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.

Capital One Continues to Innovate

Historically an aggressive marketer and innovator in the credit card industry, Captital One has expanded its reach in recent years, using their growing banking franchise as the foundation for introducing innovative banking products. In addition to having a relatively rich debit rewards program and expanding into online and small business banking, they have recently introduced a new savings product called "InterestPlus Online Savings".

The saving program offers an above market interest rate on balances over $2,500 in addition to a 10% quarterly interest bonus payment paid if the customer uses their Capital One credit card once a month.
The bonus can also be earned if the customer maintains a minimum balance of $15,000 each month. The bonus for using the credit card is similar to other promotions done by Captial One in the past 12-18 months to cross-sell services and relationships off their credit card foundation.

The promotion of the new service began in December of last year through the bank's web site, statement inserts, direct mail and with email according to Comperemedia. Using strong visual elements such as comparative bar graphs and icon buttons similar to what I have seen with ING mailings, it is clear that Capital One plans to leverage their strong marketing talents from the credit card industry in building a strong bank brand.

Large Banks Not Adequately Serving Small Businesses

While there is little denying the revenue potential of serving the financial needs of small businesses, there continues to be a significant disconnect between small business needs and the way large banks serve this segment according to a research report released today by Aite Group (Small Business Opportunities: Are Large Banks Missing the Boat?). And with the continuing financial crisis, availability of sophisticated cash management products to smaller banks and the significant negative press around large banks, this gap in expectations is widening. In fact, the percentage of large bank small business customers describing themselves as 'extremely satisfied' with their primary institution has dropped from 50% in 2007 to 33% in 2009. This has led to a shift of small businesses considering a community bank to be their primary financial institution from 24% in April 2006 to 35% in April 2009.


According to Christine Barry from Aite Group, the low satisfaction rates and disappointing cross-sell ratios are due in large part to large bank's failure to properly segment the small business market, thereby improving the understanding of the market. Without adequate segmentation and research, it is difficult to provide a personalized experience based on the small business' unique needs.

Another challenge is that it is difficult to even identify all small businesses since as many as two-thirds don't have business banking accounts according to a 2009 Javelin Strategy & Research report. These relationships may pay lower fees by being handled in the consumer platform initially, but they are quickly underserved as they grow and their needs expand to include payroll, specialized lending and enhanced cash management services.

One of the responses to this need to better understand the underserved small business banking customer is a shift in reporting structure at some large banks from being handled through the retail or commercial side of the bank to being handled by a standalone small business unit, where specific offline and online products can be developed and needs adequately researched. Another response has been the introduction of new services for this segment including scaled down cash management services, invoicing and payroll services and personal/business financial management products.

To win in the small business banking competition, it will be imperative to segment small businesses beyond a size categorization that neglects industry or needs segmentation. Data collection will also need to be enhanced since the amount of public information is much less reliable for small businesses than for retail customers. Finally, there needs to be constant direct communication with small businesses to demonstrate the desire to serve this segment and to provide ongoing leads for a better trained sales force.

Don't Forget Small Businesses With Your Reg E Communication

While small businesses are not impacted directly by Regulation E, many of the banks at the Atlanta BAI Checking 2.0 Executive Forum where I spoke last week indicated that they will be reaching out to their small business customers to explain the law and the potential impact on their retail business.

Not only do many smaller businesses use consumer checking accounts for their small business transactions (with the potential for debit card rejected transactions), but with the potential for so many customers of small businesses having payments for goods and services rejected after the implementation of Reg E, banks are communicating details around this consumer legislation and options as to how to deal with transactions that are rejected.

U.S. Bank Introduces Customizable Small Business Rewards Card

Looking for a way to help small businesses improve their business, U.S. Bank has teamed up with online print and personalization supplier Vistaprint to provide credit cards that can support the brand of the small business while helping the business earn rewards on their purchases.

Once a small business enters the new custom credit card area of Vistaprint, a small business can select from one of hundreds of industry specific template designs already provided or they can design a credit card from scratch. By following easy directions, the small business can expand the impact of their brand every time they make a purchase.


As part of the rewards program, cardholders will earn one point for each dollar of net purchases on the card and they can redeem points for merchandise, gift cards, travel or account statement credit. They also can receive discounts on other Vistaprint products by using their custom credit card.

