Banks and Credit Unions Focusing on Onboarding to Build Revenues

There has never been so much pressure on financial institutions to maximize the revenue and relationship potential of each customer. With government regulations reducing fee income, historically narrow interest rate spreads, and consumer satisfaction with many financial institutions wavering, there's a need to ensure that once a customer opens a new account, every effort is made to help the customer understand and use their account, expand their relationship, and increase loyalty to your organization.

While time and resources have been dedicated to new customer acquisition processes in the past, a majority of financial institutions are now working to implement or improve the communication process right after account opening and for several months into the relationship. And instead of a single welcome letter (or nothing at all), more and more organizations are using a series of well-timed, personalized communications leveraging multiple channels to improve effectiveness.

According to the recently completed 2012 Financial Services Marketing Survey done in partnership with The Financial Brand, both banks and credit unions indicated that onboarding would be one of the most important strategies for the next 12-24 months, with virtually no institutions stating that the importance of onboarding would be less.

2012 Financial Services Marketing Survey

This increased emphasis makes sense, since in an informal survey done at last year's BAI PaymentsConnect conference, significantly less than 50% of the attendees indicated that they had an onboarding program at their institution. In addition, with first year attrition rates ranging from 25% to 30% and even higher at most financial institutions, stemming this attrition provides a significant revenue opportunity. When you consider the cost of acquiring (or replacing) a new account, the revenue impact potential of that account, and the opportunity to expand the customer share of wallet, the rationale for a strong onboarding program is evident. (see previous BMS post The Business Case for Onboarding)

In a recent onboarding webinar conducted in conjunction with Forrester Research highlighting the results of a recent research report entitled, "A Strategic Approach to Onboarding Financial Service Consumers" , Brad Strothkamp highlighted the primary goals of most onboarding programs as improving activation, increasing usage, driving cross-selling and enhancing the overall customer experience, with the primary objective of stemming attrition. 

Onboarding Program Objectives (Forrester Research, 2012)

GETTING STARTED
So where should banks and credit unions start as they build a new customer onboarding program? In a white paper I just completed entitled, "Ten Strategies for an Award Winning Onboarding Process", I provide what I have found to be the most important elements needed for a successful onboarding program. These include:

1. Acquire the right account holder
2. Provide relevant communication, early and often
3. Use the right message, with the right channel(s) at the right time
4. Know your audience
5. Encourage usage and engagement before cross-selling
6. Model for the right solution
7. Personalize your message(s)
8. View onboarding as a 'process' not a 'program'
9. Measure results and adjust your program accordingly
10. Have a single point of responsibility

The impact of following these ten steps can result in a significant improvement in retention and revenues based on an analysis conducted by Harland Clarke using their industry database. In my experience, the impact of a change of only 1% in retention can many times fund an entire onboarding initiative.

Source: Harland Clarke Marketing Services Industry Database, 2012

POTENTIAL HURDLES
So, what are the hurdles that financial institutions face when trying to implement an effective onboarding program? According to Forrester's Strothkamp and supported by my experience in assisting organizations with onboarding programs over the past 7 years, the primary obstacles to success usually include:

• Lack of a single owner: Since onboarding crosses over many product lines, uses multiple channels and impacts an assortment relationship building objectives (engagement, cross-selling, retention) it is important to have a single point of reference to ensure consistent communication from the customer's perspective. A single owner also helps to eliminate a focus on products as opposed to the customer.
• Data availability: The success of an onboarding program hinges on the immediate availability of data. While most traditional marketing initiatives can leverage a weekly or month-end database build, best-in-class onboarding programs use daily data to drive the initial communication to the customer (usually an email thank you and/or appreciation call). Combining multiple data sources quickly also assists with later targeted communication around engagement and cross-selling.
• Customer/Channel Blindness: Making assumptions around the customer's financial objectives or channel preferences can undermine the optimization of an onboarding process. By asking the new customers their financial goals, what financial products they are using elsewhere, who is the primary decision maker on the account, and what channel(s) he/she would like to be communicated with turbocharges an already effective process. These questions can be asked at the new account desk or can be part of the early customer communications.
• Goal Alignment: The best onboarding goals usually are aligned around overarching customer metrics like retention, engagement and share of wallet as opposed to being focused on specific product sales goals. For organizations funding onboarding through product groups, this can be difficult. As a result, we usually recommend that onboarding be funded (and measured) on an enterprise basis.
  

PATH TO SUCCESS
In the onboarding webinar presented by Harland Clarke and Forrester and in Brad Strothkamp's research study, a POST methodology was presented to underscore the importance of understanding People, Objectives, Strategies and Technology to achieve the desired onboarding results. This methodology can set the foundation for a strong program with market leading results. If any of these steps are skipped or misaligned, the results of an onboarding program will not be optimized.

