Bank Customer Service Still Stinks

Banks and credit unions realize that there is a strong correlation between customer satisfaction, portfolio growth and financial results, yet recent studies of customer satisfaction indicate there is still a major gap in performance between the financial services industry and other verticals. 

Where are financial institutions falling short in their quest to become customer-centric and how can banks and credit unions begin to exceed customer service expectations? 

According to findings from a new Carlisle & Gallagher Consulting Group study, 65 percent of consumers say their primary financial institution is not as good as (47%), or much worse than (18%) leading customer service companies. This is despite increased investment in customer experience initiatives by the financial services industry. (A SlideShare presentation entitled, Are Two Calls Too Many in the Eyes of the Customer? is available for download)

The key findings of the report include:

• Customer culture drives great customer service
• Customer experience is defined by first problem resolution
• Most complaints involve core banking products (checking, debit card, credit card, mortgage)
• Banks are not listening to their customers
• There is a correlation between complaint handling, satisfaction, loyalty and new business potential

These findings correlate with the just released ForeSee Experience Index that found that the financial services industry had the lowest aggregate score of any industry, including the lowest scores in retention, upsell and referral potential. In addition, financial services as a category had the largest gap between the highest and lowest scoring brands (American Express is 82 and Santander is 65), suggesting that there is much work to be done in offering the experience that customers expect from companies in this category.

Quick Problem Resolution Provides Challenge and Opportunity

One of the impediments to customer satisfaction is that more than a third of consumers surveyed by Carlisle & Gallagher did not believe their problem* was completely resolved. Of the complaints resolved, a whopping 72 percent of the problems required two or more interactions, with close to 30 percent requiring 3 or more interactions. This is certainly not a path to success.

Source: Carlisle & Gallagher (2013)

From an opportunity perspective, more than half of the customers surveyed said they felt like a valued customer when their issue was resolved with a single interaction and that their confidence in the financial institution increased by 38 percent. Conversely, confidence dropped to 17 percent and trust dropped to 10 percent when a problem required two or more interactions to be resolved.

While some complaints may be complex and require further research, this insight shows the power of resolving a problem quickly and completely. In fact, several studies done in the past have illustrated that a customer who has had a problem resolved satisfactorily can be more loyal than one that has never had a problem.

Source: Carlisle & Gallagher (2013)

There is also a direct correlation between a customer's experience and future banking relationship potential according to the Carlisle & Gallagher study. As shown below, while first call resolution can often lead to more business, slower resolution requiring additional interactions leads to higher dissatisfaction and lower potential for relationship growth.

"Banks have one shot to resolve their customer’s problems before they hurt confidence, trust and future banking relationships. Two calls is just too many in the eyes of the consumer when it comes to solving problems," according to Patricia Sahm, Ph.D., Customer Experience and Channels Practice Lead at Carlisle & Gallagher

Source: Carlisle & Gallagher (2013)

Key Problem Areas

According to Carlisle & Gallagher, the key problem area for banks and credit unions are the core banking products, including checking accounts, credit cards, mortgages and debit cards, with fees and payments being the primary focus of service issues. As a result, focusing on resolving issues with these core products will have the greatest short and long-term impact on customer satisfaction.

"We were surprise that is was the rudimentary products that banks offer that are costing consumers the most headaches with personal checking leading the pack at 38%," said Sahm.

Source: Carlisle & Gallagher (2013)

Interestingly, the CG research also found that customers who did not have their problems resolved felt they shared ideas for problem resolution with their financial institution but were not listen to. This was especially true with debit cards (75%), credit cards (68%), mortgage issues (63%) and problems with checking accounts (60%). 

For institutions hoping to improve satisfaction levels, being able to collect and leverage these insights may provide the foundation for improved customer communication and problem resolution.

Opportunities for Improvement

From recent research from Carlisle & Gallagher as well as ForeSee, it is clear that customer expectations are increasing daily with industries other than financial services setting the bar for success.

According to Patricia Sahm from Carlisle & Gallagher, “Financial institutions have a long way to go to become great customer service organizations. In today’s world of instant gratification, consumer expectations are being shaped by experiences outside of the financial services industry where content, interactions and features are richer, delivering a more engaging and rewarding experience for the consumer.” 

