be some).
3. Grandfather Existing Customers: Under this strategy, current customers who have used mobile deposit will not be charged, while any customers who use the service for the first time after the transition date will be charged a fee. The challenge is that customers (and employees) talk, potentially undermining this strategy.
4. Productize the Old and Sell the New: The challenge with any of the above strategies is that they can trigger a powerful, negative psychological response -- people don't like to have something taken away from them or to have differential treatment for a segment of the customer base. In this scenario, mobile deposit continues to be given away, but in a lower value manner. For the majority of organization, this approach is far superior to the others since the customer is given a choice of services and fee options.
• Productize the old: With 'basic' mobile deposit, this can be done by extending the period for funds to clear. Similar to what Regions Bank has done, change basic mobile deposit to a 7-10 day clearing period.
• Sell the new: For 'premier' mobile deposit, the clearing time can be reduced to 3 days or even shorter. When given the option, most customers will willingly opt for the faster clearing of deposit and will pay the fee. Another option is to include 'premier' mobile deposit in a bundle of mobile benefits as discussed above, with the option of charging an even higher fee.

Five Keys to Marketing a Fee-Based Mobile Deposit Program

To fully benefit from the a fee-based mobile deposit program, the solution must be marketed to customers. For those who have used the service, it is extremely simple and time saving. For those who haven't, it could be considered confusing and even scary from a perceived security and risk perspective. Similar to making a deposit at an ATM, until a customer tries the process and realizes it works, there can be barriers to acceptance and use. Here are five quick ideas to stimulate mobile deposit usage:

1. Free Trial: When you buy a new car, many come with satellite radio already installed and ready for use. In my case, I would never have taken this option at the time of sale, but would have most likely waited or never turned on the service. With the free trial (and very complete up-front training), I not only enjoyed the service . . . I now pay for it on a monthly basis. For mobile deposit, make a huge deal about this service an its benefits. Educate the customer up front and get them 'hooked' on the 'premium' mobile deposit service. After the trial, penetration of the service will be much greater and the opt-in rate for a faster clearing (and the fee) will be greater.
2. Incent Your Team: Don't compensate on sales volume alone, compensate on profitability (or at least reaching a minimum 'premium'/bundle penetration benchmark). By providing incentives, your front line will spend more time educating customers and will emphasize the benefits of your 'premium' mobile deposit service or bundle. Make sure your expectations are that all new customers will begin to use mobile deposit immediately.
3. Don't Accept Deposits: O.K., maybe a bit radical, but when a customer wants to deposit a check into their account in a branch, use this transaction as a customer education opportunity. Either arm your tellers with a tablet device used exclusively for mobile deposits (and other training) or use another available terminal in the office.
4. Build an Educational Video: a short educational video serves several purposes including being a landing page for online and mobile banking customers, providing a location for linking email communication, and providing a tool that can be used in the branch when a customer opens an account or wants to deposit a check.
5. Leverage Digital Communications: Don't be afraid to regularly email customers about the benefits of mobile depost. If you have implemented either a 'premier' or bundled mobile deposit product, each email will more than pay for itself. In addition, monitor customers who continue to deposit checks in your branches. Remind these customers (through email, direct mail, online banners, digital retargeting, mobile banners, etc.) that they can save time by taking advantage of mobile deposit.

The key to success in generating revenue from mobile deposit programs is to 1) communicate the value of the service, 2) provide customers the option of not having to pay (or use the service), 3) reinforce the importance of 100% acceptance of the process to all internal teams through education, mandate and incentives, 4) continuously market the service, 5) build a segmentation strategy and 6) measure results.

"Amid the growing proliferation of digital channels and rapidly evolving consumer behavior, retail banks can no longer afford to adopt a one-size-fits-all approach in devising and enhancing their mobile strategies," says Vin Malhotra, consulting partner for Banking and Financial Services with Cognizant Business Consulting, Cognizant's consulting practice. "Providing innovative and personalized mobile services based on consumer segmentation will enable banks to not only run better by maximizing their investments, but also run differently by strengthening customer engagement and driving greater adoption of mobile banking for competitive differentiation." 

If properly positioned, packaged, sold and reinforced, not only will your employees and customers understand the rational of moving from free to fee, but the service will serve as a retention tool as customers become more comfortable with the benefits and value the fee options. 

And mobile deposit will become one of several new revenue engines within your institution.

