Now's the Time to Build Retirement Dialogue With Your Customers

In yesterday's post, I discussed the significant deposit growth being experienced by major banks and the opportunities and risks that can be associated with an economic environment of uncertainty. An often overlooked opportunity for account acquisition and relationship growth is delivering on consumer's retirement needs.

Now is the best time to reach out to customers and prospects in your market area and position your institution as the safe and secure place to place their retirement assets. And with retirement assets approaching $20 trillion, the opportunity is significant.


According to a 2008 study conducted by BAI Research and Mercatus LLC there were five key ways to be successful in the retirement market: (1) Position your bank as the local retirement specialist, including retirement dialogue in all relationship building conversations and providing a varied and competitive product offering; (2) Provide online information and tools that allow the customer to manage their retirement planning in much the same way as is done by current 401K providers; (3) Demonstrate problem solving capabilities around helping customers diversify and provide the tools for decision making; (4) Deliver a positive branch customer experience that relates to the retirement customer from a knowledge and retirement focus perspective; (5) Provide competitive and transparent pricing which reinforces the trust a customer must feel to transfer retirement funds to your bank. A summary of the most important factors is illustrated on the attached link.

With most consumers still very leary of the equity markets and still in the process of reviewing their current 401K providers, there has never been a better time to build a proactive retirement saving strategy at your institution. Not only should this strategy be implemented in the prime contribution periods from January - April, but throughout the year as consumers continue to move funds to protect their retirement nest egg.

Banking on Social Sites Unlikely

According to a new research report by Forrester, Banking On Social Sites Is A Work In Progress, while social networking sites have a 30-day active population of more than 400 million users of which more than half visit on any given day, that love doesn't extend to banking through social networks. In fact, more than 70% of online households surveyed showed little or no interest in accessing their accounts through social sites like Facebook. Not surprisingly, the reasons for the lack of interest revolves around privacy and security concerns more than anything else.

So, while the majority of large financial institutions continue to look for more ways to leverage social networking's ability to engage customers, resolve problems and ultimately build loyalty, the reach of these sites beyond stronger interactive communication remains to be seen. At the very least, consumers will need the stronger security guarantees, authentication and more that is already afforded customer who use online and mobile banking.

New Smart Card Geared to Convenience and Safety Conscious Consumers

As banks continue to innovate around the use and rewards structure of both debit and credit cards, the penetration of smart cards in the United States has lagged other countries. That may soon change, however, after Pittsburgh-based Dynamics, Inc. won the first prize ($1,000,000) 'DemoGod' award at this week's Demo tech start-up conference in Silicon Valley.

Leveraging a programmable magnetic stripe that can be changed at any time (but still able to be read at today's magnetic stripe POS readers) the MultiAccount card can carry different card accounts on one piece of razor thin plastic.

This could be a debit card and credit card, personal and business card, etc. Push a button on the card, and an integrated light source highlights the account being accessed. A card with a light source alone provides a WOW factor for the user.

For those users interested in an expanded level of security, another card (called Hidden) presented at the Demo conference by 31 year old Dynamics Chief Executive Jeff Mullen only shows an abbreviated account number on the card. To get a complete account number to appear, the user needs to type their PIN on a set of five buttons on the surface of the card. When the correct PIN is entered, the electronic stripe is then populated with the appropriate magnetic information so that it can be used in today's readers. In other words, the card is of no use to a thief unless they have the integrated PIN.

Both cards are thinner than traditional cards in the marketplace today, yet still have a small built in microprocessor with integrated memory which is powered by a battery with a three year life. Oh yeah, and the cards are both scratch resistant and waterproof, which Mullen displayed as part of his 5 minute presentation demonstrating the card at the Demo conference.

This new card technology is definitely coming at an opportune time, as bank marketers are looking for new ways improve engagement by stimulating the use of card products and the participation in rewards programs. With the Durbin Amendment set to impact interchange income for debit card transactions next year, bank marketers need to find ways to get top of wallet placement in the consumer's mind and through usage. The benefit of combining multiple card accounts on a single piece of plastic alone could have major financial benefits for banks. This type of product could also impact retention of relationships, further impacting the customer lifetime value.

As the planning process is well under way at many banks, an introduction of this type of product (which has been in a stealth test mode for an extended period in the marketplace by Dynamics) could provide the foundation for a new payments strategy. With behavioral segmentation already built into the product's benefit continuum, this could be the answer to many concerns of card product managers and bank marketers alike in 2011.