As banks try to more effectively acquire and serve small business customers, building innovative third party partnerships and private label solutions to help small businesses improve their business will be a way to set a bank apart in the marketplace.

Banks Introduce New iPhone and iPad Applications

As was predicted late last year at the Mobile Financial Services Congress held in Miami, not a week goes by without another bank introducing a smart phone mobile banking application. And with the introduction of the Apple iPad, many banks have expanded their mobile innovation to include the new device.

For instance, TD Bank has recently introduced TD Mobile Ap for both personal and small business customers covering banking, insurance and wealth management products. In addition to providing a mapping tool for branches, ATMs and TD Waterhouse Investor Centers for both the iPhone and iPad, there are must-have applications for viewing balances and activity, paying bills and transferring funds. TD also provides a way to access TD Waterhouse Investment Reps and TD Insurance Agents and provides a seamless link to their Easyline telephone banking services.


What is interesting is that as more and more banks expand their mobile offerings and are including the iPad as a supported device, I have yet to see any functions customized just for the iPad. Most banks are simply taking what they are developing for the iPhone user and formatting the functions for the new tool. While I suspect specialized applications such as loan forms, new account documents and personal financial management reports will eventually be available for the iPad, more innovation is needed to take mobile banking to the next step. Maybe I will just have to wait for Bank of America to make the first move.

Disconnect Seen Between Small Business Needs and Availability of Credit

While there are signs of the beginning of an economic recovery, many small and mid-sized companies are still finding it difficult to meet banks' tightened credit standards. This trend is reinforced by both a recent Greenwich Market Pulse Study as well as recent findings by Barlow Research which found that even though banks have a need to generate more loan relationships, more than 50 percent of small businesses say it is harder to secure credit this year than last. This would be in line with an American Banker study earlier this year that found that close to three-quarters of the U.S. banks had 'significantly tightened' their credit standards.


As a result, many small businesses are using personal savings and credit cards to fund growth. For those small businesses applying for credit, many are asking for unsecured personal lines which usually have tighter credit criteria and a higher likelihood of denial.

This tighter credit market could stifle the growth potential for those firms that could otherwise be well positioned to benefit from and contribute to the economic recovery. In fact, Greenwich Associates consultant Chris McDonnell states that a slight rebound in the perception of credit availability that began last year has now stalled, which could also end up reversing a recent uptick in economic optimism shown by both small and mid-sized businesses.

This lack of credit availability is likely also in part responsible for the lower satisfaction ratings that both large and mid-sized banks are receiving as well as the increasing percentage of firms who state they are looking for a new financial provider or are willing to consider a new provider if a compelling offer can be presented.

For those banks willing and able to lend to both small and mid-sized businesses, there can be a huge 'first mover' opportunity to win a larger share of new business at competitive margins. In addition, with more businesses dissatisfied and in the market for a new financial partner, loyalty to banks that provide funding for growth will be long lasting. This first mover advantage may be short lived, however, as the government may be close to approving a $30 billion small business lending fund which is expected to stimulate the supply of credit.

Is your bank changing their view of small business credit? With so many small businesses looking to potentially change financial institution relationships, how is your bank positioning itself to take advantage of this opportunity?

Small Business Acquisition Strategy Should Correlate to Potential Value

According to Barlow Research, a small business customer ($100K to $10MM in sales) will bring about $5,173 in Net Potential Revenue to a bank each year. This revenue estimate is based the value of short-term and long-term loans, demand deposit accounts and other business banking products balances and fees paid by a small business in 2010. Based on these revenue estimates, a shift in one percent of primary bank market share can increase the Potential Customer Lifetime Value of your small business banking portfolio by approximately $577 million.

Even with this potential, most banks are viewed as underserving the small business market according to research from Barlow, Aite Group, JD Powers, Greenwich Associates and others. The perceived brand of large banks (assets of $50+ billion) became especially tarnished due to big banks' questionable financial stability, slower responsiveness to small business requests and perceived dwindling appreciation for the small business customer. As a result, more small businesses than ever state that they are willing to consider a change in financial institution partner.