Forrester Research POST Methodology, 2012

CASE STUDY
One of the most successful onboarding programs in the country has been done with Zions Bank, where multiple channels and a series of several well-timed and highly customized communications has resulted in best-in-class results. Program metrics include a 6:1 return on investment, a retention rate exceeding 96% and deposit growth of more than $50 million during a seven month period.

This highly integrated multi-channel effort by Zions Bank, Harland Clarke and Zions Bank's interactive agency Richter7 earned them the 2011 Gold Award for Marketing Strategies from the National Center for Database Marketing (NCDM).

Does your organization have an onboarding program? How effectively is the program improving engagement, cross-selling and retention? What have you found to be either the hurdle that is the most difficult or your key to success? I would love to hear from you.

Is Bank Transfer Day a Small Bank Trojan Horse?

"A Good Day to be a Credit Union" is the headline of an article from Myriam Digiovanni in the October 19 Credit Union Times discussing the upcoming November 5 "Bank Transfer Day".

REALLY??

According to numerous news articles and coverage in both mainstream and social media, community banks and credit unions across the country are rallying around the anti-bank sentiment that has germinated from the announcement of a $5 debit card fee by Bank of America on September 29 and the increase in fees by other large banks. Not only have new account openings reportedly increased at several large credit unions, but social media traffic on the official Bank Transfer Day Facebook page and on other national credit union sites such as www.ASmarterChoice.org and www.CULookup.com have also seen spikes.

But is all this attention and potential new business a fortuitous gift or a potential threat to the well being and revenues of community banks and credit unions? It may just depend on who you ask and how the financial institutions on the receiving end of the disgruntled customer exodus handle their new customers and members.

Bank Relationship Inertia is Powerful
First of all, the number of people who are complaining may be much higher than those willing to switch. "As angry as you might be, the effort of figuring out some alternative relationship, choosing one, getting set up and the risk that the new one might be no better than the old one . . . those are huge costs," states Peter Fader, a marketing professor at The Wharton School of the University of Pennsylvania in an interview with the Chicago Tribune. "Personal relationships, the accumulated points, the brand relationship, the start-up costs and the learning curve are all intangible costs, but they are very powerful," Fader goes on to say.

The power of the relationship is also reinforced in an academic study conducted by Purdue University entitled, 'Relationships and Individual's Bank Switching Behavior' where a very weak correlation was found between the propensity to switch banks and pricing. In contrast, a much higher correlation was found between the depth and tenure of relationship and the propensity to stay with a current financial institution.

Banks have worked hard to achieve engagement with their customers through the cross-selling of additional products and services such as direct deposit, online and mobile banking, online billpay and other services. At Bank of America, there is even the possibility of a linked savings account established as part of the Keep the Change savings program. This 'stickiness', in addition to the potential tangible costs of switching at some banks who may charge a fee for closing an account (especially a newly opened account where a premium or offer may have been involved) make the changing of banks daunting for many.

The Friction of the Switch Process
For those consumers who decide to switch, many will not complete the switch process either by not associating the aforementioned engagement services or by not funding the new relationship. As a personal example, while my family moved from California to Ohio over three years ago, I have not completely severed ties with my previous bank where direct deposit and automatic payments still remain. While my new banking relationship in Ohio is sufficiently funded to avoid fees, my primary checking relationship remains in California.

According to a brand new research report from Javelin Strategy and Research, 'Faulty Process Hobbles FIs in the Battle for Acquisition, Profitability and Retention', the process of opening account online is both flawed and frustrating. In a study of the top 10 banks and 5 technologically advanced smaller organizations, the likelihood of being able to successfully open and fund a new checking account is just slightly over 50%. If you are new to a financial institution, the chances of success go down even further.

With almost one quarter of new account holders opening their desired account online in 2011, the financial and relationship impact of a poor online account opening process is significant. Hampering the process at many banks is the fact that there may not be a way to open the accounts online according to the Javelin study.

The Demographics of the Disgruntled
According to an American Bankers Association study conducted in August, as many as 70% of consumers don't pay anything for their checking account today. These households either were enrolled in a Free Checking account or (more likely) held balances or related services that allowed the fees on the account to be waived. Of those households surveyed, an additional 11% paid fees of $3 or less. That leaves only 19% of U.S. households that were paying a fee of more than $3 a month for checking as of the August survey date.

So who is still paying a fee and might be the most vocal of the disgruntled? Most likely, it is those households who do not carry an adequate balance in their account(s), do not have a direct deposit or online banking relationship, or do not have a deep enough relationship to get their fees waived.

