New Checking Plans Emerge in Response to Reg E

Already experiencing loss of fee income due to lower transactions and lower OD/NSF fees resulting from higher balances, banks are beginning to develop and introduce new checking products that can supplement these lost revenues.

In place of traditional free checking accounts are value-based accounts that allow customers to customize their account for a fee. Features such as identity theft, rewards and even enhanced OD/NSF protection can be selected from a menu of enhancements that allow a bank to replace some of the fee income that already has been lost or will be lost in response to Reg E.

One of the first to build a new array of checking accounts was BBVA Compass which introduced Build to Order Checking more than two years ago.
With a foundation account that features online banking and bill payment, customers can select from a list of additional features for $2 a month. These range from double reward points or cash back on transactions to a free OD waiver, free foreign ATM transactions or interest on the acccount. Customers can even change the features they prefer as their checking behavior changes. According to representatives from the bank, this account represents approximately 80% of the new accounts opened. A few months ago, BBVA Compass expanded their product line to include a small business version of the Build to Order Checking.

Another interesting alternative offered by some banks is an account with a line of credit attached to cover any overdrafts on the account. Not necessarily new to the banking world, some of these accounts with a line of credit are regulated by Reg Z as a credit product as opposed to Reg E, which covers electronic payments.

Finally, there are some banks that are developing a much stronger online checking product with debit transactions and online bill payment requirements while some banks are linking checking accounts with savings accounts to enhance relationship depth and profitability.

It is clear that we are seeing a new wave of product innovation in response to market conditions and the upcoming new transaction regulations. I will continue to share new ideas as they are introduced.

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.

Credit Card DM Volume Finally Rises

For the first time in three years, credit card-related direct mail volume increased during last year's fourth quarter according to research recently released from Mintel Corporation.

According to the research, while the volume of credit card direct mail in 2009 (less than 2 billion pieces) was 66% less than in 2008 and far less than the annual level of 7 billion a year experienced from 2004-2007, there was an increase of 47% during the fourth quarter of last year, compared to the previous quarter. Contributing to this increase, Chase increased their credit card mailings by the largest amount – 87% over the same period in 2008. In addition, US Bank's credit card mailings were up 64% over the same period of time, according to the study.


Unlike in the past, more than a third of credit card offers sent in 2009 included an annual fee (compared to one-fifth in 2008). While most banks are still working hard to assist customers with credit challenges in the mortgage and home equity areas, this trend in credit card mailings could be reflective of a view by some banks that the economic recovery could be beginning.

New York Times Attacks Chase Bank's First Reg E Communication

Chase Bank has already begun communication around Regulation E, and the New York Times (and more than 50 additional media outlets) are reacting quickly with a review of their direct marketing testing in an article titled, "Banks Apply Pressure to Keep Fees Rolling In". The article made special note of the part of the Chase mailing that stated, “Your debit card may not work the same way anymore, even if you just made a deposit. Unless we hear from you.” According to the NYT, the mailing continues to warn (in big red type), “If you don’t contact us, your everyday debit card transactions that overdraw your account will not be authorized after August 15, 2010 — even in an emergency,” with 'even in an emergency' underlined. Additional toned down versions of communication are also being tested by Chase, including a postcard that simply asks customers to be ready for future ways to say yes to debit card overdraft coverage.


As expected, the article positions the mail in a somewhat biased manner as the first in a series of heavy handed customer communications from banks across the country to maintain the high level of fee income currently generated. While the article references many industry marketing experts, most are quoted around how they are helping banks get customers to opt-in as opposed to referencing the experts who have done research around why consumers do not want OD coverage to cease.

From this initial outcry, it is apparent that banks will need to be careful as to the way they balance the communication of education around Regulation E with the desire for the most impacted households to continue to be covered. The New York Times article also illustrates the pressure our industry will feel in the coming months around the fees we charge for these services.

Segment Your Customer Base For Reg E Communications

The recent changes to Reg. E, impacting how financial institutions can levy fees for overdrafts caused by one time debit card or ATM transaction, have created a period of both challenge and opportunity for financial institutions. Due to the almost certain negative impact on a bank’s fee revenue and potential customer confusion about this new regulation, it is important to be able to effectively and efficiently implement these new requirements, maximizing account holder opt-in responses while providing a positive customer experience.

