Banking Innovation For The Fat-Fingered

Financial services innovation takes many forms, but Mitek Systems believes simplifying a customer's banking life is best. A leader in the category of using the smartphone camera to simplify normally complex processes, Mitek's mobile deposit solution set the stage five years ago for innovations to follow.

Since 2008, Mitek has had a laser focus and a broad passion for using the phone's photo capability to eliminate the keystrokes that are the bane of consumers in a hurry, who are spelling challenged or have a hard time using oversized fingers on an undersized keypad.

As I have written about frequently over the past several months, I believe some of the best innovations in banking are not the result of added features and benefits to existing financial products and services, but the simplification of everyday processes that can improve the lives of a banking customer. This is what makes me such a fan of Mitek. 

Mitek has created solutions that allow customers to use the camera on their smartphone and tablets to deposit checks and reload prepaid cards, pay bills, get insurance quotes, open new accounts and transfer balances . . . all with a snap of a picture. No data entry is required. With mobile imaging technology, the image is captured with error correction and adjustments made, then data is extracted and put into pre-set fields on the mobile banking app instantly.

What is interesting when I watch Mitek and their bank and credit union partners is that every time I think there is no more that my phone's camera can do, Mitek finds a new solution or enhances a previous innovation.

In an industry where the growth of mobile banking is mirroring the growth in smartphone ownership, the benefits of using one of the most easily understood functions of a smartphone and leveraging it to facilitate a better mobile banking experience are enormous. These capabilities can attract new customer, build engagement, increase cross-selling and enhance loyalty.

While what may follow may sound like a commercial for Mitek, it probably is. With so little true innovation being done by traditional banking organizations in the U.S., it is refreshing to see a company that makes innovation part of their overarching company mantra. The good news is that Mitek continues to build new solutions that banks can implement quickly and easily (i.e. U.S. Bank), making them innovators as well.

To illustrate my point about the focus of Mitek on innovation, I have included a video where Jim DeBello, president and CEO of Mitek discusses innovation at his company.

Mobile Deposits

In a recent Forrester research paper entitled, 2012 US Mobile Banking Functionality Rankings, Peter Wannemacher wrote, "No mobile feature has made as big of an impact as quickly as the mobile remote deposit capture (RDC) functionality". The benefits of offering mobile deposit include:

• Mobile customer engagement: Moving the customer beyond simply checking balances.
• Cost reduction: While the amount of cost reduction is certainly up for debate due to the ability to reduce staff and physical facilities, there are definitely lower costs with mobile deposit than for a branch-based transaction.
• Revenue potential: As I outlined in a recent blog post entitled, From Free to Fee: Monetizing Mobile Deposits, U.S. Bank, Regions Bank and others have found a way to generate fee income from this value-added service.
• Enhanced customer experience: Anytime, anywhere simple mobile convenience to make a deposit, generate a receipt and access funds.

Rather than resting on their laurels, Mitek has continued innovation within their mobile deposit solution. In the Spring of 2012, Mitek introduced the ability to leverage their mobile deposit platform to load prepaid cards using a smartphone, freeing underbanked customers from needing to use costly check cashing facilities.

At the Remote Deposit Capture conference I attended in Orlando this September, Scott Carter introduced enhanced capabilities including endorsement analytics that can reduce risk, improved business intelligence that increases the ability to investigate processing exceptions, and a real-time image capture technology that provides instant feedback to the customer as to the quality of their image during the capture process (MiSnap™ SDK).

Mobile Photo Bill Pay

In May of 2011, Mitek won their first 'Best of Show' award at Finovate for their Mobile Photo Bill Pay solution. At the event, JJ Hornblass, publisher of Bank Innovation gave the service an A+ for the 'cool factor', an A+ in the category of 'I want it' and an A+ for 'profit potential'. Nice report card at a highly competitive financial innovation showcase including dozens of other innovation introductions.