Update (October 5, 2010): It was announced yesterday that Citibank will be the first bank in the country to leverage the Dynamics, Inc. card programmable magnetic stripe, embedded battery and chip as well as integrated buttons on a payment vehicle in a well publicized pilot. The Citi 2G Credit Card will allow consumers to make a choice whether to pay for a purchase using a traditional credit account or to utilize points for the purchase.

“People don’t typically think of credit cards as an innovative product, but we are excited to be the first issuer to pilot these advanced technologies and additional choice at checkout through the ‘next generation’ of credit cards,” said Terry O’Neil, executive VP of Citi’s North America credit card division. “With Citi’s latest feature, customers now get a credit card that better fits their lifestyle and needs, putting more options right in their hands.”

At a cost of about three times the cost of traditional plastic cards, it will be interesting to see if other banks get on the bandwagon and develop innovative and segmented products based on this technology.

Optimistic Forecast for FinTech Providers

A new report, being released today by the William Mills Agency, reveals that spending by financial institutions is recovering as the economy and industry rebounds. The tenth annual ‘Bankers as Buyers’ study shares indepth insights and research from more than thirty individuals and organizations regarding what technology, services and solutions banks and credit unions are expected to invest in 2013. 

This report is a compilation of viewpoints from many of the most influential research and fintech support institutions in the country and is available as a free download here.

In this year's report, IDC Financial Insights projected that technology spending is expected to increase to $57 billion, with much of the spending expected to occur in the ‘second tier’ of financial institutions ($1 billion - $10 billion) as opposed to the largest banks.

"As technology continues to be central to customer interactions and an improved customer experience, we are constantly reminded that technology in not a banking department, but is everywhere . . . including in the hands of consumers”, states Scott Mills, president of the Williams Mills Agency. “Demographic and behavioral changes, combined with changing technology preferences and the need for improved trust and brand loyalty will force banks and credit unions to evaluate the role of technology in the delivery of services", adds Mills.

Additional findings of this year’s ‘Bankers as Buyers’ report include:

• A total of 14,210 financial institutions make up today’s depository landscape, which is down 3.7 percent from 2011 according to the FDIC and CUNA.
• While much of the focus on payments technology is on mobile, organizations are also looking at improvements in online payments, ACH, P2P and prepaid cards to attract customers.
• Mobile banking gained a stronger foothold in 2012, as FIs strived to meet increasing consumer demand for anytime, anywhere financial services.
• Consumer mobile banking is now used by 33% of mobile consumers according to Javelin Strategy and Research.
• According to the 2012 KPMG Community Banking Outlook Survey, 47 percent of responding institutions identified regulatory and legislative pressures as the most significant barrier to growth over the upcoming year.
• Raymond James predicts North American IT spending will continue to grow at a relatively modest three-year compound annual growth rate of 3.1 percent.
• Branch/teller capture will have a 98 percent expected adoption rate in 2013 and 2014 according to Celent.
• Cloud computing has had a rapid acceptance, with many banks inquiring about alternative cloud strategies, according to Dan Holt, president of CSI.
• Being able to leverage ‘big data’ will be increasingly important to profitably serving both retail and small business customers according to Jim Swift, CEO of Cortera.
• Mobile Remote Deposit Capture (RDC) is being considered by 80 percent of financial institutions according to Celent.

Spending Outlook

As mentioned above, IDC Financial Insights expects North American financial institution technology spending to increase to $57 billion, with the largest financial organizations seeing slower growth rates than their smaller counterparts. This trend is expected to continue in 2014 and 2015 as shown below.

This post is recapping some of the spending highlights from the 'Bankers as Buyers' report, including those in the areas of mobile banking, compliance and security and payments. Additional areas of spending covered in the 'Bankers as Buyers' study in significant detail include:

• Analytics/Big Data
• Small Business
• Branch Technology
• Cloud Computing
• Community Banking
• Loyalty Programs
• Personal Financial Management (PFM)

Mobile Spending

This year's report emphasizes that, with the penetration and use of smartphones and tablets continuing to increase, mobile banking technology is expected to impact all aspects of technology spending in financial services in the coming years. “Mobile payments are a major driver behind mobile banking and a potential customer retention and revenue tool for financial institutions”, states Richard Crone, founder of Crone Consulting, LLC.

Ron Shevlin, senior analyst from Aite Group agrees saying, “Aite Group anticipates that mobile banking users will triple between 2012 and 2016 in the U.S.” He continues, “Tablets will become financial management devices, and smartphones will become financial transaction devices. FIs need to invest accordingly.”