In this month's ABA Bank Marketing Magazine, Robert Giltner from Velocity Solutions suggests that financial institutions should start their communications process with a mass mail and email campaign to all customers explaining the new regulation. While I agree that all customers should be provided a clear understanding of their options, I don't agree that an all encompassing direct mailing should be done from a cost perspective.

Every customer should not be treated the same. Research shows that while most customers do not like the fees associated with overdrafts, there is a percentage that rely on overdraft coverage to meet current expenses or avoid embarrassment caused by inadequate record-keeping. To achieve the highest possible opt-in response at the lowest possible cost, I believe a segmented and integrated communications process should be used, leveraging multiple communication and response channels and focusing resources where they will have the greatest impact.

Instead of treating all account holders the same, most financial institutions I have talked to will be communicating most aggressively to the 10-15% of the customers who have the highest incidence of overdrafts, connecting with those households that the FDIC found to be the highest users (and fee generators) in their 2008 Study of Bank Overdraft Programs.

Some firms are even trying to determine which owner on an account is responsible for the majority of the overdrafts. By using all available communication channels (direct mail, statement inserts, email, POS, phone, and branch level communication), banks are hoping to communicate the benefits of opting-in to the customer, thereby minimizing the fee income impact of the regulation while improving the customer experience. The majority of the customers who do not overdraft their accounts will be more efficiently reached using a series of statement inserts, statement messages, branch level POS, ATM messaging, email, etc as opposed to postal mail.

I believe the most difficult challenge may be after the regulation takes effect in August, when customers who were not frequent overdrafters experience their first rejected ATM transaction or debit card purchase.

Reg E Provides Opportunity for Enhanced Relationships

While many banks initially viewed the primary objective of Reg E communication as the recapture of potentially lost fee income, many banks are now positioning their Reg E communication around expanded overdraft options including linked accounts, checking reserve lines of credit and even electronic alerts. While the 12-18% of a bank's accounts that have had overdrafts in the past 12-24 months may still receive messaging primarily focused around opting-in, segmentation strategies will allow banks to reinforce the benefits of alternative overdraft protection to the roughly 80% of the households that do not generate revenues from fees or from higher balance spreads.

The benefit of communicating to a broader audience with alternative options is that the linking of accounts or the opening of a reserve line of credit can extend the life of a checking customer relationship by 2-3 years, thereby eliminating the replacement cost of the customer which can be between $200-$250 based on industry research. The value of this extended relationship far outweighs the potential for fee income for the mass market customer.

In addition, with media attention on Reg E, there is the opportunity to leverage this coverage and enhance the customer experience by educating the mass majority about overdraft coverage options available.

Free Checking Obituary

Seeing that a lot of industry writers seem to be already announcing the death of Free Checking as a likely outcome of Reg E, I thought it would be appropriate to write an obituary for this product that saw such an active and successful life.

While many may claim to be the father of this service, paternity tests will most likely point to Ralph Haberfeld as the individual who most nurtured this service during the formative years and who was the strongest proponent of the benefits of the fee income associated with Free Checking. Ten years ago, when some banks (and consultants) began "pushing" free checking, there was concern about losing the meaningful income of monthly fees associated with traditional checking accounts.


Well, here we are, ten years later, having the same concerns about NSF/OD fees. These fees, that grew faster than the growth of checking accounts, became the prime fee income driver of well over 60% of our industry in this past decade. Ever since the introduction of these fees, banks have found ways to optimize the opportunity with strategies such as 'large to small' check presentment order.

The Fed said it focused on ATM and debit card transactions for Reg E because these have been "a key driver behind the growth in the volume and cost of overdraft fees" (41% of NSF transactions). Finally, consumers and regulators both balked, which is, in part, why we're facing increased scrutiny and regulation.

So, is Free Checking really dead? Free Checking coupled with overdraft protection is a product that is still highly valued by a small but important segment of customers who prefer to use overdrafts as a way to make ends meet at the end of the month. The outgrowth of Reg E will most likely be pseudo Free Checking that includes relationship stipulations (direct deposit), transaction requirements (minimum number of signature debits) and/or channel restrictions (no teller access). There may even be Free Checking as we know it today for those households that decide to opt-in.

In other words, rumors of the death of Free Checking may have been greatly exaggerated.

Why People Leave Their Bank

According to seventh annual household banking survey of 5,000 households conducted by Javelin Strategy and Research, it appears that fees and customer service continue to be the primary reasons a person leaves their bank (in addition to moving). What may be surprising to some, however, is that many millennial (ages 18-24) leave their bank due to the lack of ATMs while there is a growing percentage of households moving to a new bank to get mobile banking services. In fact, according to the study, 'ATM availability' edged out 'online features' as a factor that can predict customer attrition.