The scenario that Bank of America (and other large banks) may be actually 'firing' unprofitable, low balance relationships was well documented in Ron Shevlin's blog, 'Maybe Bank of America Has a Plan'. With the new fee being imposed, the customer has the choice to pay a fee for their debit card at Bank of America, expand their relationship at Bank of America or leave. In his post, Ron shows how Bank of America's profitability could actually increase with the diminishment of lower balance accounts and how the recipients of these relationships (smaller banks and credit unions) could be adversely impacted by the influx of new customers.


The Importance of Engagement and Onboarding
Finally, for those customers who are walking into the doors of a new bank or credit union, the importance of a robust process of new customer engagement and onboarding couldn't be more important. According to Mike Bartoo, Regional Manager at Marquis and  financial industry veteran, "Hope is not a strategy" when it comes to building new relationships. According to Mike, banks should look back to the last 6 months of account openings to determine how well they have done with getting new customers to open 'sticky' services. If success in cross-selling has been poor, attrition has been more than desired and relationships are not profitable, there is no reason to believe the new influx of accounts will perform any better. In fact, the results may be worse.

I have covered the importance of engagement, onboarding and cross-selling extensively in this blog over the past two years, illustrating that the future profitability of a relationship often will be determined by a bank's outreach during the first 6 months of the relationship. History shows that most relationships that are unprofitable after 6 months remain that way.

So, while there may or may not be a significant amount of movement of accounts between financial institutions leading up to and following Bank Transfer Day on November 5, banks should be cautious of the types of accounts they open and determine whether they are prepared to make sure these new relationships are profitable (or are relationships at all).

What is your organization's perspective on Bank Transfer Day? Does your institution stand to benefit or lose from customers leaving or coming to your offices? Or will Bank Transfer Day be a non-event in your opinion?

I would love to hear your thoughts.

Revenue Replacement in a New Regulatory Environment

In my travels over the past 18-24 months, a single unifying theme seems to be of primary importance for all of the banks I visit . . . the need to find new sources of revenue to help offset the impact of environmental, competitive and regulatory changes that have occurred in our industry. With the potential of the Durbin Interchange Amendment hanging over our heads, lost overdraft fees from Reg E in our rear view mirror, the ability to pay interest on business deposits and the implications of the Card Act just 18 months ago, bank earnings are being squeezed from all directions.

According to Novantas, the regulatory changes alone have slashed retail banking revenues by more than $50 billion per year compared to pre-crisis levels. To make this number even more staggering, Novantas estimates that the equivalent cost savings needed to offset these lost revenues would entail closing 50,000 branches or would require a 1500% increase in maintenance fees. Neither of these options are feasible.

As banks look forward, while it will definitely be important to control costs across the organization, the immediate challenge will be to focus on ways to generate revenues that are significant and sustainable over time. To do so, banks should analyze opportunities across the entire customer lifecycle including product innovation, repricing, new engagement and cross-sell strategies, channel migration, improved marketing and enhanced measurement of results.

Here are the top ten revenue replacement strategies I believe banks should focus on in today's environment. Some are rather rudimentary, while others may entail a paradigm shift within the organization in order to be implemented. Still others may not be consistent with your bank's brand or position in the marketplace. These strategies were the foundation of a presentation done at the 2011 Louisiana Bankers Association Annual Convention in New Orleans.

• Move Beyond Free Checking: With the implementation of Reg E and the potential impact of the Durbin Amendment, virtually every bank in the country is reviewing their checking product offerings to determine how they can positively impact earnings without negatively impacting their customer franchise. Much of this customer portfolio and product review is long overdue. The reliance on a 'free' lead product where penalty fees from the lowest balance accounts fund the majority of the portfolio is not sustainable. While some banks are building a much more robust segmentation strategy, where the relationship value will be more in line with the cost to the customer, other institutions are looking to a menu based approach, where components of the account (debit card, rewards program, ATM transactions, security services) are priced independently. Integral with this repricing strategy is the need for effective communication of changes and the opportunity to place customers in the best product set for their lifestage and transaction behavior. I cover this in a previous blog post entitled, Minimizing the Impact of Unintended Consequences.
• Focus on Quality Customer Growth: With the cost of new customer acquisition increasing and the quality of many new customers no longer meeting expectations, many banks are focusing their efforts on quality as opposed to quantity of customer acquired. Models are being developed that are based on incremental lift, potential for engagement, balance growth (using tools such as IXI wealth indicators) and likelihood for cross-sell and retention. In addition, many banks are fine-tuning their acquisition strategies to focus on branch trade area, neighborhood level direct communication as well as time tested programs like new mover acquisition. Many of these acquisition programs are at the carrier route level, taking advantage of postal economies. Finally, some organizations have had tremendous success leveraging their web sites, search engines and even social media to drive quality new account growth.
• Improve Customer Engagement: According to a study from Aite Group entitled, Measuring Customer Engagement: Making the Metric Matter, customers who have a higher level of engagement (more money movement, more transactions, online bill pay, direct deposit, more inquiries) are more likely to open another account with their bank in the next 12-24 months (27% vs. 5% for low engagement households), are more likely to recommend their bank to a friend (41% vs. 23%), and have a much more positive view of their financial institution. In addition, a more engaged household is significantly more profitable as shown by numerous research studies and covered in my blog post, A Business Case for Onboarding, where I illustrate the many financial benefits to a robust, multi-channel customer communication process in the first 90 days of the relationship.