The path to rebuilding trust with both current small business customers and prospects is by better understanding the needs of individual small businesses and getting in front of these business owners to present viable banking solutions. But, even though the average small business has tremendous value, just like the retail bank customer, not all small businesses should garner the same amount of marketing investment.

Instead of casting a wide net across all small businesses, your acquisition efforts should be tiered, leveraging product focused and proximity-based direct mail for the smallest businesses, multitouch solution-focused communications for mid-tier small businesses and investing in high-touch multichannel Demand Generation strategies for the highest value businesses where the engagement of a small business relationship manager is most important.

As a sales person for most of my life, I understand that there is no bigger risk to the success of a marketing program, and the credibility of those people who build the program, than the quality of leads I receive. Bottom line, sales people will not work leads with enthusiasm (or at all) if they do not believe the quality of the lead is reliable. This is the challenge most banks face with their small business marketing initiatives.

The best solution we have found to this challenge is to match the marketing communication strategy to the effort needed to close the sale. For that most coveted segment, where the business banking calling officer is required to optimize the value of the sale, we have successfully used a Demand Generation team, that leverages email, direct mail and a centralized outbound calling effort to improve the accuracy of the prospect database (notoriously bad to begin with), identify the appropriate decision maker, help identify a financial 'pain' that can be solved by the bank and score the lead. Only after the lead is thought to be 'ready to buy' is the prospect lead sent to the small business calling officer.

With an investment in an effective Demand Generation program, a bank can spend their time in front of prospects with a need instead of asking the calling officers to follow-up on leads of questionble value. In addition, unlike traditional direct marketing programs that drop and we hope they are followed up on, a Demand Generation process allows for continuous, and immediate, test and learn adjustments and changes in the determination of lead value.

Is small business acquisition and cross-sell part of your marketing plan? Do you tier your marketing investment to the potential value of the relationship and the effort required to close the sale? Are you leveraging multiple channels for your efforts? I would love to hear about your strategies. 

The Sales Funnel Revisted

For my whole career, both in marketing and sales, I have understood the concept and importance of the sales funnel. Conceptually speaking, the traditional sales funnel starts with awareness being generated at the top of the funnel (the widest part) and then having the prospect work down the funnel through the stages of interest, consideration, commitment and eventually having a sale made at the narrowest part of the funnel. The funnel framework worked fairly well in providing the foundation for understanding what metrics should be concentrated on and where resources should be deployed.

But what happens in a world where prospects have so many more tools at their disposal to evaluate your offerings on their own or where they skip stages of the process all together?
In addition, while the traditional sales funnel usually ends when the sale is consummated, should that really be the end of sales and marketing's engagement with the customer? Shouldn't we also measure post sales activities that build share of wallet and recognize the challenges of an unengaged customer or one who attrites?

A couple months ago, the people at Focus.com asked 14 sales and marketing experts to view the sales funnel concept in a world of the Internet, social media, word of mouth marketing, massive choice and competition? They reached out to their Focus Expert Network to submit their version of the sales funnel with one condition . . . the funnel and the rationale for their depiction had to fit on one page.

The results just released this week were, to say the least, both innovative and thought provoking. Some experts provided an interpretation that redefined the steps of the sales process and the sources of leads, taking into account the impact of the Internet and the need to more closely integrate sales and marketing. Matt West from Genius.com had a traditional shaped funnel but added the important steps of lead nurturing and cross-selling while discussing the challenge of unknown prospects 'above the funnel'.

There was more than one version that visually looked more like an hour glass, reflecting the important post-sale steps that are required to get a new customer engaged and to build the value of the relationship through repurchase or evangelism. Matt Heinz from Heinz Marketing stated that, "the traditional sales funnel only reflects half the story", ignoring the impact of referrals, repeat business, renewals, etc.

My favorite, however, was probably the entry from Michael Damphousse from Green Leads who threw away the visual of the funnel altogether and provided a diagram of a 'DemandGen Cloud', reflecting that prospects have the power and capability to insert themselves anywhere they want in the sales and marketing funnel. He also reflected that once in the funnel, the prospect can jump to any step they want as a result of web content and word of mouth. He emphasizes the importance of harnessing the chaos to maximize results.