Coming Next Month: How to Generate Revenue from Mobile Bill Payments

Additional Resources 

Growth and Revenue Potential of Emerging Financial Services - Market Rates Insight (2013)

Study on Emerging Lifestyle Financial Services - Market Rates Insight (2012)

The Mobile RDC Cost-Savings Myth - Bob Meara on the Celent blog (August 2013)

The US Mobile App Landscape: An Annual Evaluation of Mobile Banking at Top US Banks: Celent (June 2013)

Leveraging an Omnichannel Approach to Drive $1.5B in Mobile Banking Cost Savings - Javelin Strategy and Research (July 2013)

Creating Fee-Based Online Services - Online Banking Report (May 2011)

Retail Bank Pricing: Resetting Customer Expectations - Deloitte (April, 2013)

Three Things You Need to Know About Mobile Deposit - The Raddon Report (August 2013)

The State of Consumer RDC 2011 - Celent (November 2011)

2011 Mobile Remote Deposit Capture: Creating a Compelling Business Case for Mobile Servicing - Javelin Strategy and Research (May 2011)

The ath Power Mobile Banking Study - ath Power Consulting (2013)

Mobile Deposit: Why Now . . . and How - Mitek Systems (2012)

Mobile RDC: Changing How Consumers Bank and Banks Compete - AlixPartners (October 2011)

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Digital Shopping Has Transformed The Bank Purchase Funnel

Historically, customers came into a branch to research financial products prior to purchase. Today, the majority of customers have done significant online research before entering the lobby, transforming the bank and credit union purchase funnel. 

Unfortunately, these digital shoppers get confused as they try to navigate tedious web pages or become unimpressed when they encounter unprepared branch personnel, requiring financial institutions to develop an improved multichannel sales strategy.

When respondents to the Novantas 2012 Multi-Channel Sales Survey were asked to identify their preferred channels for product research, online was cited as the top avenue by 63 percent of respondents with only 13 percent of the respondents stating that the branch was their primary research source. A majority of these same respondents, however, preferred to open an account at a branch, with only 36 percent preferring to open an account online.

The Novantas research found that preferences differed based on the account the customer was researching, with customer using the online channel more when shopping for a new checking account (69%) than for a mortgage (57%) or investment product (55%). Again, the branch channel was not the first choice for initial research.

Multichannel Purchase Funnel

But the online channel was not the only channel used by consumers shopping for bank or credit union products. In fact, Novarica research in conjunction with FindABetterBank found that consumers who were about to open a new checking account in the next 90 days expected to use several channels before deciding on a new financial institution.

The customer trend towards 'having it both ways' (digital shopping and branch-based opening) has a variety of implications, especially when the impact of mobile marketing through smartphones and tablets is taken into account. According to a recent Novantas Review feature entitled, "Winning With Online Shoppers", banks and credit unions must realize that their websites need to drive sales traffic to the branch and help complete sales online.

Gaining Visibility Online

Now more than ever, banks need to gain visibility online, since more and more consumers use search engines like Google to start their research process for a new product or new financial services provider. It is important for a bank or credit union to be visible as close to the top of searches as possible to have a chance in today's marketing warfare. As Novarica managing director, Robert Rubin put so succinctly in an online interview, "Improving online visibility in search and on third party sites is imperative. These are the online resources consumers use to shop. If they can’t find you, how will they know you exist?"

Despite all of the hype around paid digital placement, the Novantas research found that most consumers (roughly 80%) only clicked on organic search results that depend on keywords and search relevance. To consistently rank in the top five organic results, a bank or credit union must optimize their website so that: 1) the site has greater relevance to keywords used in local searches; and 2) the site reflects indexing activity of search engines. Novantas also recommends a program that establishes inbound links from related websites to stimulate traffic.

Although only 20% of online shoppers click on paid links through search engine marketing (SEM), the links still provide visual cues and reinforce brand presence. The value of SEM can only be determined through testing and ROI evaluation. As mentioned, the power of engaging third parties for referrals and mentions is one of the most powerful tools to reach online shoppers.

Improving the Internet Banking Sales Experience

Expanding the relationship of current customers who are comfortable shopping online is probably more important than many of the prospecting strategies discussed above since the cost of expanding a relationship is lower than finding a new customer. 

According to a recent study from Mapa Research entitled, "Digital Sales: Enhancing Existing Customer Relationships," personalization of the buying experience is core to successful conversion of customers. In reviewing the sales strategies from over 30 providers in 10 different countries, Mapa found that relevance is imperative in both the targeting of customers and the tailoring of offerings. 

