Located this article from Celent, at Aqubanc and the first thing that strikes you is the lack of differentiation in strategy amongst banks. In North American Bank Priorities: Convention or Innovation, Celent examines & analyzes — through the eyes of bank CIO’s — bank IT & business priorities.    …. Finally, the report focuses on the area banks consider core to their entire operation — customer-centricity. ‘In order for banks to succeed, they must learn to innovate while working within regulatory & budgetary constraints,’ says Jacob Jegher, Celent. Source:  Aqubanc Customer centric has got to be the most overused, misunderstood, and … Continue reading "North American Bank Priorities" don’t provide competitive differentiation

 McKinsey have released a book (registration required) that digs into the challenges facing marketing today. Marketers are struggling to keep up with an explosion of new customer segments, sales and service channels, media, marketing approaches, products, and brands. Many have responded to fragmenting opportunities by bolting on new brands, channels, and marketing programs, but doing so increases costs and complexity while reducing organizational agility. To deal with proliferation companies must instead become more sophisticated at prioritizing opportunities and allocating resources while increasing the consistency and coordination of their marketing execution. Source: The McKinsey Quarterly: Profiting from Proliferation One chapter that … Continue reading McKinsey: New thinking in customer segmentation

Jenny from the Webby Awards pointed out that there is a bank category in the annual awards for interactive advertising.  The Webby Awards recognizes outstanding Interactive Advertising in 15+ single and campaign categories. An entry may be entered into multiple categories if appropriate. Entries in multiple categories will be reviewed separately for each category entered and may win multiple awards. Source: Webby Awards The awards are quite well known now and here are last years winners.  The awards, hailed by the New York Times as “the online equivalent of an Oscar”, officially launched their Call For Entries last week. Bank of America … Continue reading Webby Awards nominations are being sought

 Great post on the new tactics required to consider your marketing audience from Tara.  (emphasis added) Of all of the ‘traditional’ marketing practices I choose to ignore, targeting is not one of them…but I do approach it in a bit of a different fashion: instead of the ‘Males, aged 18-34, from urban areas, with some college education’ etc. I like to think in terms of ‘behaviour’ or specific ‘characteristics’. Like, Technorati serves Bloggers first and Blog Readers second and targets their development goals to suit those people. [Now note that when they began that was a very narrow market…not so … Continue reading Target practice

Forrester continue to ask the obvious yet absolutely right questions, yet the answer here is confusing.  Although the branch was once thought to be dead in favor of alternative channels, the majority of consumers still prefer the branch for doing most of their banking business. A Forrester survey shows that these consumers are generally older, less wealthy, and don’t trust online banking. Source: Forrester Research: Who Are The Bank Branch Loyalists? This survey took a look at what turns out to be a significant consumer group. …  took a closer look at the 58% of consumers who say they prefer … Continue reading Forrester Research: Who Are The Bank Branch Loyalists?

Rubel picks up on the social network moves from Banks, and adds one I didn’t have in my list.  I suspect once we dig into it, there will be more Banks is MySpace, Facebook, and the likes.  Those are of moderate interest for me, and really an extension of banner ad marketing.  It remains to be seen whether that’s the model vs build your own social network, a combination of both, or more likely something we haven’t seen yet. Chase Credit Cards has a promotion running with Facebook (login required) Source: Micro Persuasion: Banks Jump to Social Nets to Reach … Continue reading Micro Persuasion: Banks Jump to Social Nets to Reach Gen Y

Internet only banks are making a comeback, for the first time since the late 90’s.

BY SUSAN HARRIGAN Newsday Staff Writer Just as new bank branches seem to be popping up on every street corner in metropolitan New York, a countertrend is gathering strength. Internet-only banks, which first made their debut in the 1990s but fizzled for lack of consumer interest, are making a comeback.

The number of U.S. households with an account at a Web-only bank — defined as one that primarily delivers its products online — has grown more than tenfold during the past six years, from 350,000 to about 4 million, according to Jim Bruene, publisher of the newsletter Online Banking Report. Such “virtual” banks, which don’t rely on physical offices, now are operated by about 40 financial services companies and hold about $80 billion in deposits, or 1.3 percent of total U.S. deposits, he says.