The Mitek Mobile Photo Bill Pay solution enables users to pay their bills anywhere, at any time, simply by taking a picture of the paper bill with their iPhone or Android smartphone. Regardless of format of the bill, the relevant information from the bill is extracted, with fields within their mobile banking application being auto-populated. The customer simply confirms the information, schedules the payment and clicks 'pay'. Address barcodes can also be read which results in faster address verification.

Beyond paying a bill, the solution allows for very easy addition of a new payee for either one-time or recurring payments. With bill payments being one of the most important engagement services to make a new or existing account 'sticky', this service is a major benefit to the bank wanting engaged customers.

“As mobile banking applications have increasingly become ‘table stakes,’ it is even more critical for financial services providers to understand which new applications are truly value-added and should become a part of their core suite of mobile banking offerings,” said Bob Hedges, managing director at AlixPartners and co-lead of the firm’s financial services practice. “The valuable consumer functionality and convenience provided by Mobile Photo Bill Pay provides banks with a critical marketplace differentiator they need.”

Partnering with Mitek, and leveraging its Mobile Photo Bill Pay product, U.S. Bank was the first leading financial institution to offer this innovative service to customers in early 2013. Since this announcement, several other major banks have partnered with Mitek on their bill pay solution including BBVA Compass.

Mobile Insurance Solutions

Mitek's mobile photo imaging technology is the foundation for a suite of solutions for the insurance industry as well including the following:

• Mobile Photo Quoting™- By entering a zip code and taking a picture of a drivers license, insurance ID card and the Vehicle Identification Number (VIN), a customer can get a quote in a matter of moments.
• Mobile Photo Payments™- By taking a picture of a blank check, automatic payments or reimbursements can be made directly using a customer's personal checking account.
• Mobile Photo Claims™- Filing a claim is simplified by using the phone's camera to take a picture of the drivers license, insurance card and the license plate, eliminating hundreds of possible keystrokes.

Progressive Insurance was the first to market with Mitek's Photo Quoting supporting their mobile rate comparison application. Below is a video that describes the insurance industry suite of services.

MiSnap™ SDK

Enhancing the functionality of all of Mitek's solutions, MiSnap™ SDK is a technology that knows when all conditions are optimal and automatically snaps a photo of the check for mobile deposit or a bill coupon for the bill pay solution. This capability provides real-time visual feedback to the user in an intuitive and fun way, eliminating time and effort in the capture process. 

MiSnap is supposed to be twice as accurate as the previous manual capture process because it eliminates human error which can occur as a check or bill is being captured. This also decreases time to complete and increases satisfaction and adoption.

Mobile Photo Account Opening

In September of this year, Mitek again won the 'Best of Show' award at FinovateFall for their unique Mobile Photo Account Opening™solution. Mobile Photo Account Opening enables banks and credit unions to reduce the time and effort needed to open an account through the use of photo imaging. This solution could be used for mobile self-service account opening or in branches by new account personnel.

By taking pictures of the front and back of a drivers license, vast amounts of validated data can automatically populate the new account application, eliminating many of the errors that occur during this process. This frees up valuable time for better customer interaction and cross-selling and eliminates mobile opening abandonment that can be as high as 70%.

The Mobile Photo Account Opening solution can seamlessly integrate with a bank or credit union's  existing account opening process, assisting with identity proofing and fraud prevention through a partnership with Experian.

According to the July 2013, Javelin Research & Strategy report, How to Upgrade Online and Mobile Account Opening for an Omnichannel Era, “the fact that 88.5 million Americans attempted to open an account online or with a mobile device in the past 12 months underscores how far digital account opening has come in a few short years. Nonetheless, its potential remains largely untapped, especially as consumers place growing importance on mobile capabilities.”

In the same report the firm also noted, “The number one job for financial institutions should be to enable applicants to open and fund an account in one session.” 

Mobile Photo Balance Transfer

In just the past couple of weeks, Mitek continued the ongoing wave of innovation by partnering with U.S. Bank to offer Mobile Photo Balance Transfer to U.S. Bank mobile banking customers.