With new compliance requirements, expanded transaction and communication channels and increased competition, the potential cost of poor complaint resolution is high. The good news is that, in an industry struggling with trust and service issues, there is a great opportunity for those financial institutions that meet or exceed expectations.

In fact, according to the study from ForeSee, customer experience is highly predictive of future business success. When comparing the financial behaviors of highly satisfied customers (scores of 80 or higher) to less satisfied customers (scores of 69 or less), highly satisfied customers are:

Source: ForeSee (2013)

"Satisfaction studies are not beauty contests," noted Larry Freed, CEO of ForeSee. “We see more and more CEOs monitoring and improving the customer experience because research shows that, when measured correctly, satisfaction predicts future financial results, revenue and even stock prices."

Some of the recommendations provided by recent research includes:

• Manage customer expectations by sharing problems and solutions with transparency and communicating the type of service level that customers can expect. (if it’s going to take 24 hours for the problem to be resolved share this with the customer)
• Invest in solving the issues with core products first (this is where the most opportunity resides)
• Evaluate your complaint database to determine the primary issues needing to be resolved (spend time resolving those issues driving the most pain)
• Create a 'first touch' resolution process (find a way to avoid multiple interactions)
• Improve social channel problem resolution (consumers using social media to complain can impact the most consumers and expect the quickest resolution)
• Develop a robust listing program (customers are willing to share ideas on problem resolution . . . let them help)
• Share the results (employees will respond to tangible measurements)

As we look to the future, the impact of social media can't be ignored. "The social media channel will serve as the benchmark in customer care, enabling customer communication across the banking enterprise and help break down silos within financial services organizations," according to Pat Sahm.

"Beyond social media, banks and credit unions will need to create the feel of first touch resolution for the customer by enabling employees to take quick action to solve the customer’s problem. It’s all about creating a ‘prevent’ defense and a culture of customer advocacy," continued Salm.

"In the next five years, consumer demands will continue to increase and regulatory requirements will only become more intrusive. Customer experience will need to be built into every aspect of the institution, no longer its own department."

 

* 'Problem' as defined by the Carlisle & Gallagher research included inaccuracies, issues with fees, concern with speed of loan, mishandled funds or other concerns and did not include a basic inquiry about a transaction or to ask product questions.


To request a copy of CG’s research report on customer complaint management available in early 2014, email insight@cgcginc.com.

Additional Resources

Are Two Calls Too Many in the Eyes of the Customer? - Carlisle & Gallagher Consulting Group SlideShare Presentation (December 2013)

ForeSee Experience Index - ForeSee (December 2013)

ForeSee Mobile Satisfaction Index: Financial Services Edition - ForeSee (November, 2012)

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)

Monday at Money2020 in Tweets

Billed as the largest event focused on emerging payments and financial services, Money2020 has easily eclipsed its inaugural event in 2012, bringing together more than 4,000 fintech followers, including 300+ CEOs and more than 1,250 companies from 50 countries.

While not being able to attend this year, I was able to live vicariously through the tweets of others who captured the highlights (and some humor) from the first full day of the event. Below is a recap of today's sessions.

#money2020 has started. Read the blog of 3 questions to be asked in almost 60 sessions: http://t.co/X7JIS61Tx1’s
— Money2020 (@money2020) October 6, 2013

#money2020 "what happens in Vegas, gets tweeted from Vegas"
— Dave Birch (@dgwbirch) October 7, 2013

Money2020 looks to be an awesome event. Sold out, it looks like EVERYONE is here. @Wmagency #money2020
— William Mills (@williamemills) October 7, 2013

Omni-Channel Reality: "67% of consumers have started shopping on device but completed the purchase elsewhere" -Kevin Levitt #money2020
— comScore FinServ (@comScoreFS) October 7, 2013

$Mitk and Experian® Collaborate to Help Organizations Monetize the Mobile Channel http://t.co/cqFCNfizbu #money2020 #mobile #technews #tech
— Deppilf flippeD (@deppilf) October 7, 2013