So what does this have to do with banking? First of all, it reflects the impact of the new communication channels such as the Internet and social media. It also emphasizes the importance of going beyond generating a sale, and instead, generating a relationship. Finally, it reflects the diversity of ways to look at the interaction of sales and marketing in any sales process. This is especially true in more complex sales such as small business, commercial, investment services, etc. Whatever funnel you prefer, however, one major challenge needs to be addressed. Whatever the steps, sales and marketing must be in alignment and finance needs to buy off on the metrics and business case. With this uniform and integrated view, the sales process will definitely not be optimized, and it may actually fail.

What does your sales funnel look like? I would love to see even more creative examples of what your interpretation of today's sales funnel might be. Share it with me at jmarous@aol.com and I will post some of my favorites. Oh yeah, the same rules of a one page limit still apply.

Demand Generation Essential for Effective Lead Management in Banking

One of the biggest challenges facing small business bankers, mortgage loan officers, corporate bankers and trust officers is the ability to keep pipelines filled with qualified, sales ready leads. While marketing may execute programs that feed the funnel at the top, sales teams within the bank are still tasked with determining which leads are qualified and nurturing these leads in an environment where buyer behavior is less predictable and the evaluation of alternatives is being done more and more online and through social media.

In many cases, bank marketing and sales team are executing with conflicting strategies while working toward a common goal of generating sales. Leads are often provided by marketing before they are 'sales-ready', while sales is accused of not closing enough leads generated by marketing. This creates departmental conflict and lower sales team engagement due to the expectation of poor lead quality. In most cases, if a lead is not immediately sales-ready, no nurturing of the lead ev ntakes place resulting in program failures.

To address this challenge, many B2B sales organizations in and out of the financial services vertical have turned to technology based Demand Generation solutions, building repeatable processes that effectively manage more interactions using expanded communications channels to attract, educate and qualify a prospect. While not very familiar with this marketing capability in the past, my company's acquisition of Protocol Integrated Marketing Services late last year has allowed me to learn a great deal more about the benefits of this process from a team that are leaders in the field.

The benefits of a Demand Generation process include:

• Tired of arguments between marketing and sales regarding the effectiveness of marketing programs, Demand Generation uses an orderly, scaleable and consistent manner to determine if a lead is qualified and ready to buy. This allows for a quicker response to market opportunities and actionable metrics.
• Demand Generation helps to make marketing efforts more effective and repeatable since the lead management process follows a consistent pattern. This results in an improved opportunity-to-pipeline conversion, deal velocity and revenue stream.
• At a time when large sales are more complex than ever, take a longer time to progress, involve multiple decision makers and may need significant nurturing, Demand Generation helps manage the communication process, building trust through dialogue.
• Demand Generation replaces spray-and-pray approaches like blanket postal or emailing with campaigns aimed at invigorating stale contacts, reducing churn, or winning back defectors - programs that couldn’t run efficiently without automating customer profiling and outreach.

In short, Demand Generation shortens the time and improves the efficiency of B2B sales efforts from program implementation to close. Additional benefits from the process include the identification of the decision maker(s), the problem(s) they are trying to solve for, the most likely decision time frame, and the investment they are willing to make before the lead gets passed to the business developer.

Finally, for those prospects that do not have identifiable 'pains', are not ready to buy, or fail to purchase the financial product or service expected, they are fed back into the sales pipeline for ongoing communication and nurturing.

Marketing still has an important responsibility to develop relevant, multichannel content to feed the lead qualification and nurturing process and stimulate dialogue. Without this content, the Demand Generation engine will slow to a stop since there is no value in continuing engagement from the prospect's perspective. But done well,  a strong Demand Generation process optimizes marketing's impact on sales and helps eliminate waste.

Does your bank have a centralized Demand Generation process to develop, manage and score leads? Is the process automated, with results shared between marketing and sales organizations at your bank? What has been the impact of this process on your sales results?

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.

Consumers Are Increasingly Using Multiple Devices to Support Banking Needs

Traditional bricks and mortar facilities are being visited less as the use and importance of online and mobile devices continues to increase according to Intuit Financial Services' 4th Annual Financial Management Survey released yesterday. According to the survey, while a large percentage of consumers still manage their finances offline (45%), the percentage of consumers using online services from their financial institution has continued to increase annually; increasing 11% since 2009 to 38% in 2011.

