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Market Outlook: Good Times Ahead, But. . .

Another day, another ray of hope in an otherwise dour environment: A new report based on a poll of 137 banking executives from over 100 financial institutions reveals an optimistic outlook for the SMB market. How strong? Try this: 95 percent of bankers describe the untapped potential of this market as equal to or greater than any other current opportunity, while more than half, 57 percent, say it’s huge.

That’s the word from the North American Insights conference held by Fundtech, a provider of financial technology solutions to banks and other corporations. And the good news doesn’t end there: 60 percent say demand for new services from this market sector is higher than usual, while nearly 20 percent call it “unprecedented.” Of course, mobile is a big issue: 38 percent report that building the mobile banking channel is a top priority. Perhaps strangely, almost as many, 34 percent, also note that cutting costs in this area is a top priority. And to top it off, a strong 67 percent of the respondents believe that social networking will play a major role in their growth, but add—and this is critical—they don’t quite know how.

That isn’t the only dark note in an otherwise bright scenario. While no one denies the viability of competition, almost 60 percent of the respondents, banking professionals all, say they see signs of inroads into their business coming from non-banking companies. That would be a tip of the hat to organizations associated with the technology sector—think Facebook, eBay and PayPal. This is by no means an isolated concern. In fact, numerous other analyses have stressed that many successful entries into this market will be made not only by innovative startups but also by companies that have achieved success in the technology arena and apply those techniques to the banking sector.

That’s just one reason why another subject covered in the report is so intriguing: regulation. Bankers confirm that they’re already not clear exactly how to comply with new mandates such as the Dodd-Frank Act—to be fair, almost half say they “mostly” understand—and yet they expect more such mandates to come down the pike.

What’s completely unrelated yet very relevant in this regard are the statements made this week by former Citigroup head Sanford Weill. He startled everyone by essentially calling for the resurrection of the Glass-Steagall Act, the Depression-era legislation that separated commercial banking from investment banking, and was abandoned more than a decade ago. This is one reason why banks got to be ‘too big to fail,’ and as has been widely reported, Mr. Weill himself was a prime mover behind the change. Now he seems to have changed his mind.

Taken together, these are some strange winds blowing for the financial services industry. There are good times for banks working with the SMB sector, but one potential concern is that non-banking institutions might steal some of that thunder. Meanwhile, one of the people most responsible for shredding the legislation that separated commercial and investment banking would like to see it return, a major reason for their existing strength, recommends reducing that power.

This should be very interesting to watch. Stay tuned.

Trapped in an Elevator? Check Your Bank Balance

What could you do on a smartphone to avoid an awkward conversation in a stuck elevator?  Read email? Check Facebook or Twitter, perhaps?  Log on to your mobile banking app and check your balance or pay a bill? If you answered yes to the third option, you’re not alone.

Mobile banking is ingrained in our lifestyle; Juniper Research predicts that mobile banking users worldwide will reach 530 million by 2013. At the recent SourceMedia Mobile Banking & Commerce Conference, Intuit mobile leaders John Flora, Chris Battles and Omar Green dug into the topic and highlighted the challenges and opportunities for financial institutions as mobile goes mainstream.

Recent Intuit data shows that people who bank online – those signing in from a desktop computer – log in 10 times a month. When you add their mobile phone logins to the tally, the number increases to 18 times a month. That number expands further to 31 times per month, when you add logins from a tablet to the mix.

“Imagine all that you can do with that type of engagement,” said Flora.

Data will be the key to creating a more valuable experience for customers moving forward, particularly those highly engaged mobile banking customers.

“Go through the data you’ve been collecting for years and drive insights from that data back out to your customers,” Green said to the attendees.  “Give customers the ability to make smarter decisions about money.”

The ability to make these “smarter decisions” will be necessary to catapult mobile payments fully into the mainstream, the panelists said. Simply put, mobile payment providers will have to provide more value in the transaction. Each panelist offered their own bit of advice.

“Early adopters do it because it’s new and cool,” said Battles. “We have to provide more value in the transaction in order to see mass adoption. Provide intelligence about the transaction. For example, use this account instead of that account. Or, instead of paying with your debit card, use your credit card.”

“There are more than a dozen ways to pay now with a mobile device,” said Green. “Compare that to a piece of plastic with a mag stripe and you know we have a long way to go in mobile payments. If mobile payment solutions could help you or enable you to make smarter financial decisions, there would be value.”

“People trust their financial institution with the way they make payments. Think about how your customers adopted checks and then bill pay. Leverage that presence and trust,” said Flora.

The rebroadcast of the panel discussion is available below.

*This post originally appeared on the Intuit Network

About Heather Almand: When Heather Almand isn’t reading and writing about banking, she’s checking out the latest foodie blogs in hopes of finding recipes that will please the palate of her active family of four. You can also find her on Twitter at @FinanceWorks and @bankingdotcom.

What We’re Reading: Dodd-Frank, Isis and Mobile Banking Security

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

  • As Dodd-Frank Turns Two, Where Are the Tech Solutions?