From Scott Grimes: Adding mobile to a banking relationship adds 6 touchpoints per week #money2020
— Ryan Page (@helloryanpage) October 7, 2013

#money2020 MasterCard have already used my favourite statistic! US is a quarter the world's card volume but half the world's card fraud
— Dave Birch (@dgwbirch) October 7, 2013

State of Gift Cards this morning at #money2020. Here's what @rsrresearch says about the best digital gifting programs http://t.co/4lPzhfL5ko
— CashStar, Inc (@CashStar_Inc) October 7, 2013

The chances of Bitcoin being regulated out of existence are the same as the entire Internet being regulated out of existence. #money2020
— Bank Innovation (@BankInnovation) October 7, 2013

Dwolla launches #realtime payments in beta, promises new level of convenience with same transaction cost http://t.co/alh5S2hhAs #money2020
— Dwolla (@dwolla) October 7, 2013

Patrick Gauthier from #PayPay "Regulation is like flood insurance. You bitch about paying for it until you need it." #money2020
— Sam Maule (@sammaule) October 7, 2013

#money2020 Fred Neil @HomeDepot Payments-retail-consumers: win-win-win collaboration that can be used effectively in marketing programs
— IMTC (@IMTConferences) October 7, 2013

RT @davidschropfer: 52% of users who have not used mobile for shopping say they are neutral to ever doing so. @comScore #money2020
— comScore, Inc. (@comScore) October 7, 2013

Why do you have to pay high fees to use your own money? @SuzeOrmanShow was giving the financial industry a hard time today! #money2020
— Ericsson M-Commerce (@EricssonMcomm) October 7, 2013

CardLinx unites Microsoft, Facebook, BofA, LivingSocial, FirstData, Cardlytics- most interesting yet from #Money2020 http://t.co/IhtcPOvYYm
— Andera (@AnderaInc) October 7, 2013

Dear #money2020 attendees: Hoping one of you will keep track of all the different definitions of "mobile wallet" that speakers provide.
— rshevlin (@rshevlin) October 7, 2013

#NFC = Not for Commerce. Panel on Innovation in Online Payment Networks. #money2020

— Matt Wilcox (@mattwilcoxpro) October 7, 2013

Between 1/3 and 1/2 of the audience claimed to be working on integrating Bitcoin into their businesses at the Bitcoin panel @ #money2020 !!
— Roger Ver (@rogerkver) October 7, 2013

Results of poll:44% here polled say phone at POS market share will be 50% won't happen until 2020 or LATER. #money2020
— William Mills (@williamemills) October 7, 2013

@KausikRajgopal at #money2020 the survey reflects 29% of attendees believe that banks have the most to lose with the innovation in 7 years.
— Mike Horrocks (@mikehorrocks) October 7, 2013

840 users and 1,204 tweets (846 RTs) in 2 weeks made #money2020 a Trending Topic in United States. #trndnl
— Trendinalia USA (@trendinaliaUS) October 7, 2013

How Bitcoin will do to money what the web did to information #money2020 http://t.co/UIhNx89n3Q
— Business Insider (@businessinsider) October 7, 2013

Visa syas it can double size of its network over next 5 years through use of mobile acceptance devices, says exec Jim McCarthy #money2020
— ngenuity Journal (@ngenuityjournal) October 7, 2013

@PayWithIsis is launching a new version of their mobile wallet. Bravely with live demo! #money2020 pic.twitter.com/oRrMmy5EyP
— Ericsson M-Commerce (@EricssonMcomm) October 7, 2013

CEO Mike Abbot of ISIS mobile wallet estimates by next year there will be 30M enabled ISIS phones to make payments, #money2020
— ngenuity Journal (@ngenuityjournal) October 7, 2013

Of course @phazlehurst is wearing his Google Glasses on stage at #Money2020 - will he send money by blinking?
— Erin McCune (@erinmccune) October 7, 2013

Google using an iPhone to present their payment app is the cockiest move I've seen at #money2020 Love it.
— Alex Maffeo (@AlexMaffeo) October 7, 2013