The sales messages can occur at any point while the customer is engaged in their online banking activities. Obviously the account activity screen is often used for customized messaging. The key is to provide pertinent offers without being obtrusive or interrupting normal digital activities. While some of the personalized messaging is in a static position on the account summary page (NAB Bank 'My Offers'), other institutions were found to use pop-up windows to draw additional attention (NatWest). 

With Bank of America, Mapa found that when a customer wanted to open a new checking account they were shown additional 'go with' services within the account opening process. If the customer does not want to open an account online, they can schedule an appointment with the phone number provided.

Providing support options at key moments of the sales journey is also important according to Mapa. For instance, Natwest provides a link to an advisor if a customer looking for a new service wants to abort a sales process, while Citibank also provides assistance prompts throughout the sales journey. Many examples of integrated sales support are offered by the larger banks as part of their internet banking sales experience.

The 85 page Mapa Research report (available for free review and purchase here) also provides many visual examples of institutions that cross-sell products to existing customers upon the log out of internet banking. While some organizations provide several product promotions on the log out screen, the best limit the products promoted to those relevant to the customer.

Selling Through Mobile

The frequency of engagement via mobile is higher than with either internet banking or tablet engagement, yet the length of engagement is significantly shorter on average. This makes the sales journey using a smartphone much different than through other channels.

For several institutions reviewed as part of the Mapa study, the sales message preceded login or was integrated within the login process, with product information, news and links to the bank's website provided at the onset of the mobile experience. Where this was done, it was important to provide a 'one click' option for the customer to receive more information or begin the sales process.

As with internet banking, there are many ways banks are beginning to provide customer service and agent access through the mobile device, While less prevalent in the U.S., many organizations overseas that have integrated customer service within their sales process.

Similar to the internet banking examples, Mapa provides many visual examples of banks that include selling as part of the logout of the mobile engagement. This is to avoid any interruption in the primary reason the customer is using their mobile device (balance check, transfer funds, etc.) 

The good news is that any message on the mobile device will usually be seen multiple times during any period due to the number of times many customers use their mobile device and since many customers access their accounts using multiple devices (desktop, smartphone, tablet).

Additional coverage of mobile sales and servicing innovations can be seen on my previous post entitled, "Banks Accelerate Mobile Banking Innovation".

Tablet Banking Sales Experience

Since many tablet applications continue to be non-customized versions of a bank's internet banking experience, the integration of selling using the tablet has lagged other channels. 

Despite the slow start, there are some examples of how banks have leveraged the tactile experience and social interaction capability to provide a better sales dialogue. Tablets also provide a much better graphically oriented tools that can build engagement. Since the time spent on during a tablet engagement is significantly longer than a customer spends on a smartphone, the potential for sales success is greater with this channel. 

The tablet also is a much better media to integrate live chat and other forms of customer support that can improve sales results. While the tablet should not be considered the channel to place all product information, it does provide a very valuable stepping off point to a bank's website. Through links and redirection, the tablet can be a great asset to any bank wanting to improve their digital sales results.

Closing The Multichannel Sale

The advantage of cross-channel integration is the possibility to sell with each interaction through each channel in a consistent and relevant manner. In other words, each interaction becomes a sales opportunity. The objective is for banks to allow prospects and customers to switch between channels, at will, without breaking the sales cycle.

In conjunction with online visibility and internet and mobile/tablet marketing, it is clear that most financial institutions need to significantly simplify the customer journey from online or mobile inquiry to completed sale. According to both Mapa Research and Novantas, the majority of banks are lagging other industries in their multichannel shopping experience, potentially losing potential customers who get frustrated. There is definitely a revenue consequence to not investing in process and site simplification (e.g. fewer clicks and clearer communication).

Complexity and lack of personalization in products and/or process creates an immediate wall for consumers that are increasingly mobile, less tolerant of difficulty in completing a process seamlessly online, and more sensitive to non-customized offerings. In addition to improving the channel experience, forms must be simplified as well as links between channels.

In addition, once a shopper is engaged, the best strategy is to provide a number of channel options for fulfillment since research shows that shopping and buying can be disjointed. Integration of channels is necessary. Do we enable online account opening? How about through mobile channels? Can customers connect directly with a live agent? Can the ATM channel assist in the process? Has social media been considered as part of the digital sales strategy?

