Zions Bank Continues to Improve Onboarding Process by Expanding Channels and Touches

Instead of simply sending a single letter to new account openers to thank them for their business, Zions Bank has expanded their onboarding program to include a 30 day 'engagement' mailing and a 60 day 'cross-sell' mailing. In addition, they utilize their centralized call center for follow-up and reach all new customers with email to reinforce the written communication. This integrated focus towards new customer communication has resulted in a significant reduction in new customer attrition and enhanced cross-sales of services.

CBA of Georgia to Host Webinar on Onboarding

On February 1, 2010 from 2:00-3:30, I will be conducting a webinar on how to develop or improve your new customer onboarding program. I will be sharing best-in-class examples and findings from close to four years of programs we have implemented with our bank partners. Look for details on the Community Bankers Association of Georgia web site and on this blog.

Growth in Deposits Presents Opportunities and Risks

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

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

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

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

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

Building Long-Term Deposits and Relationships Automatically

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

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

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

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

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

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

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

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

Five Steps to Improved Customer Engagement Through Email

According to Peter McCormick, co-founder of one-to-one communications firm ExactTarget, there are five steps for engaging customers via email.

1. Express Gratitude: According to McCormick, fewer than 50% of marketers send a welcoming email thanking a customer for accepting communication from a brand. This should be the first step after a customer provides their email address. This communication also sets the tone for future dialogue so this is a great time to include a coupon for expansion of the banking relationship and/or a research report or white paper for a B2B client.
2. Take a Genuine Interest: Let the customer tell you about their communication needs and interests to enable more relevant content delivery. A preference center can achieve this where a customer expresses what they want to know going forward.
3. Let Customers Talk and Share: Embed social network icons directly within your email that is sent so your customer can share offers and research with friends. In addition, invite customers to contribute to your bank's blog.
4. Know Your Brand Advocates: Reward those customers that respond to emails, contribute to blogs and share your offers. Expand the loyalty and engagement by inviting those customers who are brand advocates to special events where they can further discuss and share their experiences. Email provides the springboard to a much stronger social media strategy.
5.  Build a VIP Area: Create private subscriber-only access to social networking groups, events, and special resources that address the needs expressed in step 2. This heightened level of engagement not only rewards the customer for their loyalty and engagement, but also provides a source of insight not available through traditional channels.

There is no doubt banks are getting better at leveraging the power of email and social networks. The most progressive organizations are now beginning to differentiate their email communication based on customer engagement and benefiting from improved insight which can assist in future customer service and product development.

Effective Onboarding Begins with Good Insight

In 2003, the BAI released a research study entitled, 'The Ninety Day Window of Opportunity', where interviews, deposit statistics and segmentation models revealed that nearly 75% of all cross-sell opportunities and the vast majority of attrition occurred in the first 90 days of a new customer relationship. These findings continue to be verified in the marketplace, with expanded concern recently around the lack of funding, engagement and use of new products by these new customers.

More than ever, financial institutions need to begin the onboarding process by capturing an accurate and robust view of the customer which can be used across the organization to enhance the customer experience and expand the relationship with the bank. In short, to optimize the customer experience during the first critical months and year of the relationship from both the customer's and bank's perspective, you need a 360 degree view of the customer. With online account openings, this process becomes even more critical.


Unfortunately, with so many data entry points and so much emphasis on operation efficiency and regulatory requirements, the capture of many key elements of customer insight gets overlooked or is done inconsistently by the front line. Beyond address, birth date, gender and identification information, financial institutions need to begin to collect insight such as email addresses, primary decision maker on the account (it is often the female in the household even though we usually address correspondences to the male), the preferred channel of communication (which is often email), the reason for coming to the bank (move, dissatisfaction, previously unbanked) and what services they use elsewhere (the holy grail of insight). Of course, with more and more of the collection process occurring online, organizations are under increased pressure to validate this insight (especially the address).

With this insight, you are in a much better position to communicate with the new customer in a personalized and relevant manner, using the right channels to the best person in the household offering a service or solution that is geared to their needs. These communications should begin on day one and continue throughout the early stages of the customer relationship enhancing the customer experience and increasing loyalty and retention. Multiple channels should be utilized to improve effectiveness and measurement of all touches should occur to gauge the ROI of the process.