My takeaway from #Money2020 keynotes? Still lots of solutions searching for a real consumer problem to solve.
— Norman Guadagno (@ThinkTone) October 7, 2013

I’m really surprised by how many blackberries I see in use here at #Money2020. Of course, I’m surprised when I see even one…
— Jason A. Cobb (@jasonacobb) October 7, 2013

@GoogleWallet has just announced new partnership with @Walgreens for #digital loyalty program at #Money2020
— SpecOpsComm (@SpecOpsComm) October 7, 2013

Mobile wallets are the "game changer" for P2P payments because everything is right there, says Dave Wilkes of @fusenetwork #money2020
— ngenuity Journal (@ngenuityjournal) October 7, 2013

P2P need to be done in, or close to, real time so that the time-to-spend is equivalent to cash. #money2020
— Ericsson M-Commerce (@EricssonMcomm) October 7, 2013

#money2020 Amex reckon that checking account costs 2.5x Bluebird account
— Dave Birch (@dgwbirch) October 7, 2013

@chuckcordray There must be transparency to be able to monetize #bill pay data. #FutureOfBillPay #money2020
— Perficient Fin Serv (@Perficient_FS) October 7, 2013

.@Simplify CEO Josh Reich talks about pushing out 10,000 app updates vs. banks' quarter update cycles. "3 months is an eternity" #money2020
— JP Nicols (@JPNicols) October 7, 2013

Heard from Simple CEO Josh Reich (@i2pi): “As an incumbent, you’re building a 2013 mobile experience on top of 1970’s technology” #Money2020
— Tyler Felous (@TMFelous) October 7, 2013

@foursquare using #geolocation to push card-linked offers w/out user checking in #money2020
— VeriFone (@VeriFone) October 7, 2013

Best part of asking question at #money2020 panel discussion about online banking is that you get a #Patron shot.
— David Pinski (@dapinski) October 7, 2013

Jered Kenna, founder of bitcoin exchange TradeHill: "Banks are afraid of anything that's new." @money2020 #money2020 @Minyanville #bitcoin
— Josh Wolonick (@JoshWolonick) October 7, 2013

In US, 57% have savings of < $25,000. Info lacking for people to make financial decisions about life, says Anil Arora of @Yodlee #money2020
— ngenuity Journal (@ngenuityjournal) October 7, 2013

Heard at Money 2020 - "The option to expedite a bill payment today is a billion dollar business."
— D3 Banking (@D3Banking) October 7, 2013

Health and Finance are the most important things so people can live their lives-but they can’t see it in one place @Ryan_Caldwell #Money2020
— Matt West (@Matt__West) October 7, 2013

Incumbents have vested interest in not opening up the app ecosystem, but it's changing says Jim Schinella of @Manilla #money2020
— ngenuity Journal (@ngenuityjournal) October 7, 2013

The only data more valuable than Google's is financial data. How do we use it for good!? @moneydestop @Yodlee #money2020
— Melanie Flanigan (@MelanieFlanigan) October 7, 2013

"There are no unbanked people in the US." Dave Wilkes @fuzenetwork. Either I missed his point, or I...disagree. #money2020
— David W. Schropfer (@davidschropfer) October 7, 2013

#money2020 Bitcoin 'settles nearly instantly' is this good enough for the future of payments?
— Debbie Gamble (@debgamble1) October 7, 2013

"If we said 'With your permission we would add value to your life,' most people would support that," says Anil Arora of @Yodlee #money2020
— ngenuity Journal (@ngenuityjournal) October 7, 2013

One big question at #money2020 surrounds #privacy. Is it dead, is it irrelevant, is it secured, is it swapped for $? What do you think?
— Mike Horrocks (@mikehorrocks) October 7, 2013

#money2020 is like the Who's Who of #Payments. Be There Or Be Square. Well, not @Square, like nerdy. Forget it. #PaymentsHumorIsTough
— CNPsolutions LLC (@CNPsolutions) October 7, 2013

@dgwbirch just hit the nail on the head, calling American identity mgmt "Security Theater" at best. #Money2020 #FakePortugeseFishingLicense
— (╯°□°)╯︵ ʇʇɐɯ (@msgrasser) October 8, 2013