Robert Rubin provides this advice, "Look for opportunities to present add-on offers within a sales process. Also, PFM solutions from vendors like Intuit and MoneyDesktop provide opportunities to cross-sell within the online banking interface. For example, letting the customer know that your credit card has a better rate then the card they’re currently using."

Finally, banks and credit unions should consider segmentation around channel use since customers differ so much with regard to how they interact with their financial institution. According to Novarica's Rubin, "Consumer behavior is changing and branches are a very large fixed cost for financial institutions. Successful cross-selling requires channel use segmentation to allow the ability to provide customers the combination of 'right time, right offer, right channel'. Understanding how customers use channels is essential."

Need For Management Buy-In

A relevent sales experience needs to meet the content and functionality needs of the customer. Both Mapa Research and Novantas believe a shift in management mindset is required to eliminate current channel silos and to support the investment in the overall sales process regardless of where a sale begins or ends. This will require improved measurement of sales results across channels and a rethinking of products suites based on the needs of the online and mobile customer.

Note: The Mapa Research report provides some excellent examples of global banks that are succeeding in integrating channels for improved multichannel selling. In addition to ABN AMRO and ASB and others, the report provides a case study of Commonwealth Bank's personalized sales process.

Additional Resources

Winning With Online Shoppers - Novantas Review (June 2013)

Digital Sales: Enhancing Existing Customer Relationships - Mapa Research (April 2013)

Winning With The Multichannel Consumer - Novantas (March 2013)

Winning in a Multichannel World - Novarica (April 2013)

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Using Big Data To Predict Online & Mobile Banking Needs

Investing in online and mobile channels was not intended to simply provide additional channels for customers to access their accounts. The promise of reduced costs, increased cross-sales and enhanced service was the objective for most banks.

The good news is that online and mobile channel adoption is very high, meaning that customers are downloading mobile banking apps to their phones and creating online access points at a high rate. Unfortunately, that’s where the momentum has stopped.

Third in a Series on Big Data in Banking

Instead of migrating more expensive interactions to less costly channels, consumers have actually increased their total interactions. “In talking to all types of banks across the globe, we’re hearing a similar story – customers are signing-up for online and mobile banking, but calls into the call centers are not decreasing at any noticeable rate,” says Ido Ophir, head of products at Personetics. “People are still calling with transaction-related questions and even account-level questions.”  

A recent industry report revealed that more than 30 percent of customer service calls were preceded by an online visit. That’s a large percentage, especially when the vast majority of these questions can easily be answered in the digital self-services channels.

Based on the numbers being reported by large banks, while they have several million signed up for digital banking services, less than 10% are using mobile banking in any real capacity each month. So, while banks have done a great job of signing up consumers for online and mobile banking, customers are not fully leveraging what these self-service channels have to offer. The utilization problem actually goes even further - most customers log in to check balances or look at individual transaction details, but only a very small percent use in-depth or multiple features like funds transfers and check image deposits on a regular basis.

Source: Board of Governors of the Federal Reserve System  - Consumers and Mobile Financial Services (March 2013) 

The question is, what’s stopping them?  Is it that:

• They don’t want anything else? . . . Show me the balance and I’m done.
• They can’t find what they’re looking for? . . . They get frustrated and leave.
• The service they want isn’t offered? . . . Only high-level transaction inquiry; no detailed information.
• They aren’t sure what they’re looking for? . . . Expecting better personal guidance.
• They don’t know what to do or where to go? . . . Poor user interface.

Ophir from Personetics added, “Whatever the reason, or combination of reasons, it’s costing banks money because customers are still picking up the phone to call customer service. To realize the full benefit of digital self-service channels, and save money, financial institutions need to personalize the digital experience by immediately presenting the customer with the most relevant insights, issues and services they need to know about at that moment in time and offer the right tools and information to resolve problems quickly or walk them down an intuitive path to answer their own questions.”

Here are five top tips for simplifying the customer journey and increasing digital self-service channel utilization:

1. Make your mobile and online channels SIMPLE to use. Make the navigation intuitive for your users.
2. Bring relevant issues, features and services to the forefront. Don’t make customers search for answers or information. The experience should be effortless.
3. Make smart recommendations before a problem arises. As soon as the customer logs in, alert them to a potential problem (i.e., low balance, unusual transactions, spending patterns trending differently than previous months, etc.).
4. Let your customers be in control. They want to control the time, place, channel and information that they share with their bank. Give them that power.
5. Make the experience seamless across all your self-service channels. Your customers use various channels when contacting you depending on their preferences and circumstances. Make sure they have the same experience every time.