According to the study, there is one factor that does not predict whether a customer will leave a bank . . . errors by the financial institution did not move the needle as a reason why a customer attrites. This may be because banks have gotten much better over the years on not making as many errors in the first place and quickly addressing errors made as part of their focus on the customer experience.

Reg E Opt In Results Better Than Expected

As I travel across the country and talk to bankers about their early Reg E opt-in results, many are experiencing significantly higher than expected acceptance rates. In fact, some banks have indicated that they have achieved opt-in rates of as high as 85% or more from the highest impacted segments (those who have the highest use of overdraft coverage) and more than 95% from new customers who are opening a new account.

This level of acceptance should provide some comfort to financial institutions who have been concerned about a massive outflow of fee income as a result of Reg E beginning on August 15. Alternatively, this level of opt in sets the bar rather high for those organizations who have either not begun their Reg E communication or had thrown in the towel expecting customers to opt out on a massive basis.


In talking to those bankers who have achieved best-in-class results, here are the consistent strategies for success:

• Connect with customers using as many channels as possible - While response to statement inserts, direct mail and ATMs has not been as strong as the outbound telephone, 1:1 branch contact and email channel, the most successful banks have used all channels to provide a clear understanding of the regulation and to generate response.
• Use all outbound phone capabilities available - When a direct connection is made with a customer discussing the option of 'keeping their coverage the same' and 'having the assurance of no surprises', success rates have approached 90+%. Banks are using all of the resources possible to make these calls, including branch call nights, outsourced providers and leveraging inbound call resources.
• Expand communication beyond high opportunity segments - Instead of only connecting with high OD households, the most successful organizations are reaching out to all of their customers regarding opting in. While not having the same immediate financial impact, this communication emphasis will avoid potential negative customer experiences in the future.

As a result of the strong results achieved to date by those banks who started early, most of the financial institutions I have talked to have communication strategies that extend well beyond August 15. While the regulation takes effect on that date, most banks are going to continue mailing and call efforts until they have reached as many households as possible. Obviously, knowing that an 80+% acceptance rate is possible provides the financial incentive to not approach this effort casually.

Can Banks Find Ways to Make Deposits Work Harder?

As was mentioned in yesterday's American Banker article, In Cash Glut, Banks Try to Discourage New Deposits, many banks are currently in a somewhat disadvantageous position of having an abundance of deposits at a time of depressed loan demand. With loan to deposit ratios dropping from a median of more than 105% to less than 95% in less than two years for the 15 largest banks, the excess liquidity is costing banks money.

This inability to earn adequate interest on these deposits, combined with lower overdraft fees and the potential for lower interchange income has banks that I am working with scurrying for ways to make up the revenue shortfall.

Some banks are reconfiguring their checking account pricing either by adding fees for enhanced services such as privacy protection or rewards program participation or are reducing costs by offering new streamlined products that have limited service structures (like Bank of America's new online checking test).

And there is no end in sight to the inflow of deposits, as the confidence level of both consumers and businesses is weak enough to encourage a heavier savings mentality and with the equity markets too risky for many investors. Many banks are seeing inflows even with historically low interest rates being paid on deposits.

While loan demand will eventually pick up and banks will most likely find ways to recoup some of the lost fee income through new products or pricing structures, the best long-term solution is to change from a transaction support mentality to a customer relationship perspective. This holistic view encourages the acquisition of accounts with a greater long term potential, a stronger emphasis on engagement of these accounts to increase fee income and reduce attrition, and a focused effort on increasing share of wallet through needs based cross-selling.

At a time when margins are razor this, loan/deposit ratios are anemic and traditional fee income is being attacked by new regulations, it is imperative that we maximize the value of relationships at every step of the customer lifecycle. Historically, too much revenue has been 'left on the table' and we have been accepting of people who open new accounts simply for a premium (gamers), customers with dormant or low activity accounts, and single service customers. Going forward, we need to refocus our efforts on increasing our value proposition at the same time we reduce delivery costs and maximize relationship value.

Has your bank stopped their deposit acquisition efforts? Has there been an increased focus on the engagement and cross-sell processes at your bank? I would love to hear about your bank's strategy for dealing with the abundance of deposits that currently exists.