Source: A worldwide web of online banks – Newsday.com

First key and obvious point is the lower cost base of Internet banks.

Because they cost less to operate, online banks can offer higher interest rates than their brick-and-mortar counterparts, making them an ideal tool to gather deposits through savings and money market accounts. “Really, the success [of the Web-only banks] is in attracting people who have high balances in savings or checking accounts, and want to move them for higher rates,” Bruene said.

The other distinctive aspect of the new breed, is niche focus, both on customers, and with specific products.

Flushing Financial will use its Web operation to gather deposits at first, but in the future it plans to offer other types of online-only products, such as checking accounts and home-equity loans.

…

Westbury-based New York Community Bancorp, which has 166 branches, including 69 on Long Island, opened a Web-only operation early last year under the name MyBanking Direct.com. The unit offers a certificate of deposit and a money market account.

These moves are alerting experts to predict a significant reduction in reliance on branches is coming.

Although online-banks’ share of the U.S. deposit-taking business still is tiny, their growing popularity is causing some experts to predict that the craze for building bank branches is about to end. Over the past 20 years, consolidation has cut the number of banks in the United States from about 18,000 to 9,000, but branches have doubled from 35,000 to about 70,000, according to Mark Fitzgibbon, a banking analyst for Sandler O’Neill & Partners.

The debate about branches or internet, has been binary. The real story, is more of an evolution, that was well captured in a recent paper from onlinebankingreport.com authored by Bruene.

Bruene, who recently authored a report titled “The Demise of the Branch,” said he expects to see the number of bank branches in the United States decline by 20 to 30 percent over the next two decades. In contrast to the late ’90s, when fewer consumers were comfortable using the Web, “everybody’s online” now, he said. “It opens up a new way to reach people cost-effectively that you couldn’t have five or 10 years ago.”

Bankers have long memories, and at the first mention of internet banking, still too easily recall the demise of the early movers, mbanx, Wingspan, and Citi.

During the Internet bubble of the 1990s, banks including Citibank and Chicago-based Bank One, now a part of JPMorgan Chase, introduced Web-only units but ended up folding them when they didn’t attract enough customers. George Tubin, a senior analyst at TowerGroup Inc., a Needham, Mass.-based consulting firm, said the effort was, simply, too early.

The catalyst that actually began in the 90’s but survived, is ING. Their model was classic by todays standards. Focus on the online only, and only deliver those products that can be effectively delivered that way. They were also innovative enough (in Candia) to work on the fringes of the then current regulations, and by accepting the signature on the account funding cheque from the competition, successfully outflanked the regulations that the old banks diligently adhered to.

ING Direct, a unit of Netherlands-based ING Groep that began operating in the United States in 2000, was the catalyst for a revival of stand-alone Internet banking in this country. Operating only four retail locations that it calls “cafés” and uses solely for marketing purposes, ING offers savings accounts and mortgages, and also plans to offer a checking account later this year. At year-end 2005, it had $40 billion in U.S. deposits, according to the Online Banking Report, making it the nation’s largest stand-alone Web bank.

Relevance to Bankwatch:

The opportunity for traditional banks is hindered by concerns about cannibalism of balances. However better to cannibalize yourself than have the competition do it.

tags: internet+banks, ING

Continue reading “A worldwide web of online banks – Newsday.com”

This conclusion from the Dove Consulting, a division of Hitachi Consulting Dove Consulting, a division of Hitachi Consulting summarises the current state well.

Over the last two years, the search for a new model has prompted many deployers, particularly financial institutions, to re-evaluate the role of the ATM: is the ATM purely a cash dispenser, or is it a strategic customer delivery channel?

Source: New ATM Study Reveals Evolving Business Model, Diverging Strategies; Analysis of Bank, Credit Union and ISO Deployers Provides the Most Comprehensive Assessment of the State of the U.S. ATM Industry

A confluence of factors have driven Banks to re-consider their ATM strategy.

