Financial Research: Grappling with Technology

Bank leaders want to know more about how to leverage technology to make their institutions more profitable, but don’t know where to start, reveals the 2014 Growth Strategy Survey. Bank Director and CDW surveyed 145 independent directors and executives in June and July to uncover technology’s role in growth strategy.

Growth-Survey-Group-1Bank leaders know that technology can make their banks more efficient, and know that customer demands are only growing. But less than one-third talk about technology at every board meeting, and one-quarter of banks lack the IT staff to grow the bank.

Growth-Survey-Group-4When asked about the top technology concerns for their banks, keeping up with the evolution of mobile banking is a concern for more than half. Data analytics is also top of mind, and the survey finds that big banks are better users of data. Forty percent of respondents overall use business intelligence tools and analytics within their organization, but more than three-quarters of banks over $5 billion in assets currently use data to support growth goals.

Growth-Survey-Group-2One-third are concerned that the bank’s core processor impedes the bank’s ability to innovate. Community banks in particular depend on vendors for their technological expertise, yet half say that their core processor is slow to respond to innovations.

Growth-Survey-Group-3It’s important to note that many of these concerns about innovation and the use of data tie into growing concerns about competition from outside the industry. Eighty-four percent of respondents say that today’s highly competitive environment is their greatest challenge when it comes to growing the bank, and 83 percent worry about nonbank competitors. Banks above $5 billion in assets reveal a heightened concern about PayPal and Amazon.

Full survey results are available online at BankDirector.com.

Advertisements

Big Disparities in Bank CEO Pay

As discussed in my prior blog post, the 2014 Compensation Survey finds that bank boards are earning more and lending is a big focus for executive hires. But the survey also delves more into CEO pay this year, and while the disparities in pay for the largest and smallest banks should be expected, it’s still jarring to see.

CEOpayBySize

For the industry overall, the median compensation amounts for bank CEOs total:

Salary: $241,600
Cash incentive: $44,600
Potential cash incentive: $57,600
Equity grants: $50,000
Benefits & perks: $21,231

Ninety-nine percent report that the CEO receives a salary, while 41 percent report that the CEO receives equity grants. Half report a cash incentive, and more than two-thirds say that the CEO receives some benefits & perks.

You’ll find more details on bank executive pay within the 2014 Compensation Survey.

Financial Research: Is a Focus on Growth Yielding Higher Board Pay?

GrapesUnsplashBank Director just released the results of its 2014 Compensation Survey, sponsored by Meyer-Chatfield Compensation Advisors, and the results may reveal some good news for the banking industry, as evidenced by two key trends:

Lending is fueling more executive hires than compliance or risk, with boards focusing more time on loans. Loan officers are in strong demand at banks of all sizes, with more banks citing growth than regulations as the driving force behind change at the executive level. 

Bank boards are earning more. After getting their regulatory ducks in a row, a renewed focus on profitability may have translated into increased pay and benefits for bank directors. With median fees set at $750 per board meeting and median annual retainers at $20,000, bank directors are seeing a modest income for their service. However, the view isn’t as rosy for small banks: Almost half of boards at banks with less than $500 million in assets haven’t increased pay since at least 2010, and director pay is significantly lower at these institutions.

You’ll find the complete results to the survey, including median pay data for CEOs and boards, HERE.

Infograph06162014_Comp2014

More Power to the Consumer

Do you know how your customer base wants to interact with your bank?

Yesterday I attended the Bankerstuff webinar, “Branch Transformation: Positioning Your Branch Network for the Future”. Chris Gill, Jim Flannery, and Jason Wolf of Diebold Branch Transformation Advisory Services presented some fascinating information on consumer trends.

Consumer interactions are changing. Teller transactions should decline, and ATM transactions should remain flat, by 2015. Growth will be found in online and mobile transactions, with mobile growing from 5 billion transactions in 2010 to roughly 18 billion by 2015. Additionally, consumer expectations are shifting as they interact with retailers in a variety of industries. What can you learn from retailers? How do your customers interact with you – and how do they want to interact with you?