Post August 15 Reg E Strategy Provides Opportunity

For the past several months, every bank I visit has been working tirelessly to educate and encourage customers to opt-in for OD coverage in response to Reg E. Multi-channel communications, including direct mail, email, outbound phone, statement inserts, online banners and in-branch literature have all been focused on helping customers understand the potential impact of the regulation while hopefully limiting the lost fee revenue associated with the regulation.

While the regulation took effect on July 1 for new customers opening accounts, banks realize that the real impact will be felt after August 15, when transactions are denied and overdraft fees can no longer be collected from current customers who have not opted-in. So what are your post August 15 strategies for customers who have not opted-in?

First of all, realize that despite your best efforts to reach out to customers using all available channels, the majority of customers at your bank who have not opted-in will not understand the real life impact of a denied transaction at an ATM or merchant until it occurs. This will lead to a noticeable increase in customer complaints that will require proactive communication and the preparation of all customer facing employees.

When a transaction is declined, speed of follow-up communication will be key. If you have a valid email address of the customer impacted, it is best to use this channel to explain why the denial occurred and how it can be avoided in the future. An electronic link to your opt-in jump page will be a requisite. In addition, many banks will be reaching out to the impacted household with a phone call and even a letter with an opt-in form (or link) included. Other options to cover overdrafts should be communicated through these channels as well.

All front line employees also need to be prepared for irate customers who have had transactions denied. This preparation should at a minimum include:

• 
  
  A reinforcement of the basics of Regulation E
• 
  
  A series of anticipated complaints and questions that they will confront
• 
  
  Samples of all customer communications that were used during your opt-in campaign
• 
  
  Tools to facilitate the opting-in of the customer

In communicating with a complaining customer, it would be helpful if employees have access to approximate dates the customer may have received the communication and whether the customer opted-out (or if there was simply no response to the communication). There should also be additional FAQ brochures available to assist the customer in either changing their opt-in status or better understanding the impact of opting-out.

A customer who has a transaction denied poses a significant threat of attrition to your bank. Alternatively, this customer also provides a great opportunity to more fully explain that the regulation is universal with all banks and that there are alternatives going forward. This full disclosure can result in a 'saved' customer as well as significant retained fee income or even a cross-sell opportunity.

I would love to hear from you regarding your bank's post August 15 communication strategy. Are you going to use multiple channels to communicate? Is any bank going to have a strategy for households that reach a low balance threshold other than an overdraft?

Ten Bank Marketer Resolutions for 2011

It is the dawning of a new year in banking with many of the same challenges that we saw in 2010. Our industry continues to be viewed in a less than positive light from both the consumer and small business marketplace. 

The need for new customer growth and share of wallet expansion underpins the need for new sources of non-interest fee income at a time when regulations are dramatically reducing many traditional sources of revenue. In addition, the expansion of transaction and communication channels are changing the ways we interact with customers. 

These challenges are combined with an historically low interest rate environment and a credit environment where there is a massive amount of money to lend at a time when borrowing is more difficult and less desirable for many.

According to a national survey, the majority of personal resolutions in 2011 will revolve around saving money, losing weight, changing a bad habit and being closer to loved ones. Achieving any of these goals will take commitment, focus and changes in behavior. The same can be said for the resolutions I have developed from traveling the country over the past few months and being involved in a number of banks' annual planning efforts.

Here are areas where bank marketers believe they should focus in 2011:

1. Replace Lost Fee Income
Nothing has impacted banking over the past 12-18 months or will impact banking in 2011 more than the loss of fee income caused by the combination of the Card Act, Reg. E, and the upcoming changes from the Durbin Amendment. Almost all other resolutions for the upcoming year are built to address this need. The role of bank marketers in achieving fee income replacement goals will include checking product restructuring and new fee-based product development, increasing card transactions, improving customer engagement and better resource allocation for results.

2. Improve the Customer Experience
Another overarching resolution similar to the personal resolution of being closer to loved ones, bank marketers need to view all of their initiatives using the lens of understanding customer's needs, looking out for customers and rewarding their relationship. In an environment of heightened scrutiny of how we are treating customers, it will be more important than ever to market to consumers and small businesses on a more personalized basis from the day they open their first account and to build a reward structure that reinforces our commitment to relationship retention and growth.

3. Focus on Incremental New Customer Growth
A new balance between quantity and quality of new accounts needs to be struck. With the elimination of Free Checking occurring at most banks I visit, new acquisition models need to be developed that take into account the new checking account continuum. Instead of generating as many accounts as possible, banks will be focusing on the potential value of relationships including the likelihood of engagement and retention. A premium will be paid for those households that will immediately contribute to the bottom line.