Mobile Photo Balance Transfer allows U.S. Bank customers to easily take advantage of credit card balance transfer offers from U.S. Bank by snapping a photo of an exisiting credit card payment coupon from another bankusing their mobile device and sending it to U.S. Bank to apply for a balance transfer to a U.S. Bank credit card.

Using the photo capability of a mobile device simplifies the process of account transfer as well as eliminating many of the errors that can occur in the process.

What's Next?

I am not sure what could be down the road with Mitek Systems, but it is definitely fun to watch as the ubiquity of the smartphone camera photo is used to simplify banking and improve the customer experience. 

Possibly, the next innovation will move beyond transactional functionality to provide a virtual safe deposit box for important documents stored electronically by the bank. Or maybe the solutions move into the payments space, allowing a customer to snap a photo of a barcode on a high priced item to enable the almost instantaneous approval of a loan for the customer. 

The good news is that I am sure the innovation isn't done.

Additional Resources

Mobile Remote Deposit Capture: Changing How Consumers Bank and Banks Compete - AlixPartners (2011)

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

Broadening Mobile Bill Payment Adoption with Photo-Based Payment: Quantifying the Benefits _ Aite Group (2013)

Consumer Market Outlook for Mobile Photo Bill Pay - AlixPartners (2012)

The Next Generation in Bill Payment - TowerGroup 

Five Trends Shaping the Next Generation of Digital Banking - Forrester Research (2013)

The ROI of Mobile Photo Bill Pay - Aite Group and U.S. Bank (2013)

How to Increase Net Profits with Mobile Photo Account Opening - Mitek (2013)

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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9 Steps to Improving Bank Cross-Sell Performance

With an increasing need for banks to increase revenues and decrease costs, optimizing every marketing contact has never been more important. In addition to leveraging multiple channels to generate a steady stream of new customers, one of the easiest and most steady sources of new businesses and related revenue is to reach out to current customers for additional business.

With the cost of acquiring new retail, small business or commercial customers being five to ten times the cost of retaining an existing one, and with the average spend of a repeat customer being 50-100% more than a new one, bank marketers need to remember that the most efficient investment of marketing funds is to market to customers that already bank with you.

Here are 9 time-tested, common sense techniques that many bank marketers sometimes forget: 

1. Ask questions: Consultative selling has been discussed the focus of the banking industry for decades. In a nutshell, the process begins by clearly analyzing a customer’s situation before presenting services or products. From the outset, a failure to cross-sell a brand new customer is a failure to develop a consultative relationship and a failure to ask the right questions.
   
   Without these questions (which are close to impossible to ask later), the opportunity to open the right services initially or later in the relationship is made more difficult. In addition, as opposed to going through a long set of questions that make the banker (and customer) feel uncomfortable, the dialogue should be free flowing and natural. Another option is to engage the customer with tools that can be used to complete the profile easily such as a tablet device.
   
   
2.  Start with the lowest hanging fruit: The easiest sales that can be made to current customers are engagement services that help a customer use an account they already own. These 'sticky services' include a debit card, online banking, direct deposit, bill pay, automatic savings transfer, personal line of credit and security solutions such as privacy protection. These services help to ensure the customer will use the products they own more frequently, will significantly improve retention and will help to improve the overall customer experience.
3. Stay connected: I have opened a number of accounts over the past year (sometimes as a ‘secret shopper’) and am always very impressed with how much love the bank gives me when I opened my accounts. I am amazed, however, that I rarely heard from them again except to tell me about new fees or a regulatory change. This is despite the fact that each bank got my home address, my email address, my cell phone number and my home phone number. Nothing but crickets except for GoBank, that did a great job of informing me of next steps.
   