Deployment growth was outpacing transaction growth, resulting in declining per-ATM transaction levels — particularly foreign acquired transactions (i.e., revenue-producing transactions performed by another deployer’s cardholders). Declining revenues, coupled with fixed or increasing costs driven by regulatory requirements (e.g., Triple DES) and increased rent and cost of funds, were putting increasing pressure on ATM deployers’ profitability. As a result, the ATM industry was in search of a new model.

I would add to the list of factors contributing to the change, that of machine obsolescence and the cost of replacement. One network fleet I am familiar with is costing over 100 million dollars, and that network is in the smaller side.

The main factors can be summarised as:

• machine replacement costs
• regulatory costs, including triple DES, customer access, and chip card
• growth of third party ATM fleets (in Canada, third parties are 60% of the overall total of ATM’s
• software upgrade from Windows on the ATM’s to upgraded software on the switches
• changing customer behaviours resulting from surcharging

The survey goes on the make some some interesting points in detail.

1. ATM’s and Transaction Volumes

The average number of monthly transactions per ATM, a key industry metric, varies significantly depending on the type of ATM deployer and the location in which an ATM is placed. Financial institutions’ on-premise ATM’s currently average 3,651 transactions per ATM per month, compared to 1,807 for their off-premise ATM’s and 329 for ISO ATM’s.

2. ATM Functionality – Customer Relationship Management (CRM) & Check Imaging

Most of the advanced features currently offered by deployers are banking functions, with shared deposits, domestic account-to-account transfers and mini statements topping the list. Going forward, however, most deployers are focusing on advanced marketing and CRM functionality that will enable them to tailor the user experience to individual cardholders and strengthen their customer relationships and cross-selling capabilities. Deployers’ top three areas of interest for future advanced functionality are targeted marketing campaigns, product offers (e.g., credit card solicitations), and cardholder preferences.

3. Migration to Windows and Advanced Software

Although no longer sold, OS/2 continues to dominate the ATM landscape, with the majority of ATM’s — 58 percent — currently running on OS/2. The pervasiveness of OS/2 will not last much longer, however: 63 percent of ATM’s in the U.S. are projected to be running on Windows by 2008.

4. ATM Surcharge Rates

Deployers continue to increase the surcharge fees they charge to non-customers, currently averaging $1.74 at an on-premise ATM and $1.79 at an off-premise ATM.

5. ATM Economics

Deployers continue to face challenging ATM economics, as measured on a direct basis. Deployers currently earn an average of $1,104 per month at their on-premise ATM’s, and $1,013 at their off-premise ATM’s.

Finally some useful benchmark costs for your business casing.

On the expense side, deployers incur average monthly expenses of $1,444 per on-premise ATM, and $1,450 per off-premise ATM, although there is significant variation between deployer segments.

Monthly Per-ATM Expense by Deployer Segment

On-Premise ATM's          Off-Premise ATM's
--------------- ------------------------ -------------------------
Large Bank              $1,131                    $1,736
Other Bank              $1,313                    $1,256
Large CU                $1,976                    $2,549
Other CU                $1,912                    $2,578
Large ISO                 N/A                       $680
Other ISO                 N/A                       $522
Overall                 $1,444                    $1,450

Relevance to Bankwatch:

These factors shift the costs and the revenues associated with ATM’s. The opportunities exist to consider ATM’s are customer channels, or as sources of income, or both, but the bets are high because of the costs.

Continue reading “New ATM Study Reveals Evolving Business Model, Diverging Strategies; Analysis of Bank, Credit Union and ISO Deployers Provides the Most Comprehensive Assessment of the State of the U.S. ATM Industry”

I wanted to explore further my earlier post on why new immigrants provide an enormous opportunity for Banks.  I have been having a good discussion today in the comments with Reynold (thank you!) which made me realise I wasn’t clear enough in laying out my thinking. Clearly immigrants backgrounds required different approaches, based on different cultures and attitudes, but here I am speaking about the size of the opportunity relative to traditional marketing.  Also I am looking here at new business opportunity, not share of wallet. Continuing with Canada as an example there are 220,000 – 256,000 (2005) new immigrants annually. Canada has … Continue reading Additional analysis on marketing and the new immigrants