The main reason consumers said that they don't visit their bank branch as often as they used to is because they are visiting their FI's website and use their online banking tools (76%). These online banking tools are so important that one-third (33%) said they would switch their relationship to another institution if there were better online tools offered elsewhere.

Source: Intuit Financial Services' 4th Annual Financial Management Survey

The importance of online tools was reinforced by Brett King, author of the bestseller Bank 2.0 and founder of direct mobile banking start-up Movenbank at this year's BAI Retail Delivery Conference in Chicago. "Banking is quickly changing from a place you go to something you do everyday," stated King. He provided a chart from the American Bankers Association and Nielsen Research that illustrated the channel migration occurring today and projected in the future.

Source: ABA, Nielsen Research

It appears that the growth of mobile banking is only limited by the growth of ownership of a smartphone according to the Intuit study. Forty-one percent of all respondents indicated ownership of a smartphone, 23% said they used a mobile banking solution, and an additional 17% intend to try mobile banking in 2012. The primary reason consumers indicated that they do not use mobile banking was because they do not own a smartphone (25%) followed by the fact that they prefer to bank online (22%).

Source: Intuit Financial Services' 4th Annual Financial Management Survey

These findings are similar to the findings last week from comScore that drew a correlation between mobile banking and smartphone adoption. "The investments in mobile made by financial service institutions, along with the continued growth in smartphone adoption, have had a positive effect on the use of mobile financial services," states Sarah Lenart comScore vice president for marketing solutions.

As expected, the adoption rate of mobile banking is demographically skewed. Young adults (aged 18-32) are three times more likely to carry their bank in their pocket, compared to Gen X, baby boomers or seniors. And while 65% of mobile banking users access their accounts through the internet/Web, 28% use a mobile application. "Regardless of age, each customer expects to connect to their financial institution in their own way," said CeCe Morken, president and general manager of Intuit Financial Services.

In another Intuit study of more than 50,000 mobile banking customers, it was found that consumers tend to interact with their financial institution 45% more often if they use a combination of both mobile and online tools. These customer also tended to have larger relationships and a better retention rate.

"While we anticipate that there will be some mobile-only consumers, most people will be using multiple devices on any given day in the future," said Intuit spokesperson Tobin Lee in a conversation yesterday. "Financial institutions must be prepared to deliver financial information and insights across multiple devices (PC, phone, tablet), optimized to the merits of each device it they are going to meet customer's needs. If they don't, someone else will . . . probably displacing a bank's relationship."

The desire for 'anywhere app access' is also supported by a just released study from Oracle entitled, Opportunity Calling: The Future of Mobile Communications - Part Two which found that while there was a stronger preference to use a tablet for mobile banking (34%) compared to a mobile phone (11%), the majority of consumers (55%) would prefer to use both devices. This is important to prepare for since the same study found that almost 30% of the U.S. mobile customers that do not already have a tablet device plan to purchase one in the next 12 months. These findings were also reinforced in last April's, Intuit 2020 Report: The Future of Financial Services.

As customers continue to use multiple channels to connect with their bank, it will be increasingly important to have a 360-degree view of customer device touch points and to leverage the advantages of each device to provide an optimum customer experience. The current anxiety over online and mobile security needs to be addressed at the same time as innovations such as near field communication (NFC) and location based services get integrated into online and mobile solutions. Bankers will need to get ahead of the payments innovation curve and prepare for major distribution channel disruption. In short, banks will need to do a paradigm shift by becoming nimble at a time of increased regulation and consumer scrutiny.

Are today's banks prepared for the massive changes ahead? Or will new online organizations such as Ally, BankSimple, Movenbank and others steal the hearts and wallets of Gen Y and device savvy consumers?

I would love to hear from you.

Banking Industry Leaders Discuss Findings of Intuit Financial Management Survey

In conjunction with the release of Intuit Financial Services' 4th Annual Financial Management Survey, Banking.com hosted a Twitter Town Hall yesterday, bringing together financial industry leaders to discuss loyalty and channel migration as well as some of the challenges and opportunities facing the banking industry. The following is a recap of the very robust one hour dialogue. (the complete transcript can be found using #IFSsurvey on Twitter)

The Town Hall discussion began around the issue of customer loyalty and the finding that many consumers thought their financial provider was not 'in touch' with their needs. Given the events of the past week, where many large banks reversed decisions around the implementation of fees due to highly vocal negative sentiment amplified by social media and credit union trade group support, most participants believed that banks are not leveraging current insight and technology to make better decisions and provide value added service. 