Consumers have a lot of choice. Within the banking industry we tend to focus on the fact that the number of banks is declining, so there’s not a lot of thought put to the fact that consumers have literally thousands of banks to choose from – and that doesn’t even include the “non-bank” financial products on the market, like Bluebird. Diebold Branch Transformation Advisory Services found that 64% of consumers select a financial services provider based on the brand’s reputation. How are you strengthening your brand?

The branch isn’t dead.

  • 67% of consumers still prefer to go to the branch to make a deposit.
  • 53% prefer the branch for problem resolution.
  • 73% want to open an account, and 67% want to apply for a loan, in a branch.

The trend in the industry – the call for branch transformation – tends to focus on having a more specialized staff, with a shift in the branch from a transactional center to a service & sales hub. Banks may have to guide those consumers that still want to use the branch for transactional matters, like deposits, in order to create a more profitable branch system. Offering the right mix of branch, mobile, and online banking will help lead these consumers to choices that could be more convenient and better meet their needs – and help the branch become more streamlined and profitable.

Keep an eye on the young ‘uns. Gen Y’s and Millenials will hold the most spending power by 2017, and will conduct 40% of transactions. While only 33% of consumers consider mobile banking important when choosing a financial provide, 49% of Gen Y consumers, and 39% of Gen Z, do. But don’t discount the branch: 56% of Gen Z and 58% of Gen Y still consider the number and location of branches when choosing a bank. Where will these customers transact with you? Where will the relationship be? Are you offering the right mix of web, mobile, and branch?

—-

PwC Financial Services Managing Director, Nate Fisher, highlights how banks can align their pricing structure by using data from customer preferences.

Mike Branton of StrategyCorps shares how to put the retail back in retail checking.

Mobile Can’t Stand Alone

Earlier this month I interviewed the team at Reliant Bank, for an article that will post Monday on BankDirector.com. The piece is a look inside the late summer release of the community bank’s mobile app, but something I couldn’t include in the story was the other efforts the bank is making to achieve growth in a tough economy. Is a mobile app increasingly becoming a consumer expectation? You betcha. But a mobile app alone won’t generate growth. What else is your bank offering its customers?

Do your customers feel rewarded?

If community banking is largely about relationships, do your customers feel the love? Reliant Bank, a newer community bank in an affluent community, offers rewards checking – not exactly novel, but something that Brian Shaw, chief retail and deposit officer, says has resulted in significant growth of the bank’s client base. Customers earn interest for doing things like using their debit card ten times a month, using online bill pay for transactions, and using online banking. Pretty basic stuff that also encourages their customer base to do more online (which probably saves Reliant money too).

Reliant also waves ATM fees – an important thing for a community bank that can’t be on every corner.

Are you reaching out to current – and future – customers?

If you’ve visited this blog before, you know I’m a big fan of financial literacy. As part of their financial literacy program, Reliant offers a popular, high-interest child’s savings account. Reliant has been able to talk to kids in the schools, and the kids are rewarded for saving with $25 from the bank (or a giftcard). Kids are taught to save – and rewarded for it – with the help of Reliant Bank.

Reliant Bank is also active on Facebook, using the channel to notify customers of new programs (like mobile banking) and for community outreach. If you take a look at their page, most of their posts over the past week are about community events, like a bake sale, customer appreciation days, and seminars available to the public.

What does your bank offer that stands out?

Reliant Bank offers a Groupon-like ‘Raving Fan’ program, connecting Reliant’s business clients to retail customers.

The ‘Raving Fan’ program features local businesses, like area restaurants. Reliant’s retail clients appreciate the discounts to local businesses, while their business clients appreciate the free advertising and connection to consumers.

I love hearing stories of banks that are doing something different. Do you know of a retail bank doing something a little different? Maybe a unique branch concept, or a branding standout? Comment below, or email me at emccormick[at]bankdirector.com.

Update: The article “Reliant on Mobile”, detailing Reliant Bank’s summer release of their mobile app, is now available.

Bluebird of (Un)Happiness?

So, the big news last week: after years of attempts, Walmart finally got into the banking business.