Ten Steps to Onboarding Success

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

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


These ten steps are:

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

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

Onboarding Communication - How Much is Too Much

As I discuss multichannel new customer onboarding program development with financial organizations, it doesn't take long before the client asks about how much communication is too much early in a new relationship.

Interestingly, according to our research at Harland Clarke as well as research from J.D. Power, the number of new products sold and the customer satisfaction ratings both increase as the number of contacts increase during the first 90 days. In fact, according to J.D. Power, the average number of accounts sold increases from less than 2.5 to more than 3 if the customer is communicated with 4-7 times or more. In addition, the satisfaction ratings increase by more than 10% if more connections are made with the customer who opened up a new account.


Unfortunately, there are still several institutions who do not have a robust communications sequence with customers who open a new account, which impacts new customer engagement, cross-sell potential, customer satisfaction and even retention. For those banks that effectively reach out multiple times using email, phone, and direct mail, the results are consistently better across the board.

One of the strongest onboarding programs I am aware of is at a regional bank in the west. Their robust onboarding process proactively takes control of the customer experience for the entire first 90 days, stressing engagement and by offering products and services that are best matched to the customer's needs. The process begins at the new account desk, where there is a selling mentality but also an emphasis on collecting key information that will assist in future communication with the customer. Email addresses are collected from as many as 85% of customers opening new accounts, which is significantly above industry averages and which allows the bank the leverage for multi-channel communication throughout the entire customer lifecycle.

An initial email that is delivered in the first two days of the new relationship discussing what the customer can expect from their bank in the upcoming months are to provide key contact information if there is a problem. This is followed by a branch personalized Thank You letter with a series of engagement service offers. Subsequent communication (beyond standard debit card mailings, etc.) include a welcome call on day 15, an engagement reinforcement letter and email on day 30, and a cross-sell direct mail and email communication based on next most likely product modeling on the 60th day of the relationship.

The bank has found that the ability to offer integrated, multi-channel communication is critical in their quest to achieve the best engagement and sales results and to reach the highest levels of customer satisfaction. Delivering early, relevant and persistent communication has help them improve retention by more than 5%, significantly increase engagement levels and improve both cross-selling and balance build efforts compared to their control group. They achieve these results by 'touching' the new account opener 6-8 times during the first 60 days and by using personalized jump pages to enhance the experience.

While the planning and development for this program was definitely more extensive than a single touch welcome program, the return on investment using all metrics validated the effort.

How many contacts does your bank use to onboard new customers? What channels do you use to reach and engage the customer?

Thinking Like Your Customer

Yesterday, I received a thought provoking Harvard Business Review blog from Scott Anthony, Managing Director of Innosight Ventures entitled, Think and Act Like Your Customers, where he discussed that many marketers surround themselves with what they produce as opposed to placing themselves in the position of a customer of their competition.

He pondered the fact that we may receive lots competitive intelligence from research decks and market studies, but we sometimes miss the simplest form of insight that can be derived by having our employees (or ourselves) use the products and services of the competition.


This got me thinking as to how often bank marketers actually open a new account at the competition as opposed to simply doing shopping studies with a third party research firm. How else can we really get a feel for the new account opening process, the insight collection and selling done on the front line, the subsequent onboarding communication process and the communication done later in the relationship?

As Scott Anthony pointed out, we should determine what the competition has that is better than our bank? How do they position or communicate their offerings that may be of interest to our customers? Most importantly, if you were not an employee of your bank, would the offering of the competitor encourage you to select the competition as being your bank of choice?

Sometimes, there is nothing better (or more frightening) than seeing the truth for yourself.

Onboarding Needs to Reflect Bank Customers' Diverse Preferences and Needs

According to a new Javelin Strategy and Research report issued today, many banks are not leveraging the insight available early in a new relationship to develop customized offers and to utilize preferred channels of communication. In their study entitled, 2010 New Account Onboarding: Using a Systematic, Tactical Approach to Deepen Financial Customer Relationships, the importance of collecting key pieces of information such as age, income and the customer's previous banking experience is emphasized. With this baseline insight, Javelin proposes that communication channel determination and messaging can be improved, thereby leading to improved engagement, retention and cross-sell results.