Onboarding touchpoint roadmap example

• Restructure Rewards Program: In the past, the majority of rewards programs were funded primarily with interchange income. With the potential for this revenue stream to be negatively impacted by the Durbin Amendment, the structure and underlying strategy for bank rewards programs need to be evaluated. Options that banks are considering include the complete removal of a rewards component from some or all classes of accounts, an adjustment in the value of the reward program currency and even the potential for an annual fee associated with the program. Another strategy is to move the funding of the rewards program from the bank to the retailer with a merchant-based rewards program partnership. Leading providers in this space include Cardlytics, BillShrink, Segmint and Bling Nation as well as home grown options that connect the merchant to the customer. The benefits of a merchant-funded reward program are many, with the primary advantage being the offering of much more targeted rewards to a finite audience of the bank based on online transactions. For more insight into merchant-based rewards, visit my blog post on the subject. 
• Expand Share of Wallet Initiatives: In the BAI Banking Strategies article written by Sherief Meleis from Novantas entitled, Relationship Expansion: Sharpening the Focus, he points out that a bank would only need to increase the amount of business done by each customer by 15% in order to offset the $50 billion revenue shortfall facing our industry. While definitely not a slam dunk by any means, the concept of expanding share of wallet with current customers is far less daunting than trying to increase fees to compensate for the impact of legislation over the past 24 months. According to Novantas, approximately one quarter of deposits ($900 billion) as well as one half of loans ($4 trillion) and half of investments ($3.7 trillion) remain unconsolidated with primary financial institutions. Their research also indicates that as much as two thirds of these relationships are held by customers who are attitudinally willing to consolidate. The key for banks implementing this strategy will be to avoid boiling the ocean or overwhelming the customer with blanket communications. Instead, it is imperative to reach the right customer, at the right time, with the right message using the channel they prefer. A good discussion of some easy to implement cross-sell strategies is available on my blog post from April 15, 2011.
• Shift Debit/Credit/Prepaid Emphasis: While the Durbin Amendment may change the financial benefits of the debit card, it definitely doesn't change the importance of debit as an engagement and payment device. Some banks may be impacting the equilibrium of this payment device by adding annual fees, transaction fees and spending thresholds to the product. It is yet to be seen if these charges will stick or if they have a negative impact on the customer experience. Alternatively, banks can continue to encourage usage of the debit card while expanding their marketing efforts to include the potentially more profitable credit and prepaid debit cards. Serving alternative ends of the demographic spectrum, the appeal of credit cards is usually for people that want to leverage the grace period to their advantage. The appeal of the prepaid debit card is for people that want the convenience of a debit/ATM card without the fees of a checking account. The growth of the prepaid debit market has been significant in both the lower and mid demographic segments as people get frustrated with banking fees or have been closed out of the traditional banking system.
• Optimize Communication Channels: As the number of marketing messages received by each consumer has skyrocketed exponentially over the past decade, the control of consumption of these messages has definitely shifted from the marketer to the consumer. As economic growth has slowed and budget constraints at banks have impacted the amount of funding we have for marketing initiatives, there is a need to leverage less expensive, but potentially more expansive channels such as email, social media and even formal word of mouth strategies. Instead of replacing traditional media with electronic channels, however, banks need to manage a blend of channels that will yield the best results. For most initiatives, it is not an either/or proposition, but a media mix that needs to be optimized for each customer segment and marketing objective. This is definitely an area where a test and learn mindset is needed and where improved analytics are needed to determine channel attribution.
• Deliver on the Mobile Banking Promise: According to recent comScore research, 29.8 million Americans accessed financial services accounts (bank, credit card, or brokerage) via their mobile device in Q4 2010, an increase of 54 percent from Q4 2009. The report also found that preference for online access and security concerns topped the list of reasons why consumers have not yet used mobile banking. With such a skyrocketing growth and with the vast majority of banks now offering mobile banking, strategies need to be set forth that will ensure that mobile banking customers become engaged with their mobile banking provider as opposed to using the channel as a utility similar to an ATM. Studies show that mobile banking can effectively reduce costs related to call center usage and increase retention if the channel is enhanced with Personal Financial Management (PFM) applications and if the channel becomes more interactive and intuitive (a delivery device for rewards). The development of mobile banking strategies also need to include strategies for iPad applications that expand the mobile banking horizon far beyond what can be done on a smart phone.
• Reconfigure the Branch Model: As the use of electronic channels continues to increase, the functionality of the traditional bricks and mortar branch changes as well. Over the past several months, several innovative branch models have been tested including the Citi version of an Apple store as covered on The Financial Brand website. Going a different direction, but still focusing on the branch, Huntington Bank has recently purchased the rights to dozens of supermarket branches, extended hours to include evenings and Sundays and is in the midst of a $70 million branch refresh in which it will make over all of its 608 branches with new digital signage and e-merchandising. A third strategy is to significantly downsize the retail space, recognizing that the opening of accounts, responding to inquiries and handling transactions can be done using a much smaller footprint. The 'right' answer is not clear yet, and may reflect the bank's brand promise more than being strictly a cost or revenue decision. (Discussion on making the ATM channel more productive can be found on my November post)
• Increase Focus on Metrics That Matter: As opposed to being a cost center, marketing is increasingly being looked upon to generate revenue and to be able to show the impact of their programs. Measurements such as marketing ROI, incremental revenue lift, lifetime value and internal rate of return are all metrics that matter to the CEO and CFO and need to be built into all revenue strategies. In addition, where the sales cycle is longer, marketing is now expected to develop Demand Generation programs as opposed to simply lead generation initiatives, nurturing leads much farther in the sales funnel with an eye towards the final sale. I covered the new sales funnel in my blog post on February 26.