Personetics has built a packaged solution specifically for the banking industry that predicts customer intent and helps banks convert passive digital adopters into active digital customers. The customer experience is intuitive, convenient and always relevant. Personetics helps its clients reduce overall service costs and increase share of wallet. The solution can be seamlessly embedded in any existing banking digital self-service channels to provide customers with a personalized and consistent user experience.

Using Big Data to Predict Needs

Each time a user log in to one of a bank's or credit union's digital channels, Personetics reviews the customer's information and highlights what’s important to them at that immediate moment such as reminding them of an upcoming bill or that their balance is trending lower than usual. These insights are tightly coupled with personalized and relevant calls-to-action such as establishing automatic bill payment or overdraft protection on a checking account.

Personetics also analyzes individual items such as transactions. It will offer customers robust details regarding an item and provide contextual assistance that guides the customer through the necessary service process whether that’s disputing a charge or simply trying to remember it.

Personetics addresses the information silo challenge that many banks have by leveraging readily available banking data, the context of specific customer interactions, individual customer activity and crowd behavior to accurately predict customer intent. The solution comes pre-loaded with a comprehensive library of banking-specific analytics and solutions – with more being added every day.

The system “learns” from individual customer interactions, as well as crowd behavior, to present customers with a personalized and prioritized list of “need-to-know” topics every time they log on. The fact is, customers don’t always know what to ask, they want someone to take care of them and tell them that everything is ok or alert them to potential problem areas. 

Intelligent assistance provided at the moment of interaction eliminates unnecessary calls into call centers. In fact, some Personetics’ customers have seen more than 90% call deflection when Personetics has been invoked.

Using patent-pending technology, Personetics maps to a bank's existing data and augments that with industry and proprietary databases and crowd sourcing analytics to create a robust view that can help to predict customer intent.:

• Smart Hints & Data Enrichment – includes prior interactions, bank documents, industry databases, and geolocation. All of this data provides a complete picture of a customer and allows Personetics to present the most relevant solutions possible.
• Out-of-the-Box Knowledge Model – Personetics has built a solution that understands financial services – the processes, technology and language of this industry. They’ve already developed a robust model that defines accounts, cards, transaction types, etc. so you don’t have to. This out-of-the-box functionality allows for quick implementation.
• Pre-built Processes and Solutions – Personetics spent nearly two years building the business logic that makes up their comprehensive solutions library. This means that banks and credit unions don’t need to dedicate a team of developers and thousands of hours to creating the vast amount of scripts that make Personetics “intelligent.” They’ve included the most common banking-related topics so that on day one, customers are interacting with an intelligent virtual personal banking assistant who can solve their many of their problems.
• Profile-based Prediction – Predictive algorithms are used to determine the most likely solution to solve the customer's issue or answer a question. The process is repeated until it comes to a successful conclusion – either solving the issue or deciding at what point to hand over the customer to a live agent.
• Search and Aggregate Transaction Data – Many of the questions require customers to look for data, filter specific transactions and calculate results. Personetics does this in real time using their own server.

Using the process above, Personetics can also be used to introduce new products and services to increase a bank’s share of wallet. Using the same predictive engine and available data, the solution can make personalized offers to customers at the moment of truth – when a customer is actively engaged with an institution. 

Data shows that customers are more likely to sign up for a new service or product when they have a live example of how your bank can simplify their life. Shortly after Isracard, a major international card issuer, deployed Personetics to offer up-sell recommendations, they found that nearly half of customers accepted the new product or service – an astounding statistic that is well above the current industry average.

If banks and credit unions don’t step-up their game they’ll lose mind share with their consumers. There are more and more options for digital users outside traditional banks and credit unions to manage their overall finances make payments and save money electronically. Those new entrants are offering state-of-the-art digital experiences, which is enough of an enticement to win over dissatisfied customers.

For a quick video on how the Personetics solution works, click below:

Additional Resources

Israeli Credit Card Issuer Uses Data to Deflect Call Center Calls - American Banker (February 2013)

   

Personetics Predictive Customer Service - The Nilson Report (March 2013)

Mobile Banking Features on B of A’s Drawing Board - American Banker (April 2013)

Consumers and Mobile Financial Services - Board of Governors of the Federal Reserve System (March 2013)

Report: 46% of U.S. Bank Account Holders Will Use Mobile Banking by 2017 - TechCrunch (August 2012)

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