The findings in the robust 44 page study are a refinement of a previous Javelin onboarding study from 1997 and are consistent with what I have found visiting and speaking with banks across the country. In fact, two of my clients (Zions Bank and KeyBank) are referenced in the study.
Both banks initially communicate with all new account openers, focusing on the engagement process, with an emphasis on online banking and bill pay, debit card utilization, direct deposit and more recently autosave and overdraft protection (in response to Reg. E). In addition, both banks leverage multiple channels for communication, including email, direct mail and either centralized or branch-based phone calling. At both institutions, segmentation of the customer base and the process of customized messaging and cross-selling is done after the more overarching process of getting the customer familiar with and engaged with their service. The collection of transaction history provides the foundation for leveraging propensity models to drive cross-selling later in the relationship.

While the Javelin study (which was based on research collected online) indicates that consumers prefer to receive email communication regarding their new account, research done with the majority of my clients show that results are enhanced when multiple communication channels are utilized (even for online account openers). These findings are not inconsistent, but reflect the online banking focus of the Javelin research. In fact, by leveraging personalized jump pages, online banking messaging, help/switch lines and even statement messaging and inserts, results can be further enhanced.

Additional recommendations from the Javelin research include establishing a paperless relationship at account opening and during onboarding (many banks I work with are building marketing programs around this objective) and collecting mobile phone numbers.

In conversations with Mark Schwanhausser, Senior Multi-Channel Financial Service Analyst for Javelin in the development of this report, he found it amazing that banks were not focusing on the collection of mobile numbers as part of the account opening process due to the significant number of households making their mobile phone their primary communication media and the increasing preference of data distribution via mobile channels (alerts). The collection of email addresses should also be a required component of the new account opening process even though many banks still do not leverage this channel effectively.

While an emphasis on a strong onboarding/welcome process seems to be universal throughout the industry, there are dozens, if not hundreds of ways to implement such as process when you take into account messaging, timing, channels, target audiences, etc. I am interested in onboarding success stories and additional insights you can share. Feel free to leave a comment or learnings on my blog.

Newly Acquired Bank Customers Need to be Onboarded

Regulators closed six more banks last Friday, bringing the failure total this year to more than 100. As each of these banks failed, or as others have been acquired through mergers, healthier banks are expanding their geographies and gaining new customers along the way trying to benefit from efficiencies and economies of scale. Unfortunately, too much focus on cost savings and a lack of focus on the newly acquired customers can have unintended consequences.

This was found in a study done earlier this year by the Deloitte Center for Banking Solutions entitled, Beyond Day One: Minimizing Customer Attrition During Bank Mergers and Acquisitions. According to the study, 17 percent of respondents who had gone through a merger or acquisition had switched at least one of their accounts to another institution after their bank was acquired, while an additional 31 percent said they were at least somewhat likely to switch over the next year. The study further found that that those who had switched had more financial products and more investable assets than those who had not, making the potential revenue impact of lost relationships even greater.

The challenge for the acquiring bank is that the recently acquired customer is more aware than ever of service flaws, system inefficiencies, changes in account structure, fees and even competitive offers that are in abundance after a merger or acquisition is announced. This awareness occurs quickly after a merger is announced as well. In fact, almost two-thirds of the Deloitte survey respondents who had switched an account to another bank did so within the first month after the deal was announced.

Much like I recommend to clients that they implement a multi-channel, multi-touch onboarding process with customers that open new accounts, the same process should be done with customers who are acquired in a merger or acquisition. Not only can onboarding a new household reduce customer attrition, an acquiring bank also has an opportunity to drive relationship engagement and cross-sales by introducing the bank’s brand and taking a proactive interest in the newly acquired customer's needs.

In their special report entitled, Bank Consolidation Through the Eyes of the Customer, J.D. Power found that constant, proactive communication is the key to success. In fact, only a small percentage of customers believed they received too much communication, yet they are quick to react when they don't receive enough communication. That is why banks should implement an integrated communication process that not only includes what is required by the regulators, but has additional components that deal with what your bank stands for, the best products based on customer account ownership and behavior, and FAQs related to the acquisition.