4. Gather Email Addresses
When presenting at the BAI Retail Delivery Conference this Fall, it amazed me that there were more banks that collected cell phone numbers than collected email addresses at the new account desk. I suppose this phenomenon may be caused by the combination of more households using a cell phone as opposed to a land line for home communication and the relative ease of having a bank's IT team build another phone field into the new account process as opposed to an email field. But with other communication channel cost increasing and the improved results achieved when email is combined with more traditional channels, the importance of collecting (and using) email addresses has never been more important. Some banks are even considering stand alone marketing initiatives to address this need in 2011.

5. Reduce Customer Attrition
At a time when the cost of acquiring a new customer exceeds $200 and the annual income potential from a new relationship is at least as high, banks can ill afford to accept first year attrition rates of 30-40%. Multichannel onboarding programs that encourage alternative channel use, enhanced services (such as online bill pay, automatic savings, privacy products, etc.) and increased transactions need to be leveraged to stop the massive outflow of accounts that occur early in the customer's lifecycle. Improved tracking of relationship diminishment and win-back programs will also be used to achieve this resolution.

6. Expand Share of Wallet Through Lifestage Marketing
To compensate for the increased difficulty of generating high value relationships, there needs to be a much greater focus on organic growth, including behavior based cross-selling and lifestage marketing. While the movement from product centricity to being customer-centric has been discussed for decades, the removal of product silos is no longer an option for those banks who are seeking optimal resource allocation. More banks than ever are investing in improved models and strategies for relationship growth which will improve both engagement levels and retention in the long term. New service introductions such as privacy protection and enhanced personal financial management (PFM) tools will further allow for relationship deepening in 2011.

7. Don't Confuse Channel Economy with Channel Efficiency
No communication channel is 'free'. While email may seem like a far less costly channel to use for reaching customers, the lack of clear targeting and message development may prove costly as customers opt-out of future communications or simply ignore email messages. In my experience within the banking industry, email has not proven to be as good of a replacement for channels like direct mail as it has been a good supplement for improved results. In 2011, banks will develop much better processes for measuring the incremental impact of alternative channel communication and will continue to expand communication channels to include mobile, ATMs, social media, etc.

8. Leverage Social Media Personally and Professionally
Social media channels definitely can be beneficial or a distraction. Not many of us have time for reading about someone else's dinner plans or personal political opinions on Twitter, yet Twitter can be a great source of timely financial industry or marketing insight and competitive research delivered in a very compact format to the desktop for consumption at a time and place desired. Banks have also realized that social channels need to be used differently in financial services than with retail or other industry verticals. As opposed to trying to find 'friends' of our brands, social media has been used most effectively for customer service (Twitter) and for the promotion of broad based public relations initiatives (Chase's very popular Community Giving Campaign). The coming year will be a year of expanded testing of these new channels for the banking industry. Unlike the past, however, investment in these channels will need to generate a tangible ROI.

9. Deliver On The Mobile Banking Promise
The opportunity to be a 'first mover' in the mobile banking marketplace is quickly closing as more and more financial organizations are introducing products that work on multiple platforms. Bank of America has found that their market leading mobile banking customer base has significantly less attrition than a customer without a mobile banking application. USAA has continued to push the envelope on ways to use the mobile phone for financial convenience including remote deposit capture, receiving auto insurance quotes, requesting proof of insurance cards, etc. While building a concrete business case for mobile banking may be challenging, the marketplace will eventually demand this channel for P2P payments, geolocational applications and even low cost banking alternatives. Next year will also see the first wave of iPad and Android tablet applications that go beyond minor adjustments to current phone applications and leverage the enhanced capabilities of the popular tablet hardware.

10. Reconfigure The Branch Bank Model
The most challenging resolution for 2011 may be the testing and development of new branch banking models in light of the shift in channel use by the consumer. As branches are increasingly used primarily for account openings and small business servicing, the physical and operational configuration of branch networks will need to be evaluated. But what will be the best model for the future? While Citibank introduced a refined branch model late last year similar to an Apple Store, Huntington Bank went in an opposite direction by expanding their branch network and increasing hours and days of operation. With such a significant investment in real estate and human resources to support branch operations, each bank will be testing a variety of options in the next few years with multiple configurations most likely winning based on specific market dynamics.
I am sure there are several more important resolutions that can be added to my list, but there are already more than many of us can handle. This will definitely challenge the ability to focus and to achieve meaningful results especially in an environment of continuous change. Similar to personal resolutions, however, we all need to start as soon as possible and focus our attention on those resolutions that have the greatest impact and opportunity for success.