I am sure I have missed revenue opportunities that banks are pursuing to replace revenue lost due to recent changes in the marketplace. Can you share some of your ideas on my blog for others to react to?

7 Common Sense Ways to Increase Bank Cross-Selling

Every financial institution needs to generate a steady stream of new customers, yet 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 percent 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 7 relatively easy techniques to do just that:

1. 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.
2. Stay Connected: About a year ago I was talking to a friend who said, "I was very impressed with how much love my bank gave me when I opened some new accounts, but amazed that I never really heard from them again except to tell me about new fees". 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 expands their relationship, their bank may never include them in a model-driven cross-sell program.
3. 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.
4. 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.
5. 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.
6. 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 direct mail, email, statement inserts, banner ads on your website, ATM messaging, outbound calling efforts, etc.
7. Measure and Reward What You Want Done: By providing ongoing measurement of the cross-selling objectives you want to achieve and paying for this 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.

I would love to know other ways you are improving cross-sales within your bank, credit union or investment firm. I know I have missed some great ideas and I would love to hear from you.

Checking Changes Make Onboarding and Cross-Selling More Important

Over the past several weeks, many of the larger banks across the country have announced significant changes to their checking account continuum, including elimination of traditional Free Checking, discontinuation of rewards programs, ceasing reimbursement of foreign ATM fees, as well as potential fees and transaction limits on debit cards.

While each of these strategies are intended to reduce costs or generate revenue in response to Reg E and the Durbin Amendment, these changes could also present a challenge to banks as they seek to increase engagement and gain share of wallet. This is because debit card use and rewards program enrollment were two of the more important account engagement criteria and basis for a broader relationship growth.

According to an economic analysis on the effects of the Durbin interchange amendment presented to the Federal Reserve Board on February 22, between $33.4-$38.6 billion of debit card interchange will be lost during the first two years the new rules are in effect. This reduces the revenue on a personal checking account by $56-$64 and by $79-$92 on a small business checking account according to the study. These impacts make it more important than ever to optimize onboarding and cross-sell efforts for retail and small business customers thereby reducing costly attrition, improving engagement and providing a stronger foundation for ongoing relationship expansion.

Here are several of the steps financial institutions should consider as they begin to implement changes to their deposit accounts and debit products.