Tobin Lee (@Tobin_Lee), Intuit Financial Services spokesperson stated, "It is time for a banker mindset shift; cultivating deeper relationships, more meaningful engagement and stronger advocacy for growth". Campbell Edlund from EMI (@EMI_mktg4sales) added, "These findings provide a very strong argument for a communications plan around the customer lifecycle". 

The already robust dialogue really took off as the discussion moved to the acceptance and utilization of banking channels (especially mobile and tablet banking). Bradley Leimer (@leimer) from Mechanics Bank in the San Francisco Bay area believed mobile strategy will be the key to future engagement due to the portability and 'always on' nature of the device. He also believed that the correlation between mobile banking and smartphone use (41% of respondents owned a smartphone) could indicate a lower engagement with financial technology in general for non-smartphone users.

Edlund added that while there is currently a higher penetration of smartphones than tablets, tablets can not be ignored by banks since Oracle found that tablet ownership is expected to increase significantly in the next year. She also warned that we need to be cautious not to get ahead of the acceptance curve. . . "we always underestimate inertia". Brett King (@brettking), author of Bank 2.0 and founder of Movenbank went a step further stating that within 3 years all bank websites will need to be built for tablets first. He also believed that branches will continue to diminish in presence and utility (according to the study, 27% of respondents still visit their branch once a month in addition to ATM visits).

Mark Zmarzly (@BankMarketing) did not believe bricks and mortar would completely go away, but definitely felt the relevance of branches will change. "It's easy to say branches will go away, but is that realistic? They have to evolve, but customers will never let them become 100% irrelevant." King responded that with the drop in branch transactions, the economics of the branch are not working. I (@jimmarous) illustrated the model of Boeing Employees Credit Union in Seattle, where only 2 of the 40 branch network have tellers, while the installation of multiple ATMs at offices and around the city have an average of 10,000+ transactions each. 94% of the transactions at BECU are done electronically, according to Howie Wu (@howie_wu) from the credit union.

"Relevance is the key to banking for tomorrow," stated King. "By 2015, mobile will be the #1 day-to-day channel, OLB #2 with the branch network being #5. The challenge for mobile and online will be developing great customer journeys". King doesn't believe these journeys exist today and believes the goal should be to have banking so pervasive that it is not tied to a branch, device or website, but is everywhere customers are.

Edlund pointed to the retail industry as a forerunner for what we will see in financial services. "Social and tablets will change the landscape in banking as they have in retailing", Edlund stated. (During the Twitter Town Hall, there was even a discussion of the integration of TV as a channel for banking). Representatives from EMI in Boston (EMI_mktg4banks) emphasized that we will continue to see a blurring of all channels with social media providing some of the glue for enhanced communication. Gamification and location-based rewards were also seen as a key elements of engagement by Leimer and Edlund.

A conundrum was discussed with regard to the needs of small businesses where checks still prevail and the need for branches. King believed that we will see significant attention paid to mobile payments for businesses in the next couple years, while I added that tablet apps for business are also being developed to respond to the needs of the business community. NFC was also seen as a game changer with regard to the need for branches for small businesses. Bob Williams (bob_williams) from Harland Clarke believed that, while check usage is definitely dropping, there are much greater efficiencies today than in the past with RDC and other electronic tools.

It was clear from the Intuit research that was just released, the Bank 2020 research released in April, and the discussion during the Twitter Town Hall today that there is significant disruption in the banking industry with regards to channel support and device utilization. The consumer movement to new banking channels is mirroring the movement to more sophisticated devices such as smartphones and tablets. Many consumers are NOT choosing one device or channel over another, but are using multiple devices depending on their personal needs.

Consumer desire for an integrated banking experience without friction will need to be supported by banking organizations in the future. Distribution networks (whether tangible or intangible) will need to support an expanding array of capabilities that may include integration within retail or social sites as opposed to standing alone.

As I stated to the participants of the Twitter Town Hall at the end of today's discussion, "If banks are not prepared for the channel migration that is already underway, they may experience the impact of 'Bank Transfer Decade'".