"No offense, but 99% of what I've heard so far at #money2020 has been *consumer*. The elephant in the room is...*business* banking" <= Truth
— Michael Levinson (@mdlevinson) October 8, 2013

Does the emergence of 'mobile' mean the death of bank branches? Send us your thoughts on #VocaLink. #banking #payments #Money2020
— VocaLink (@VocaLink) October 8, 2013

What? Why?! Cheers! #money2020 @ Money2020 http://t.co/IZnvVyE6iw
— Alex Linebrink (@AlexLinebrink) October 8, 2013

Bank Marketing Strategy Named A Top Financial Marketing Blog

For the second consecutive year, Bank Marketing Strategy was named a top 5 financial marketing blog by The Financial Brand. 

With the intent of providing a list of valuable resources for bank and credit union marketers to reference, this year's honor was bestowed on blogs that met a defined set of weighted criteria including relevancy, quality, originality, frequency, longevity and design.

The top five blogs recognized this year were:

1. Snarketing 2.0 - Ron Shevlin, Senior Analyst from Aite Group
2. Acton Financial Marketing Insights - Steve Topper, Joe Swatek
3. Bank Marketing Strategy - Jim Marous, SVP of New Control Direct and Digital
4. Visible Banking - Christoph Langlois, Social Media Planner and Speaker
5. The Gallop Blog - Various authors

A description of each of the top 20 blogs, as well as a list of blogs receiving honorable mention are provided in The Financial Brand Top 20 announcement post.

In ranking Bank Marketing Strategy number three in 2013, Jeffry Pilcher, the publisher of the Financial Brand wrote:

"Of all the banking blogs out there, Jim’s is most similar to The Financial Brand. Jim regularly discusses the design of retail banking products/services, pricing, marketing and the customer experience. Jim’s posts will also frequently gravitate towards new/emerging technologies and channel integration, with a slant towards mobile. Some financial marketers will struggle putting the insights in some of these posts to use, but they will always find the material interesting and engaging."

This is the second year in a row Bank Marketing Strategy has been recognized as a top blog for bank and credit union marketers. Last year, Bank Marketing Strategy won both the Reader's Choice (#4) and Editor's Choice distinction from The Financial Brand (last year's winners).

It is an honor to be named in a list that includes so many blogs that I enjoy reading, learn so much from and provide such great insights. I consider the authors and publishers of these great resources both my professional and personal friends.

Thanks also to Jeffry Pilcher for setting such a high standard for each of us with his Financial Brand publication. His insatiable appetite for financial marketing news and ability to publish such a massive amount of invaluable insight daily makes his digital publication the 'go to' resource first thing each morning.

Banks Need To Reassess Cross-Selling Efforts

For decades, cross-selling has been a strategic priority of banks and credit unions since earning more business from current customers is the most efficient way to achieve growth. Despite this focus, a new study indicates that many financial institutions may be far from realizing the full potential of cross-selling.

In fact, according to the study, only 19 percent of retail bank customers owned three or more products in addition to a checking account with their primary bank compared to 49 percent who have three or more products with other financial institutions.

A just released Deloitte report entitled, 'Kicking It Up a Notch: Taking Retail Bank Cross-Selling to the Next Level' supports the view that success in cross-selling targeting may need to move beyond traditional product ownership, satisfaction and tenure parameters to include a behavior segmentation approach that takes into account perceptions based on total account holdings. 

While the Deloitte survey shows that banks have generally achieved long tenure and a high degree of satisfaction with customers, this success has not translated into multiple product relationships. In fact, the study found that there is a positive correlation between the number of products a customer uses and their desire to use multiple institutions.

Source: Deloitte Center for Financial Services

According to the study, customers only turned to their primary financial institution for a savings account on a consistent basis. In fact, while 75 percent of respondents owned credit cards, only 33 percent had one that was issued by their primary bank. Obviously, this could be the result of an inferior offer, poor marketing and/or the absence of a primary bank offered credit card, but it still illustrates a major opportunity gap.

Some of the other 'opportunity gaps' may be caused by poor cross-selling at the time of account initiation, poor customer education on the benefits of relationship consolidation or even beliefs that a primary bank is not the best place to build a specific relationship (wealth management or insurance products).