As J.D. Power states, "While every bank diligently fulfills regulatory notification requirements when it merges, that bare minimum isn’t sufficient for maintaining customer satisfaction. In today’s environment of uncertainty and fear, customers need to feel that they are informed every step of the way during a merger so there are no surprises. Banks that focus on the communications aspect of the customer satisfaction equation will reap the dividends of customer and deposit growth".

If you have recently acquired or merged with another financial organization, tell me how you have gone beyond the basic regulatory communication and the results you have achieved.

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.

Zions Bank Integrated Strategy Yields Results

I recently spent a couple days at a Marketing Summit with the Zions Bank direct marketing team and their interactive agency Richter7 in Salt Lake City and it was exciting to see the great results of their integrated marketing communications programs.

Not only have they lowered an already industry low attrition rate with their multi-touch onboarding program that uses direct mail, email and phone contacts of customers over the first 90 days of the relationship, but they have also seen a strong increase in account engagement, cross-sales and balance enhancement. Even using very conservative estimates, the ROI of the program far exceeds 400%, with enhancements still being introduced to improve these results.


In addition to a best-in-class onboarding process, they also have seen seen great results from their recently introduced multi-touch customer cross-sell program that scores every household to determine the best product to offer each quarter. This systematic communication based on product propensity and a next most likely product score has enabled the bank to be both efficient and effective in their sales efforts, replacing a multitude of programs that used to be run on an ad hoc basis over the course of a year. Like the onboarding program, the great results for the cross-sell program can be attributed to both excellent targeting and leveraging multiple channels as opposed just one communication medium.

Beyond these foundational programs, the Zions team continues to test new ideas that banks several times larger are not doing. In addition to being close to introducing a new customer acquisition program that leverages multiple channels, traffic generation and the power of their sales force, they are more focused than many in the industry on the power of social media, online and mobile banking (just introduced) and continuously improving metrics. They are even building the infrastructure to expand some of these initiatives to their affiliate network. As a lead player on the Zions team, Matt Wilcox mentioned during the meeting, "I want Zions Bancorporation to be a recognized marketing leader in the financial services industry and to do things that others just imagine".

I want to thank the teams from Zions and Richter7 as well as the people from our team that continue to amaze me by what can be accomplished with senior level approval and with an attitude of partnership and a forward focus. It is always an energizing summit to attend and the results definitely illustrate the value of these planning meetings.

Matt Wilcox has also agree to join me at BAI Retail Delivery 2010 in Las Vegas where on Monday, October 18 we will partner on a half day workshop entitled, Improving Acquisition, Onboarding and Cross-Sell Effectiveness with Multi-Channel Communication . During this session, we will discuss ways to leverage multiple channels in the implementation of successful, integrated marketing communications programs.

Banks Need to Build Foundation for Effective Multichannel Marketing

While the BAI Retail Delivery Conference in Las Vegas doesn't officially begin until today, hundreds of attendees participated in a series of pre-conference workshops, including a session entitled, "Improving Acquisition, Onboarding and Cross-Sell Effectiveness with Multichannel Communication" which I was lucky enough to present with Matt Wilcox from Zions Bank and Tal Harry from Richter7. The workshop was attended by representatives from banks of all sizes and in various stages of multichannel marketing development.

During the session, we had several formal and informal surveys to determine where this limited cross section of the banking industry was with regard to their marketing mix.

Interestingly, while the majority of the banks are regularly using web banners and email as part of their marketing initiatives, less than 25% use paid search or jump pages with their campaigns. Even more surprising:

• Almost half of the banks in attendance still do not have a formal, multi-step onboarding program. This is surprising given the amount of attention given this strategy in the trade press and with market leaders over the past several years.
• While only about half the participating banks routinely collect email addresses, more than two thirds collect mobile phone numbers. This is most likely a result of IT challenges in setting up capture methods for email vs. another phone number box. The current level of email address pollination within the databases for the banks in attendance was still less than 30% on average.
• Only a very small handful of banks in attendance ask a new customer what their preferred channel of communication is. This is both a potential missed sales channel opportunity and a customer experience shortfall.
• Almost half of those at our session have used web video as a communications tool, about the same number are using Facebook, while less than 25% have used Twitter or YouTube.