Let me hear where you will be focusing your efforts in 2011.

DDA Under Siege

As part of the planning committee for this year's BAI PaymentsConnect 2011, I would love to take credit for the great title of this program track, but I am not sure even the great minds at the BAI could have foreseen how apropos "DDA Under Siege" would be for bankers attending this year's conference that wraped up today in Phoenix.

If there was a unifying theme from the many sessions I participated in this week, it was that revenue lost from last year's Reg. E and this year's Durbin amendment can not be completely recaptured through repricing. Instead there needs to be a stronger focus on targeted customer acquisition, share of wallet growth strategies, retention, product innovation and cost containment. While everyone at the event seemed to be interested in what others were going to do around checking repricing, the energy was definitely focused on building a stronger platform for the future.

Sessions at the conference started with a review of the BAI/Finacle Innovation Imperative Customer Sentiment Study completed last Fall, which found that while there is still a ways to go in the customer's confidence in the economy and the banking industry in general, the view of bankers is more closely aligned with the consumer than in the past couple years. This uniformity of beliefs should assist as banks try to build messaging around their checking repricing and try to improve the customer experience. The study also found that the customer's perception of their bank being 'innovative' tends to correlate with satisfaction, product ownership and overall confidence in their bank.

Steve Mott from BetterBuyDesign followed the BAI research presentation with a very fast paced competitive overview of the payments industry, including a discussion around Google, PayPal and several potential payments platforms from the U.S. and even China. His message was that it will be up to the banks to leverage their customer relationships, distribution network and trust advantages to maintain some level of ownership of the consumer payments continuum. He emphasized, however, that the bank 'ownership' of payments is anything but guaranteed.

David Stewart, Senior Expert from McKinsey & Co. expanded on his recent BAI Banking Strategies article, emphasizing the continued importance of the debit card in the bank's payment product arsenal. In addition to providing financial metrics around the value of the debit customer and the real impact of repricing with net interest margin and other fees are included, he emphasized that trying to move mindshare or marketshare from debit to credit may be close to impossible in today's economic environment. David also shared the view of McKinsey that the potential for merchants to 'steer' payments from one payment vehicle or another was unlikely since doing so may actually cost the merchant more in discounts than could be retrieved in interchange savings.

David also left the attendees with the following strategies for trying to reposition the debit product in the future:

• Base debit strategy on new debit economics as opposed to the old economics
• Price products for competitive advantage
• Rationalize customers on the relationship level not just checking level
• Remember that the debit product is still sticky and builds customer engagement

Ending the morning sessions was a presentation by Hitachi Consulting around the findings of their semi-annual Consumer Payments Preference Study released last Fall. Some of the highlights included:

• The millennial generation provides a good opportunity for growing payment volume (especially around mobile)
• Ease of use and convenience drive payments behavior
• Debit is still the preferred payment method
• Credit for online purchases expected to increase
• Micropayments will continue to increase

Hitachi also emphasized that security continues to be a concern of consumers and is impacting the take up rate of mobile for payments.

The afternoon sessions revolved around ways that banks are trying to take back the payments franchise and extend relationships beyond just the DDA, with speakers from the Federal Reserve, Fiserv, Comerica, Fifth Third, Peak Performance Consulting, Novantas, TD Bank and Huntington Bank all providing unique viewpoints. It was clear during these sessions that the days of every bank having close to the same product set are over. While some of the larger banks may retain a Free Checking program (PNC's decision was referenced often during the conference), many are completely revamping their deposit product portfolios in a way that reinforces their brand and leverages their customer franchise. All of the banks were also bullish on credit products as well as the need to continue to capture increased share of wallet.

Hank Israel from Novantas stated that banks should segment their customers based on channel preference and will most likely price their product set in one of the following ways:

• Keeping Free Checking (hoping to make it up on volume)
• Fee for services (make it up within the checking product set)
• Product bundling (packaging product sets based on customer needs)
• Relationship pricing (drive value from relationship perspective)

A strong case was made for all banks to move more to a relationship focus that can optimize customer profitability and focus on customer needs.