Many others in the ‘Bankers as Buyers’ study point to tablet growth as being the foundation for the next phase of mobile investment by banks and credit unions. With growth of this device category far surpassing that of smartphones, financial institutions are currently behind the eight ball, lagging in both offerings and functionality. In fact, some mid-tier banks still do not offer a customized tablet application for tablets, deferring to a reconstructed mobile or web application.

According to David Peterson, executive vice president for Q2 in Austin, TX and a report contributor, “The key for financial institution executives is to understand and leverage the tablet, smartphone and other devices that customers use, and present them with the right capabilities for the right device.”

Additional areas of technology investment for mobile in 2013 will be focused on remote deposit capture capabilities (beyond check capture), improved mobile alert functionality and voice recognition.

Perhaps reflected in the increased technology investment by mid-tier financial institutions, many community banks have lagged their larger counterparts and credit unions in mobile banking offerings. With mobile banking becoming the primary way many consumers interact with their bank on a transactional basis, hesitation to respond to consumer behavioral trends could have a significant impact on customer acquisition growth in the future.

Compliance and Security

Compliance and security costs continue to put a strain on financial institutions of all sizes according to the study. Beyond the extensive investment in human resources required to keep abreast of requirements, data management tools are being used to comply with new regulations and to monitor all areas of the organization for potential security breaches.

Some institutions are adjusting to the new regulatory reality, however, with some costs seemingly being reduced over time. According to report contributor Jimmy Sawyers from Sawyers & Jacobs, LLC, “Some institutions are getting innovative (around the cost of compliance). They are starting to do more with less and adapting to the new playing field.”

Unfortunately, the same can’t be said for security costs, which are increasing and a very high priority for all institutions given the growing threat from a highly creative fraud community. All is not bad news on the security front, however, since the report indicates a direct correlation between superior security and loyalty according to Javelin Research. In other words, the investment in security may have a consumer payback.

Payments Technology

While the majority of the focus around payments technology is on mobile, financial institutions are also looking to improve online payments, ACH, P2P and are spending funds to develop prepaid offerings according to this year’s report.

“The challenge banks have is in trying to better understand how people will transact in the future”, said David Wilkes, CEO of Fuze Networks and one of the report’s contributors. “The reality is that there is really no such thing as an ‘unbanked’ consumer.” While some may interact with their financial provider in a non-traditional manner, there is some form of payments system supporting virtually every consumer.

While many theories of how the payments marketplace will finally settle exist, the competition (and the need to keep up with new entrants and innovation from traditional players) will require significant investment to support the payments process.

“Payments will continue to evolve.” says John Balose from ORCC. “Fifteen years ago, few people were using online payments. Mobile solutions have changed everything. It’s a very fractured market.” According to the report, there are nearly 50 digital wallet providers currently, with more expecting to emerge.

It is clear from the report that financial organizations may want to opt for playing a game of ‘payments roulette’, placing smaller bets on a variety of potential outcomes, hoping to hit the jackpot when the competitive dust settles. One thing is clear, however. Financial institutions should not sit on the sideline and wait for a winner. By then it may be too late.

Additional Insights

Beyond the insights collected for the development of this year’s ‘Bankers as Buyers’ report, Williams Mills provides four feature articles from some of the best minds in the FI space. The titles of these must-read articles and are included in the free download:

‘U.S. Banks and Core Replacement’ - Jeanne Capachin

‘Technology in Wealth Management: Opportunity or Threat?’ – JP Nicols

‘Mobile Payments Offer a Variety of Payment Opportunities’ – Richard Crone and Heidi Liebenguth

‘Top Ten Trends Impacting Bank Technology for 2013’ – Jimmy Sawyers

FREE Downloadable Report

Bankers as Buyers 2013: William Mills Agency (January, 2013) 

Contributors to Report

Aite Group, American Banker, BankInfoSecurity, Banno, Jeanne Capchin, CARDFREE, Clelent, Clientific, Comscore, Cortera, CSI, Credit Union National Association, Crone Consulting, Finovate Group, Federal Deposit Insurance Corporation, Federal Reserve Bank of Cleveland, First Annapolis Consultion, Fuze Networks, IDC Financial Insights, Jack Henry Banking, Javelin Strategy and Research, KPMG, Mercator Advisory Group, MoneyDesktop, Morgan Stanley, Online Banking Report, ORCC, ProfitStars, Q2 Banking, Raymond James, Sawyers & Jacobs, Symitar, Wells Fargo and Zions Bank.

Top 10 Mobile Banking Mistakes

There’s plenty of great information out there for consumers about the dos and don’ts of mobile banking—password protect your device, use caution with what apps you install on your phone—but there are also plenty of mistakes financial institutions make when it comes to mobile. 