Source: Deloitte Center for Financial Services

The research suggests that banks and credit unions may want to revisit traditional cross-selling strategies that focus on current product ownership, tenure of relationship and demographics to predict cross-selling success. Deloitte believes a deeper analysis of customer perceptions and motivations driving product purchasing may be needed, including a potential share of wallet segmentation scheme.

Share of Wallet Segmentation

"To remain competitive in a largely saturated market where revenue opportunities from new customers tend to be limited, deepening relationships with existing customers will likely remain critical to increasing banks’ top-line growth," Deloitte says. "One important way this might be achieved is through more refined strategies and targeted execution of cross-selling programs."

As a first step, respondents were grouped into four segments - 'Basic Users', 'Value Shoppers', 'Diversifiers' and 'Consolidators' - based on share of wallet.

The segments were then analyzed based on a number of dimensions such as demographics, perceptions, price sensitivity and channel use.

Finally, the segments were analyzed for product ownership patterns to identify opportunities for cross-sell success as well as 'dead ends', where investment could be wasted (no expanded ownership potential). Product ownership details available in the full report.

Segment Challenges and Opportunities

Basic Users

As the name implies, 'Basic Users', despite the large size of this segment (42 percent of respondents), have limited financial means, less access to credit, and an average bank product ownership rate of 1.7. And while there is uniformity of income and product ownership rates, Deloitte suggests there are two groups of basic users; 1) young people whose product needs may evolve/grow as they get older, and 2) middle-aged and older customers whose needs and behavior are unlikely to alter over time.

"One way to attract young basic users could be through education. Providing information and advice on financial challenges, such as debt management, benefits of improving one’s credit score, and the importance of saving early for retirement may help banks become the go-to institution for this group," Deloitte says.

To target young basic users Deloitte suggests use of social media and mobile banking and gamification that emphasizes improved money management.

"As young basic users progress in their professional and personal lives, their needs are likely to evolve. Banks could leverage their primary relationship to engage early with this group to provide products that meet their needs at various life events - education, marriage, purchasing a home, starting a family, investing, or retirement. This can allow their product needs to be met sequentially and appropriately, rather than pushing products prematurely with limited success or failing to cross-sell at all. A consultative approach as opposed to hard-selling may be particularly effective with this group."

In addition, Deloitte suggests retail bankers could learn from product bundling strategies common in other industries, offering younger consumers in the Basic User segment the flexibility to purchase products in bundles as well as individually. For example, all add-on elements of checking account such as debit card usage, in-network ATM usage, paper checks, overdraft protection, and wire transfers can be priced individually. "Such a pricing approach will likely increase the affordability of the product, allowing Basic Users to pick and choose services that fit their wallet size," says Deloitte.

Deloitte also advocates low-cost products such as prepaid cards with low usage fees, no minimum balance requirement or overdraft fee. While the younger part of this segment is relatively small and could be considered a long-term investment, banks and credit unions who connect early could enjoy relationship growth over time.

Value Shoppers

Value Shoppers, the second largest Deloitte segment (39 percent), are described as being the least loyal customers with only 1.1 products with their primary bank. A lack of trust among this category of customers means that they usually don't believe their bank is 'fair', and are prepared to take their business elsewhere even over a 'slight' fee increase (6 in 10 will leave if fees increase $5 a month).

Nonetheless, Deloitte suggests targeting value shoppers can be an attractive proposition for banks.

"They have all the attributes that banks typically look for in high-value customers: financial strength, broad product needs, and higher channel engagement levels (67% pay their bills online and 58% use bank tellers) - the second highest among all the segments. Winning over this segment will likely involve changing their negative perceptions and incentivising product consolidation at the primary bank,"' Deloitte says.

The report notes that companies seen as having transparent pricing are best placed to win customers' trust. This may require simplified fee structure, consistent communication or a better demonstration of value.