• Double Down on Onboarding Initiatives: While most banks currently have an onboarding process for new retail customers, many have yet to build an onboarding process for small businesses. In addition, many programs only reach out to the customer once or twice and don't leverage a robust mix of communication channels. The impact of recent legislation makes the opportunity cost of attrition more expensive than ever. Banks need to increase the number of 'touches' a customer receives by email, phone and direct mail with the message centered on maximizing the benefits of using the account the customer just opened. When the account becomes active, then begin to expand the relationship.
• Don't Walk Away From Debit: While the economics of the debit card have definitely changed, the use of this payment vehicle remains better than many of the alternatives and provides the consumer with constant brand reinforcement each time they open their wallet. David Stewart from McKinsey & Company wrote in a recent BAI Banking Strategies article entitled, "Keeping Debit in Focus Post-Durbin" that debit cards remain an important component of the anchor DDA. As a result, getting new customers to activate and use their debit card as part of the onboarding process should continue to be a primary objective.
• Expand The Definition of Engagement: In the past, most banks focused on debit card utilization, enrollment in online banking (with bill pay) and the sign up for direct deposit in their onboarding messaging. While you don't want to cover too much in the onboarding communication, there are some households you may want to encourage to apply for a credit card and/or activate an autosave transfer as part of welcome process.
• Encourage Channel Migration: Another way to stem attrition, potentially reduce cost and build share of wallet is to increase alternative payments channel use. As part of the onboarding process, some of my clients are building messages around the use of mobile banking early in the relationship lifecycle. This makes sense based on recent trend research done by Javelin Strategy and the potential for offline customer mobile adoption found in research done by Fiserv. While there may only be minimal channel shift from a payments perspective initially, there could be significant savings if call center inquiries are reduced.
• Focus on Share of Wallet Early: While I totally agree with Ron Shevlin in his Marketing Tea Party blogs (Honeymooning and Why Engagement Matters) that a new customer must be courted and engaged before they can be cross-sold, customers define the pace of this trust building as opposed to the bank. This level of engagement/trust is usually found by looking at transaction volumes and whether engagement services are active. Once actively engaged, the customer should be offered additional services that may improve their overall banking experience. This is where product propensity models and behavioral segmentation can be effective.
• Leverage the New Account Desk: Many of my clients have found that the new account desk can  be an effective cross-selling environment for the customer, especially if credit services such as credit cards, personal or small business lines of credit and even equity credit are pre-approved at the point of sale. The point of sale is also the best place to discuss the correct account to open in the first place and the benefits of engagement services and rewards alternatives.

The effective communication of your checking account changes to existing customers has been discussed in my recent blog (Minimizing the Impact of 'Unintended Consequences'). It is just as important to communicate well with new customers at the new account desk in the days, weeks and months immediately following the new account opening. Without an aggressive communication process, leveraging multiple channels and customized to the customer's stage in the engagement process, the investment in acquiring the customer will be lost or the value of the relationship will not be optimized.

How are you going to ramp up your new customer communications to maximize your marketing ROI? Are you considering new ways of onboarding your customer in the first 30, 60 or 90 days? Have you found a way to leverage any social media in your onboarding process? I would love to hear your ideas.

Ten Steps to Onboarding Success

Later today, I am presenting at the Oregon Bankers Association 105th Anniversary Convention at Sunriver Resort on the topic, Stemming Attrition and Building Relationships Through Effective Onboarding.

In addition to sharing recent statistics from J.D. Power and Associates around the positive impact of increased attention early in a new relationship and the positive impact of using multiple communication channels from case studies across the banking industry, I will be sharing the ten key steps to onboarding success that I have seen over the past five years.


These ten steps are:

1. Acquire the right customers: The most important component of a successful onboarding program is to acquire customers that have a greater liklihood of future value based on modeling and geographic targeting.
2. Communicate early and often: The sooner you can build dialogue with the customer and the more often you can connect in the first 90 days, the more successful you will be in retaining and building relationships.
3. Integrate across multiple channels: Reaching out to the new customer using phone, direct mail, email and personal 1:1 communication will greatly improve the success of an onboarding program. We have seen lifts of 25-50% when multiple channels are used.
4. Build in learning from day one: An onboarding program should not run on auto pilot. The competitive environment, customer behaviors and transaction trends change all the time. Your onboarding program also needs to adjust on a dynamic basis.
5. Engagement is key: Cross-selling the new customer should not begin until after you encourage engagement with the new account. This can include direct deposit, online banking and bill payment, autosave, credit utilization, debit/credit card utilization, etc.
6. Build a cadence of communication: A successful onboarding program uses a sequence of communication to improve the customer experience by helping the customer understand their new account, get to know the bank brand and eventually build trust and a stronger relationship.
7. Develop personalized offers: Once the customer has demonstrated a satisfactory level of engagement with their new account, offers targeted to the specific needs of the customer should be communicated.
8. Use a test and learn mentality: Testing should always be done with an onboarding program to determine the right offers, timing, channels and cadence for each customer segment.
9. Measure results: Results should be measured consistently against a control group. Common metrics include changes in attrition, engagement, cross-selling, balances and satisfaction on both a customer and household basis.
10. Provide a single point of responsibility: Since most banks do not have Directors of Cross-Selling or VP of Retention, it is important to assign the onboarding process to a single person who will 'own' the development and impact of the onboarding process. This person will work with segments, product managers and marketing teams to ensure the success of your program.