Tuesday's sessions focused on how banks can go on offense through mobile banking, prepaid debit and mobile payments as well as how institutions can better defend their customer base through onboarding and rewards. Some of the key takeaways from the mobile banking session presented by FIS and M&I Bank included:

• Smart phones will be used by the majority of consumers by the end of 2012
• Mobile banking will surpass online banking by 2015
• Remote deposit capture is the 'power app' that engages the customer (more are needed)
• Mobile banking customers have a 53% lower attrition rate (Tower Group)
• Mobile banking customers decrease VRU use by 55%

The speaker from M&I Bank also emphasized the need for banks to build mobile banking critical mass quickly, with a focus on expanding the solution set coming after 'getting the basics done right'. He referenced that mobile banking customers at his bank had higher balances, increased check card usage, and a better bill pay adoption rate than similar customers without mobile banking.

Greg Schreacke from First Federal Savings Bank and Robert Gitner from Velocity Solutions discussed the market potential for prepaid debit and how a bank could build a checking product set around the card. Research was presented that showed the following characteristics of a prepaid debit user:

• 53% have a checking account
• 50%+ want a prepaid debit because of overdraft fees
• 47% want immediate access to funds
• 46% believe they can get better service at a retailer than a bank
• 43% have had a previous problem that limits their ability to open a traditional checking

In the mobile payment presentation done by Calvin Grimes from Fiserv and Emmett Higdon from Forrester Research, the impact that mobile banking has on the customer relationship was again emphasized. It was shown that not only is a customer who uses mobile banking 30% more likely to stay with a bank, but the customer is also 26% more likely to recommend their bank. The team emphasized that now was not the time for banks to stand on the mobile financial services sidelines, but instead should be searching for ways to move their mobile solutions from being simply informational to being more transactional.

While many banks are still trying to build the business case for mobile payments, the following benefits were shared:

• Customer acquisition and retention benefits
• Lower cost of servicing
• Revenue generation potential and revenue retention
• Competitive parity
• Better customer experience
• Deeper customer engagement

It was also mentioned that, while security and privacy concerns still remail around mobile payments, these concerns will eventually work in favor of traditional financial institutions since customers inherently trust banks more than companies like Google, Apple or even their phone company.

The presentation that I did in partnership with Bill Stamp from KeyBank focused on the market trends around onboarding as well as the basics on development and implementation of a successful onboarding program. Interestingly, when the attendees were informally polled as to their current onboarding programs, while the majority were doing something, less than half were using more than one communication channel, very few were leveraging three channels, and only one bank was communicating with their customers more than 5 times in the first 90 days. It was stressed that this lack of a focused and consistent onboarding process could hamper organization's objectives of improving customer engagement, increasing fee income and definitely hurt cross-sale and retention efforts.

Bill's presentation around KeyBank's onboarding program illustrated that developing and managing an onboarding initiative is an ongoing process where testing of offers, channels, and communication sequence and cadence is continuously needed. Bill also shared how an onboarding process can reinforce cross-selling done at the new account desk and the importance of reinforcing engagement with services before the cross-selling of other products.

To further reinforce the importance of engagement and retention in a highly competitive and revenue challenged marketplace, Tom Brooks from Regions Financial Corporation, Lynne Laube from Cardlytics, and Aaron McPherson from IDC Financial Insights showed how a highly innovative merchant-funded rewards program may be the answer for banks looking to move away from a 'reactive' interchange funded program to a 'proactive' program that could be bring higher value to the customer and even make money for a bank.

Lynne Laube discussed two macro trends in the banking industry that has paved the way for a merchant-funded program:

• Digitization of payments (where and how payments are made)
• How customers relate to banks (>50% have online banking with 7 visits a month to their online banking site)

The benefits of a program like Cardlytics offering shared by the panel included the ability to target actual transactions for incremental growth and engagement. The benefit to the customer is that offers will always be relevant, while the merchant benefits from only providing offers to people very likely to be interested in their services. Since the targeting potential is so strong, more valuable offers can be developed as opposed to when a merchant is discounting to the masses.

While the program at Regions is relatively new, the benefits included:

• No enrollment is required (all customers with online banking and electronic statements are included)
• Ease of value transfer (no coupons are needed since the customer can electronically 'activate' an offer and 'redeem' the offer simply by using their debit card)
• Immediate notification of earnings/rewards
• Rebates deposited directly into account
• Offers are targeted and relevant
• Integrated user experience
• Fully funded as opposed to being a contingent liability like with points programs

The success of this innovative rewards program was probably best illustrated when Lynne mentioned that Cardlytics is partnering with 2 of the top 5 banks already and expect their customer base to grow from 15M today to more than 60M by the end of the summer. For more information on Cardlytics, read my earlier blog on the company done last year.