Note: A summary of the findings of Intuit Financial Services' 4th Annual Financial Management Survey and recently released related research is available in my previous Bank Marketing Strategy blog post.

If you weren't able to join us, what are your thoughts around the impact of channel shift away from the branches and towards other media? Will we see the elimination of branches completely? Will another device or technology unseat smartphones and tablets?

I would love to hear from you.

Relationship Trumps Fees for Small Business Bank Satisfaction

At a time when discussion around higher bank fees is at a fever pitch, small businesses value the human touch more than ever and are more satisfied with their banks than they were in 2010 according to the just released J. D. Power and Associates 2011 U.S. Small Business Banking Satisfaction Study.

The study, which ranks satisfaction in the areas of product offerings, facility, fees, account information, account manager, credit services, problem resolution and account activities saw all of these categories except fees improve on a year over year basis.

"Contrary to popular belief that most customers are unhappy with their bank, small business banking customers are more satisfied than last year with nearly all aspects of their banking experience," stated Michael Beird, Director of Banking Services at J. D. Power and Associates. In a webinar done yesterday by the firm, it was emphasized that having a person assigned to the relationship 'who understood their business' was a primary reason for improved satisfaction. It was also mentioned that banks should not 'boil the ocean' trying to be the best in each category, but should leverage relationship managers to improve performance in as many areas as possible. In fact, while missing a single KPI does not impact satisfaction scores significantly, missing 3 or more measures can dramatically impact satisfaction.

Source: J.D. Power and Associates 2011 Small Business Banking Satisfaction Study

Illustrating this point, M&I Bank was the highest rated bank in customer satisfaction this year (and the bank with the greatest increase), yet they also had some of the highest incidence of fees of banks in the study. In yesterday's webinar, it was mentioned that while much of the negative press recently deals with fees, having a relationship manager that could answer questions and discuss fee changes ahead of time went a long way towards maintaining a strong satisfaction rating for M&I and other top ranked organizations..

Source: J.D. Power and Associates 2011 Small Business Banking Satisfaction Study

Other studies reinforce the importance of a strong relationship manager to assist small businesses in navigating  difficult economic and business conditions. An August study entitled, 'Businesses Seek the Human Touch from Their Banks by Greenwich Associates found that the importance of a relationship manager increased by 5% for small business since 2009 and by 11% by mid-sized businesses. And even though the internet is far and away the most used channel for transactions by small businesses, a drop in the value of the internet as an interaction platform also occurred during this period, indicating that business owners are looking for more direct and personal assistance as the business environment becomes more challenging.

Even with this improved satisfaction, the J.D. Power and Associates research and research released in August by The Aite Group entitled, 'Community Banks: Maximizing the Small Business Opportunity' indicated a significant opportunity for banks since small and mid-sized businesses are still willing to transition financial service providers. 

According to the J.D. Power and Associates research, between 10-12% of small businesses say they are likely to switch relationships in the next 12 months. Only between 25%-30% said they would definitely not switch. The Aite Group research is more concerning for banks, since they found that 20% of small businesses would be looking for a new banking relationship in the next two years. The Aite Research also found that satisfaction had decreased in their study from 2009-2011. 

Greenwich Associates consultant Pete Garrison states, “For banks, there is an opportunity to provide added value to customers at a time in which client trust and loyalty remains tenuous. For businesses, our research shows that some of your competitors are in fact receiving proactive outreach from their banks,

who are offering valuable assistance in areas like increasing cash flow efficiencies. If you’re not getting the same type of advice, you should ask your relationship manager why that’s the case. If you find your bank is unable or unwilling to provide this type of advice, explore other options.”

Some of this new business opportunity may come from the largest banks. In all recent studies reviewed, the largest banks in the country fared the worst, with significantly lower satisfaction scores than the regionals, super-regionals and community banks.

Source: Aite Group Community Banks:  Maximizing the Small Business Opportunity, August 2011

Does your bank have a 'high touch' strategy for your small business clients? Do you you have a communication strategy for delivering fee changes that is clear and easy to understand? Do you find a way to reach your clients at least 3 times a year (found to be the tipping point by the J. D. Power and Associates study)?

I'm interested in how your organization is serving this very lucrative market.