There has never been a more important time to develop a successful onboarding program. With fee income being attacked by Reg E and net interest margins at historical low levels, it is imperative that financial organizations attract and keep customers with the highest potential lifetime value.

Seven Predictions for the Future of Banking

Today, Susan Wolfe, Vice President of Financial Services from Mintel Comperemedia, presented a webinar entitled, "Seven Predictions for the Future of Banking" where she explored trends in the industry based on the research and direct marketing examples from their custom consumer surveys and mail panel. Each of these trends correlate with what I have seen in the marketplace even though many trends have been impacted by the massive influence Reg E has had on the focus of many bank marketing departments over the past few months.

The predictions presented in the Webinar were:

1. More Aggressive Focus on 'Relationship Banking': Even though trust in banks has waned lately, banks are emphasizing the building of a stronger relationship through integrated accounts like Fifth Third's Relationship Savings Account and with rewards programs like PNC Bank's points.
2. Increased Promotion of Account Builder Programs: Responding to a much higher savings rate, especially by higher income segments, new products are being introduced such as SmartCents by Capital One and U.S, Bank's S.T.A.R.T. program.
3. More Debit Card Marketing: With the loss of overdraft fee income, banks will encourage debit card use for automatic bill payments and will begin to share interchange income with per use rewards programs and sweepstakes.
4. Continued Importance of Incentives: As mentioned my recent Blog, incentives for opening new checking accounts have increased and are becoming more widespread. BBVA Compass also offers incentives through an offline and online refer-a-friend program.
5. Mobile Banking is the 'New' Online Banking: While the adoption of mobile banking currently is inversely correlated to age, this trend could easily reverse as offline sign-up expands and promotion of text messaging and electronic alerts increases. Bank of America has around 3 million subscribers with the majority using an iPhone or iTouch. Online money management tools also continue to become more sophisticated such as those from Mint.
6. Proliferation of Financial Literacy Programs: Banks are focusing efforts on new programs to help customers better understand and manage their finances such as Chase's Blueprint and Bank of America's financial education website.
7. Expanded Testing and Use of Social Media: Financial services firms continue to test ways to leverage social media such as American Express's online booking app on Faceboook, Bank of America's help page on Twitter, Chase's Facebook charitable giving event and Stagecoach Island from Wells Fargo.

Online and Social Media Emphasis Grows

As the focus on marketing spend is magnified and marketers are asked to do more with less, marketers are continuing to increase their online and social marketing strategies, according to the CMO Council's 2010 State of Marketing report.

The global affinity network, which surveyed 600 of its members from across the world and representing most industry verticals, found that 46% of its members ranked investing in digital demand generation and online relationship building as a top initiative for 2010. The survey also found that 62% will be crunching customer data to improve segmentation and targeting. Most of the respondents plan on doing much of the heavy lifting internally or by specialized outsourced providers.


The survey also saw a significant uptick around online channel integration and multi-channel offerings that deliver the brand promise consistently across online, mobile, in store, and traditional channels.

The challenge for bankers and non-bankers alike will be to find the skill sets to successfully implement these strategies. With only 6% of those surveyed rating their online marketing performance 'excellent' and the majority trying to grow their capabilities, finding people with a successful track record is difficult.

Building Long-Term Deposits and Relationships Automatically

Over the past several years there have been a number of financial institutions that have built automatic savings programs where customers can set goals, establish recurring transfers between accounts to fund the goal(s), and track their savings progress.

One of the first programs developed was the Orange Savings Account from ING Direct which greatly simplified the process of opening new accounts for various savings goals. Following the success of the Orange Saving Account, SmartyPig was another program with that same goal in mind, making it easy for a customer to setup savings goals.

A customer can name their accounts, set the deadline for reaching their goals and even use an interactive calculator to determine the amount they will need to set aside each month. What makes Smartypig unique is that they added a social element to the mix . . . allowing other people such as friends and family members to contribute to the customer's goals as well.

The customer can even place a widget on their Facebook or MySpace page. Once the customer reaches their goal, they can either put all of your savings plus interest on a debit card, have it sent back to their bank, or receive bonuses by having the amount placed on a gift card from participating merchants like Macys, Amazon, Best Buy, etc.

While SmartyPig brings unique technology to its enterprise, it remains a one trick piggy (offering only savings accounts) and is a still-small Internet start-up. Being able to grow a savings account product from $0 to $500 million in deposits in less than two years is a phenomenal feat but its success can be assailed.