"Given value shoppers’ low affinity with their primary banks and their tendency to shop for the best offers, loyalty incentives could be effective in influencing them to consolidate some, if not all, of their financial relationships with primary banks," says Deloitte. "Although banks have effectively implemented rewards programs at the individual product level, they will have to build a more holistic structure that incentivises customers to achieve the 'preferred' status in multiple product categories."

Wells Fargo’s Portfolio Management Account (PMA) is provided as a good example of incentivising customers for consolidating accounts with the bank. The PMA package begins with a checking account, which is then linked to other eligible Wells Fargo accounts, including savings, deposit, credit, mortgage, and brokerage. (details available in the Deloitte research available here)

Diversifiers

This group, according to Deloitte, is comprised of a significant proportion of mass affluent households (47 percent) and takes the highest average amount of bank products at 6.3, with about half from their primary bank. What they don't have through their primary financial, institution is the likes of investments, life insurance, and annuity products.

"Banks seeking to grow relationships with 'Diversifiers' may need to target specific products where the segment relies on other financial players (investment brokerage, life insurance and annuities)," says Deloitte. "Retaining this segment will also likely require banks to shift from traditional pricing to value-added benefits."

Advice given here includes personalised service at the branch level, access to dedicated financial advisors, and immediate resolution of any complaints.

Deloitte also suggests that banks could impress diversifiers by developing a better perception among the mass affluent base as a viable alternative for investment and brokerage services. The report highlights an example of Bank of America utilising its Merrill Lynch unit.

Consolidators

'Consolidators' are the banks' most loyal consumers, holding an average of 4.1 products with 3.6 of the products at their primary bank. They clearly hold a positive view of their primary bank, often in terms of service and even fees.

"What strategy should banks use with consolidators?" Deloitte asks. " Banks should retain them and leverage their loyalty by converting them to advocates."

"Personalised attention to consolidators’ needs and prompt response to their concerns will strengthen their relationship with the primary bank, increasing the possibility of turning them into advocates," says Deloitte. "Peer influence-based, community-oriented marketing holds the potential to create authentic customer relationships."

The report goes on to suggest banks could create dedicated virtual space, both on websites and social media pages, for consolidators to share their experiences and influence the perceptions and buying decisions of other customers. "Banks may also consider devising reward programs to incentivise consolidators to help generate referrals."

Additional Ways to Achieve Cross-Sell Success

While I have written many blog posts around the importance of cross-selling and the opportunities for success, Deloitte also emphasizes the importance of of changing current banks processes and functions to achieve success. Three aspects recommended by Deloitte are:

• Improve onboarding: It is critical to make the onboarding process efficient and effective since 75 percent of cross-selling occurs in the first three months
• Set cross-divisional goals: Set goals that ensure that lines of business stay coordinated and capitalize on cross-functional relationships
• Equip sales force: Combine incentives with training to improve sales force effectiveness

As shown in this recap of the well done Deloitte research report, banks need to move beyond product ownership and demographics to better understand the behavioral and attitudinal traits of customer segments. With this understanding, banks can redesign their channel and communication strategy and fine-tune product offerings to suit the needs of the different segments.

While the process may be challenging, it is clear the current strategies are not effective and need to be adjusted to remain competitive in a highly saturated market where revenue opportunities from new customers are limited and the importance of deepening relationships is paramount.

Additional Detail of the Deloitte Research

The survey was conducted online by Harris Interactive during August 16-30, 2012. In total, 4,271 checking account customers aged 18 years or older participated in the survey. Responses were weighted across geographic regions, income levels, age, and gender groups to reflect the national population.

Definitions of “primary bank” as used in the Deloitte report refers to the bank where respondents have their primary checking account. “Other financial institutions” refers to other organizations at which customers have a financial relationship.

The analysis includes 12 different products sold by financial institutions beyond the checking account:

• Savings account
• Money market account
• Home equity line of credit
• Investment/brokerage account
• Credit card
• Auto loan
• Prepaid card
• Life insurance
• CD
• Mortgage
• Secured card
• Annuity

Additional Resources

Kicking It Up a Notch: Taking Cross-Selling to the Next Level - Deloitte (July 2013)

Kicking It Up a Notch: Taking Cross-Selling to the Next Level (Infographic) - Deloitte (July 2013)

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