Without a doubt, this was a well-timed conference covering a broad range of topics on the front burner of many banks. On each attendee 'to do' list upon leaving, I am sure there will be a review of any pricing changes not yet implemented, a strong focus on ways to engage and retain new and existing customers we can ill afford to lose, and a much more accelerated movement to future payment products like mobile and even P2P.

I would love to hear from other attendees about their experience and takeaways.

Minimizing the Impact of 'Unintended Consequences'

At the BAI Retail Delivery Conference in Boston in November of 2009, the overriding theme from major bank leaders, industry pundits and vendor partners to the financial services industry was the risk of 'unintended consequences' as a result of the yet to be implemented Reg E. There was the belief that, while the government was trying to protect people from excessive fees from overdrafts, there would be many consumers who would be negatively impacted as debit card transactions or ATM withdrawals were rejected. Based on a recent straw poll of many of the bankers I work with across the country, some of the same people the regulation was intended to 'protect' have been negatively impacted the most.

It has been almost 9 months since the implementation of Reg E, and the government has again created legislation that will have unintended consequences for a majority of bank customers. The still debated, but most likely to be implemented, Durbin Amendment to the Dodd-Frank banking bill will significantly lower the interchange income that banks can earn from debit transactions. In fact, many believe the impact could cause a reduction of 60-80% or more to this important non-interest income source.

Banks can't absorb this massive of a reduction in revenue without passing the costs on to the consumer in some form. On January 20 in an interview with the Los Angeles Times, Wells Fargo's Chairman, John Stumpf stated that new fees will need to replace those that are being eliminated. "We've begun to implement some changes," Stumpf said, apparently referring to a $5 monthly checking fee, imposed last July on new customers. "And there are more to come."


On the following day, Richard Davis from U.S. Bancorp echoed the sentiments of Wells Fargo, stating that they will soon will eliminate free checking and debit card rewards without strings attached, like minimum balances. At the same time, Chase and Bank of America are testing fees including a monthly fee for having a debit card, increased monthly checking fees and the elimination of rewards programs and free ATM usage.
So, how can bank marketers soften the impact of these fee adjustments and position new checking options in a more positive light?

• Know Your Customers: Take time to evaluate your customer database and understand which accounts are profitable to your bank and which are under water. But don't stop there. You also need to understand the customer's entire relationship to evaluate the potential impact of your repricing decisions.
• Look Out for Your Customers: Instead of converting a whole class of customers to a new pricing structure, you should determine which customers are no longer in the best account type based on balances, activity, relationship, etc. Over the past ten years, almost every customer was encouraged to open a Free Checking. Many of these customers will hold balances or conduct business in a manner that could retain their free status. For those who don't, provide clear guidance as to how they could retain a free or low cost alternative. Put yourself in the shoes of the customer and consult them as to the best way to bank with your institution.
• Communicate With Your Customer: In the past, most checking pricing changes were communicated using a statement insert. Since most banks will be implementing significant changes to their checking product portfolio, it is better to leverage the segmentation and targeting potential of more direct media such as direct mail, email and phone calls. These channels provide the opportunity to build custom messages for customers to guide them to the best product in your new continuum. In addition, leverage as many channels as possible to reinforce the best strategy for the customer going forward.
• Reward Your Customer: In almost every instance, there is the ability to structure your communication in a way that can reward positive customer behavior. While you may be eliminating the waiver of foreign ATM fees, can you reward the use of your ATMs? While you may be increasing the balances required to maintain minimal fees, can you reward the customer for selecting electronic statements? Finally, while you may be either charging for your rewards program going forward or eliminating the program for some categories of accounts, can you use points as a currency if the customer moves to a different category of account?

When I worked with a bank in Canada, we partnered with the bank to communicate significant checking account pricing changes on two different occasions. Each restructuring impacted the majority of the customer base. In both instances, we positioned the changes as a way to move many of the checking relationships into a better account for the customer and the bank. With clear and repeated communications, we not only increased balances by more than 10% overall, but retained more than 90% of the customers and minimized the number of customer service calls that needed to be handled.

How are you planning to communicate your changes to customers? Will there be unintended consequences from your communication? I'd love to hear from you.

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?

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.