Full-service banks have begun to copy some of SmartyPig’s basic features and leveraged their own new savings features. For instance, U.S. Bank introduced the S.T.A.R.T. (“Savings Today And Rewards Tomorrow”) program in late 2009 in test markets, giving a $50 Visa gift card to a customer depositing $1,000 or more into a U.S. Bancorp money market savings account and establishing a monthly transfer from their U.S. Bank checking account. If a customer chooses to transfer between $.25 and $5.00 from their checking account into his money market savings account each time he uses his U.S. Bank debit or credit card, the S.T.A.R.T program counts those toward program term fulfillment.

In addition, customers maintaining a minimum $1,000 balance in the new savings account for 12 months will receive another $50 bonus, while U.S. Bank is offering another $100 bonus for establishing an automatically funding savings account tied to the bank’s standard checking account.

Building new products that encourage a long-term savings perspective supports the current trends toward more conservative money management while providing tremendous opportunity for additional cross-selling and relationship building. I fully expect more banks to develop both online and offline savings alternatives and to use these products as part of their onboarding and lifestage communication processes.

Growth in Deposits Presents Opportunities and Risks

The American Banker today had an article detailing the recent trend of low cost deposit growth experienced by the major banks in the fourth quarter of 2009. According to KBW Inc.'s Keefe, Bruyette & Woods, the top 40 banks experienced a deposit growth rate of 8% in the quarter, with only a couple large banks intentionally allowing higher-cost deposits inherited during acquisitions to run off during the year.

Even though interest rates remain extremely low, consumers were still saving at a rate of 4.7% as a percentage of disposable income in November, according to the Bureau of Economic Analysis primarily due to uncertainties in the marketplace and due to the view of banks being the safe harbor for funds accumulated during a time of reduced spending.
While bank revenues will not return to high levels until consumers begin to borrow again, productive deposit gathering should help banks lessen the impact of the Obama administration's proposed "financial crisis responsibility fee," which would subtract government-insured deposits from the covered liabilities on which the 15 basis-point tax would be based.

There is an opportunity and risk associated with this deposit growth however. For banks that have well developed onboarding and cross-sell programs in place, this deposit growth and the resultant increase in new accounts provides a tremendous foundation for developing long term relationships with an enhanced ROI. In addition, with households continually evaluating where to place their funds, firms with aggressive aquisition programs will benefit the most.

Conversely, those organizations who become complacent during this time of deposit growth could risk seeing the deposit growth over the past 15 months evaporate, moving either to other banking organizations or eventually to the equity markets as the economy grows stronger. I am recommending that my clients continue to focus on deposit acquisition programs and reach out to those new households they have recently acquired or households who have expanded their relationship and further secure the relationship through insight gathering, engagement programs and improved retention processes.

Eventually, it is expected that consumers will become more confident and will seek additional investment and savings options. When this occurs, it will be those organizations with the best customer experience and strongest relationships that will lose the least.

Small Business is Big Business

While most banks are spending more time and resources trying to address the needs of small businesses, a large percentage of this segment is still underserved. According to a Javelin Strategy & Research report released last year, about two-thirds of the 26 million small firms don't have business banking accounts.

Smaller companies usually integrate their business and personal relationships or simply open another personal account according to the Javelin report released late last year. That means they may pay lower account fees, but also don't receive cash flow and treasury service attention from a bank's small business sales team, potentially impacting the business' ability to grow.


At a time when banks are looking for ways to acquire new customers and generate additional revenue, marketing to and serving this untapped banking segment is a win-win for banks and small businesses alike. The challenge is to uncover these somewhat hidden relationships. Sometimes, banks are evaluating transactions to determine what customers are using accounts for business purposes while others are using social media to have small businesses indentify themselves.

According to several reports over the past two years by Aite Group, while smaller businesses tend to use banking services similar to consumer banking relationships, their payments habits show tremendous growth opportunity for debit and credit cards as well as online banking services. In fact, according to Aite, only 4% of spending by small businesses currently is done on a small business credit card. Capital One has already responded to this opportunity by allowing small businesses to combine their business rewards with their personal rewards. Other banks are tracking checks and ACH transactions to help find underserved businesses.

Alternatively, firms like Bank of America are leveraging the power of social media to develop the Small Business Online Community which has over 50,000 registered users, while American Express continues to promote their very successful small business OPEN Forum where small businesses can find articles, expert blogs, success stories and advice with limited networking opportunities. Wells Fargo is also the first bank using blogs to stay in touch with small business and retail customers, while VISA teamed up with Facebook to create the VISA Business Network for small businesses to share advice and potentially grow their customer base.

Going forward, bank marketers should take notice of the smaller business market (under $500,000), tieing together personal and business relationships, changing payments behavior and providing better cash flow solutions that can help these business grow.