Let’s look at what may be considered to be the top ten.

By Danny Tang, Worldwide Channel Transformation / Front Office Solutions Leader, IBM Global Banking & Financial Mkts

10. Not going for 100% mobile banking adoption  The adoption rate for mobile banking should be 100% of those customers who have a mobile phone. And yet, many banks choose to limit themselves by requiring users to activate in online banking or enroll at a local branch. This reflects the fact that mobile is still an afterthought for many banks.

9. No Balance Between Security vs. Usability  Can’t we have both? It’s remarkably easy to lose your mobile phone, which makes it especially important for banks to safeguard user information. While banks should absolutely secure mobile banking beyond just ID and password, it shouldn’t be impossible to use, either. Does it really make sense to ask users who their favorite teacher was in elementary school, or require everyone to carry another device just to log in to mobile banking on their smartphone? Risk-based authentication, geolocation, biometrics—these and many other technologies are available to help banks find the right balance between security and ease-of-use.

8. Cutting Corners in Education  Should we assume that all smartphone users are smart? This is especially true for security. No technology today (that I know of) can prevent a user from writing down his/her ID and password on a paper attached to the back of the phone. An educated user is your best defense against fraud and loss of privacy. If you teach customers the value of security features—and how to use them—they’ll be happy to see those authentication layers instead of cursing at them.

7. No Consistency in User Experience Across Platforms  Does your Android app look like it’s from a different planet than your iPhone app? People shift between platforms, and lack of consistency is confusing—and annoying. Banks should invest in a MEAP (mobile enterprise application platform) to help teams ensure a consistent user experience between environments. A MEAP such as IBM Worklight can enable write-once-deploy-across-many-platforms that both saves cost and improves user satisfaction.

6. The “X2 Button” Tablet App  If your iPad app strategy is to tell users to push the X2 button, you’re missing an opportunity to provide customers a richer banking experience. You’re also providing an interface that’s downright clunky. Tablets aren’t going anywhere soon, so don’t waste the screen real estate your clients have paid a premium for—invest in a tablet-friendly user experience with dedicated features such as spending analysis and retirement planning.

5. No Love for the Mobile Team  Is your mobile team stuck in a corner of basement? For many customers, mobile is how they most frequently interact with your bank. The mobile banking team deserves more love from bank execs. Mobile should be at the center of your channel strategy—and your planning meetings.

4. One App Fits All  Consider providing a unique app for each major customer segment (retail, mass affluent, small business, and so on). Different customer segments have different needs. Mass affluent clients appreciate more financial analysis, while small business clients would rather have mobile invoicing and collection. Don’t assume you can satisfy everyone with the same solution.

3. No Roadmap to ROI  Mobile shouldn’t just be a cost center. What’s your plan to profitability? In the interest of “getting something up and running,” many banks lose sight of the long view. When it’s done right, mobile banking can be a valuable sales and marketing tool that can build loyalty, cross-sell products and yes—generate revenue.

2. Me-Too Syndrome  One of the worst mistakes a bank can make when going mobile is adopting a “me-too” approach. When you outsource to a company that creates and hosts mobile banking for your competitors, you’ll end up with a mobile banking app that looks just like your competitors’—and one that provides zero differentiating value.

1. Not Realizing that Non-Banks are Eating Your Lunch  Non-banks such as Square and PayPal have been riding the mobile momentum for some time now. And Google, Apple, Walmart and others have their eyes on the revenues traditionally enjoyed by banks through mobile payment and wallet apps. Does your bank have a strategy for dealing with cross-industry competition and disintermediation? (If not, how well have you been sleeping these days?)

So, what other oversights have you seen in mobile banking lately? Share your own top mistakes—as well as best practices for success.

About the Author

Danny Tang leads the Customer Care and Insight (CC&I) Framework for IBM’s global banking organization. Prior to his current role as CC&I Framework Leader, Tang was on assignment to China between 2009 and 2011 as the Executive leading IBM Software Group’s Financial Services Industry Solutions team for the Greater China Group. Before that, he was IBM’s Worldwide Executive Consultant advising financial services firms around the world. 
Tang joined IBM via its acquisition of CrossWorlds Software, Inc., where he spent several years architecting EAI and B2B solutions. Prior to CrossWorlds, Tang worked for top consulting firms including Andersen Consulting (now Accenture).

Note: This post originally appear on 'Insights on Business'. This is probably the best post I have seen around what banks may be doing wrong in the mobile space. The post has been reprinted with permission from the author.