For those of you catching up, big-box retailer Walmart has teamed with American Express to offer what essentially boils down to a really fancy prepaid debit card.

Daniel Eckert, VP of Financial Services for Walmart, states that customers are simply tired of fees, or at least the lack of transparency surrounding them, claiming that “Bluebird solves this problem and we believe it’s the best product on the market to help customers affordably manage their everyday finances.”

Are bankers concerned? They should be, since Walmart has a long track record of putting businesses out of business, and particularly if they want to reach that underbanked population that relies on products liked prepaid debit cards. And this isn’t your standard prepaid card, oh no. It’s gone mobile y’all.

So what does Bluebird offer that bankers can learn from?

Bluebird is easy for consumers to understand.
No minimum balance. No fees. No overdrafts – once you’ve spent what’s on the card, it’s gone. American Express plans to generate revenue from the card via processing fees.

Accessibility.
Customers can use the card wherever American Express is accepted, as well as at a network of 22,000 ATMs. It also includes a digital wallet with P2P payments via AMEX’s Serve platform. You can also use it for electronic bill payment.

Want to pass some money to the kids? Busy moms can control sub accounts for family members. Prepaid cards are growing in use among the young. Not only can parents use them to control a child’s spending, but the cards (particularly one that you can integrate with your phone, like Bluebird) appeal to tech-savvy youngsters.

Money can be added several ways. Aside from the expected direct deposit method, Bluebird’s mobile app offers RDC – or you can take cash to your local Walmart.

It’s more than just banking.
Everything that’s standard with an American Express card – fraud protection, roadside assistance, and more – is available with Bluebird.

Of course, Bluebird isn’t FDIC insured. But for the underbanked, that probably won’t matter.


Insights into the Prepaid Card Market from The Financial Brand.

Gauging consumer sentiment via social media – a chance for bank marketers to learn more about their customer.

Should the big banks be broken up?

Everyone else thinks housing is turning around – but not Citigroup.

Think “Brand” New

Who are the great brand builders in banking? Really, I want to know. I’ve been asking that question lately, to little response. Does this lack of response affirm that community banks have a branding problem? If community banks  plan to grow, brand-building is crucial to growing those deposits. For paper towels, sure, I’ll trust generic – but for my mortgage and checking account, I want to know the institution I’ve entrusted with my financial future.

When it comes to brand-building, I can’t help but wonder if, among community banks, so-called younger banks (say, 10 years or younger) have a slight leg up on their staid half-century-old-or-more brethren. Younger banks – perhaps because they’re scrappy, perhaps because they’re working a little harder against the established competition to gain that market position – always seem to have their marketing & branding ducks in a row. Brand builders know who they are, and know how they differ from the competition. Out of the gate the younger banks have to look at how to differentiate from the rest of the area, many times taking advantage of technology as an efficient and cheap way to expand their reach.

Of course, younger banks have their challenges, but established banks can learn from these scrappy branders. Take a hard look at your brand – are you ready for growth, or are you OK with stagnation?

What’s in a name?
Does your bank name reflect who you are? Is it unique? Would your bank benefit from a new name? While Ally Bank was forced to change their name (due to GM’s bankruptcy back in 2009), the bank has done a stellar job of marketing through that name as an “Ally” to their customers.

How are you expanding your reach?
What are you offering your customers (and how are you attracting new ones)? Online and mobile are great ways to expand your reach – you don’t need to need to have a branch on every corner.

Not ready to take that tech step yet? Paducah Bank of Paducah, Kentucky invites its customers to “Get Wowed!”.  Aside from the usual involvement in the community, Paducah Bank has an ice cream truck for use by businesses, churches, schools and other organizations that bank with Paducah Bank. They’ve also published Wow! magazine (originally Expressions) since 2003, highlighting not only staff but customers as well.

One other thing: ever notice that all the banks that are getting “brand buzz” are heavily engaged in social media?
—-
Will mobile payments create the most significant revenue opportunities of the decade for financial institutions? Free video from PwC.

Speaking of rebranding: How Ally Bank gets social media right.