An overarching takeaway was that, while most of the banks in attendance are doing dual channel marketing, few are integrating multiple channels for improved marketing effectiveness. With budgets either staying the same or being reduced in 2011, it will be more important than ever to optimize marketing channel investments through the testing of new media and even social channels. At the same time, banks will need to focus on the basics (such as the capture of email addresses and determining customer's commnication channel preferences) while setting the foundation for improved measurement of channel effectiveness.

Thanks to all of the banks that attended our session yesterday and especially to Matt and Tal for their exceptional insights that they shared with in the workshop.

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.

New Email Marketing Study Highlights Missed Opportunities for Bankers

As social media channels continue to proliferate and traditional communication channels become more expensive, bankers struggle with how to maximize the effectiveness of the email channel within their marketing mix according to a just released study from SubcriberMail, a Harland Clarke company. The study entitled, Email Marketing Within Financial Services Institutions, surveyed 71 banks and 191 credit unions, finding that email marketing among these organizations to be strong and growing.

But, while many organizations are leveraging email to inform and communicate news and product information (50% for both banks and credit unions) and even cross-sell existing customers (56% of credit unions/42% of banks), a far lower percentage of credit unions and banks use email as part of a multi-channel onboarding and/or activation process (26% and 27% respectively) or use email for delivery of an electronic receipt.

This is a missed opportunity since studies show that new account holders are very open to all channels of communication early in their relationship and that as many as 75% of customers open and read transactional emails. In addition, in working with financial organizations across the country in the development and implementation of onboarding programs, early customer engagement, cross-selling and retention are all positively impacted by adding email marketing to the communications mix.

At some organizations such as Chase, email welcoming messages many times arrive at the customer's home before the customer returns from opening a new account. This communication is used to thank the customer for opening their account, encourage usage of engagement services (online banking, debit cards, direct deposit) and describe future communication the customer will receive from the bank.

So why the hesitation in using email as a communications tool? According to the survey, while the fear of phishing or fraud was a significant concern, the primary controllable challenges to successful email marketing included the effective collection of email addresses in the first place in addition to subscriber churn (or addresses going bad). Roughly 40% of banks and credit unions found both of these issues to be an impediment to success.

To address these concerns, the SubscriberMail study suggested a holistic, company-wide approach to collecting and confirming customer's email addresses at every touch point. This would include collection and verification at the branch level, call center, and even as part of direct mail efforts and at the ATM. The key is to establish the collection and maintenance of an email address database as an overarching corporate initiative that will result in both lower communication costs as well as improved marketing effectiveness.

Unfortunately, senior management support of such an initiative was far from a reality according to the survey, with less than 30% of the bank respondents stating that senior management was supportive of email marketing strategies. With a subscriber email address valuation estimated to be an average of $118 according to a recent DMA Email Experience Council calculator, marketers need to continue to seek managerial support for their email collection initiatives.

Another challenge to keeping a subscriber database up-to-date comes from the customer's perspective, since allowing email communication is directly correlated to the relevancy and value derived from the emails a customer receives. As with traditional direct mail, relevancy depends on effective segmentation of the email database and timely communication of opportunities, events and offers. Again, both banks and credit unions were found to fall short in their efforts to segment customers, with far fewer than 50% segmenting their email database in any manner. Interestingly, only half of the responders had email initiatives planned in the next six months, indicating a less than robust email strategy and the potential for the customer to undervalue email communication from their financial institution.

Overall, the SubscriberMail survey results illustrated a tremendous amount of untapped potential with the email channel and the need for the same type of discipline with email marketing as with other direct channels. With increased focus on the collection and cleansing of email database files, improved segmentation and more consistent use of this communication tool, return on marketing investment can be improved at a time when bank marketing budgets are being reduced.

I am interested in your results and use of email within your bank.

If you are interested in this free survey, simply follow this link to the download.

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.

Checking Changes Make Onboarding and Cross-Selling More Important

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

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

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

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

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

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

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

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?