   
   While some banks have very successful onboarding programs to help stay connected with new customers, a surprising number of banks still rely on the customer to onboard themselves. And unless the customer either opens a number of accounts initially or is successfully onboarded soon after they open a new account, their bank may never include them in a model-driven cross-sell program. This is because model-driven marketing programs usually focus on customers with broader relationships.
4. Continually evaluate upsell opportunities: Rather than using product-driven programs that are done seasonally, consider funding more customer-focused programs that evaluate each customer's propensity to open one or more of the products and services you offer. With some of my clients, we evaluate each customer's transactional, product ownership and even behavioral characteristics to determine what would be the most likely next purchase and whether the propensity to purchase is high enough to make an offer.
   
   In some of most successful programs, this evaluation of opportunities is done monthly, with smaller mailing universes, but much higher response rates. As the ability to use 'big data' increases, the movement from sales 'programs' to sales 'processes' becomes a necessity.
   
   The goal is to offer the right product, at the right time, to the right customer through the right channel. This takes customer data analytics.
5. Personalize your communications: A recent report from Gallup revealed that 66 percent of the most engaged customers at banks believed the marketing communication they are receiving was 'general in nature' and not at all personalized. Worse yet, 53 percent of the households surveyed said that the offer received was for a product they already owned.
   
   With consumers becoming aware of the ability for all companies to micro target, they are expecting their financial institution to be one of the best due to the insight organizations have. Therefore, now more than ever, banks need to build segmentation programs that reflect customer needs as well as current product ownership and use this insight to drive communication.
6. Empower your customer contact teams: For most customer-facing employees of your bank, their primary responsibility revolves around efficient processing of transactions and/or customer service. To leverage the thousands of customer engagements these employees have each year, you need to provide easy ways for them to extend their conversations to include relationship expansion opportunities. Many banks provide prompts on their employee's computer screen around recent sales communications received by the customer, most likely products that may interest the customer and even special offers that can be made as part of their transaction or service conversation.
   
   The best programs don't stop there, but include tools for the customer to take advantage of the offer. This may be an immediately generated custom printed sales document, a follow-up email or sales call or a referral form.
7. Ask for referrals: One of the easiest ways to generate new business and increase loyalty of current retail or business customers is to ask (and possibly incent) for referrals. If a customer is happy with the way they are treated at your organization, they usually want others to know. This is especially true with satisfied small businesses, private banking customers and with retail customers that are part of a bank-at-work program. And it doesn't hurt if you provide an incentive to your current customer.
   
   At a time when new customer acquisition offers often exceed $100 and when the overall cost of acquisition is more than $250, offering a 'bounty' of $50 would be less expensive and would most likely generate a more loyal customer.
8. Leverage all channels: Never assume that customers understand all that your organization offers or absorb communication the same through all channels. Remind your customers continuously that you know who they are, understand their needs, are looking out for them and that you are willing to reward them for their loyalty.
   
   And use as many direct channels as possible to reach out to your current customer base, including email, direct mail, statement inserts, banner ads on your website, ATM messaging, outbound calling efforts, etc. Digital retargeting of customers who visit your website or are part of your direct mail or email programs also is a highly effective and very efficient way to cross-sell customers.
   
   Finally, it is time to start building cross-selling messages within your online and mobile bank applications and to not assume customers will not want or read an SMS message if it is well targeted..
   
   

   

   
   

   Source: Novantas 2013 Multi-Channel Sales Survey (Total US Respondents = 4,813) 
   
   

9. Measure and reward what you want done: By providing ongoing measurement of the cross-selling objectives you want to achieve and paying for the achievement of these objectives, you have a much better chance of reaching your goals. This continuous reinforcement of your cross-sell mission allows your team to be focused on what's important.
   
   You can also turbocharge your results by communicating how you are assisting in their efforts. Provide opportunity reports of the customers where they may have the greatest opportunity for success. As part of these reports, it is also helpful to provide background as to why the customer is being selected for a specific offer.

Finally, remember that current customers like to be rewarded for their loyalty. One of the best ways to do this is to remember to include an offer with any cross-sell or upsell message. Without an offer, you may be perceived as simply 'pushing product' without leveraging the relationship value already in place. A strong offer will not only generate a better response to your communication, but also remind the customer of the value of doing business with your organization.

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