American Banker

On the second anniversary of the Dodd-Frank bill, the technology to handle it is far from complete. But it’s no wonder, given that only 10% to 30% of the actual rules and regulations implementing the sweeping reform bill have been written, observers say. “There’s a tip of the iceberg issue here,” says Jason Marx, vice president and general manager, residential and indirect lending at Wolters Kluwer. “A fair amount of work has been done on the regulations, but the market still hasn’t seen the full scope of the regulations as a result of the legislation.”

Read more

  • Bank of America Adds Chips to Consumer Credit Cards

American Banker

Bank of America (BAC) is offering EMV chip technology for many of its consumer credit cards. Credit cards with EMV chip technology are embedded with a microprocessor chip that encrypts and stores the account information. Many countries outside the U.S. have already converted from magnetic stripe to this technology. This technology will increase acceptance and security of cards for international travelers, the Charlotte company said Monday. Customers will be able to request the chip card options through a branch or via the telephone beginning this week and online later this year.

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  • 5 Critical Strategies for Mobile Banking Security

Bank Systems & Technology

By 2013, one-third of mobile phone users are expected to use mobile banking services. Already, one out of five Americans accesses financial information through a mobile phone, according to March 2012 research conducted by the Federal Reserve Board’s Division of Consumer and Community Affairs. Yet the increasing use of mobile financial services has been accompanied by increased risk. According to Javelin Strategy’s 2012 Identity Fraud Report, smartphone owners are one-third more likely to have been victims of identity fraud in the past year.

Read more

  • Isis mobile pay service may start trials in August

CNET

Isis, a joint venture among Verizon Wireless, AT&T, and T-Mobile USA, will likely start trials of its mobile-payment service in August, according to a person familiar with the launch plans. The August target, however, isn’t set in stone. CNET has gotten indications elsewhere that the timing may change. A representative for Isis only said the service would begin trials in Salt Lake City and Austin, Texas, this summer, pushed back from the prior forecast of a mid-year launch. Isis will join Google Wallet in its attempt to get people to start paying at cash registers with their smartphones instead of a credit card or cash.

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  • Report: Consumers prefer mobile wallets from banks over other providers

NFC News

Consumers would choose mobile wallets provided by banks over other non-traditional mobile wallet providers, according to Auriemma Consulting Group’s (ACG) lastest Mobile Payments Report. ACG’s report found that 18.4% of consumers would choose a mobile wallets provided by a bank (American Express, Barclays, Lloyds TSB, etc.), while 11.6% of consumers would prefer mobile wallets from digital/mobile payment providers (PayPal, Skrill, Neteller, etc.), and 9.5% would get their wallets from mobile operators (O2, Vodafone, etc.). Only 5.1% of consumers said they would acquire wallets from external providers like Google, Apple and Facebook. “The mobile wallet is poised to gain strong momentum and usage over upcoming years, so in order to capitalize on the strong consumer interest, banks will need to consider their preferred path moving forward in this space,” said ACG.

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  • BofA, Wells Fargo Rolling Out New Mobile Banking Services

Reuters

 Bank of America Corp and Wells Fargo & Co are rolling out more retail services accessed by mobile phones, including check deposits, as the banking sector races to cut costs in a tepid economy. Starting Thursday, Bank of America will allow customers to make deposits by submitting a photo of a check through their smart phones, the bank’s online and mobile banking executive, Aditya Bhasin, said on Monday. The No. 2 U.S. bank is also rolling out a service allowing customers to send money to other individuals using their email address or mobile numbers, as well as expanding a coupon service that can be used by mobile customers. Wells Fargo launched its mobile check deposit service earlier this year and will gradually expand it across the United States by the end of the year, said Brian Pearce, head of the retail mobile channel at the bank.

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FI Spotlight: Vantage Credit Union

We got the chance to interview Eric Acree, executive vice president at Vantage Credit Union (VCU) about the TweetMyMoney program VCU launched in 2009. VCU was early to the social scene when they launched TweetMyMoney, the world’s first banking-by-Twitter service, on September 28, 2009. The service is available exclusively to Vantage members and is free of charge. With TweetMyMoney, members can monitor their account balances, deposits, withdrawals, holds and cleared checks with simple commands. Members can also transfer funds within their own account to different account types (checking to savings, checking to loans, etc.).

We chatted with Eric to learn more about the program:

Q: Where did the idea for the campaign come from, and how have you seen it grow over the past three years?

A: The idea for TweetMyMoney came out of an internal online brainstorming session between some technology staff and business staff (all participants were social media users as well). At that time, we did not have a ton of money available to hire a firm to create a mobile app, but we desperately wanted to provide something to our members. So, we were discussing possible ways to create a mobile banking solution for little money. There was much discussion on how we could possibly use SMS technology, which then led to ways to possibly use Facebook and Twitter. The Twitter platform provided the perfect opportunity for us and we were already familiar with it. Not everyone uses Twitter and not all Twitter users are comfortable using TweetMyMoney. So the growth of the service (when compared to more traditional/mass market mobile banking solutions) has been relatively small. However, we have several hundred members who use the service a lot, on a regular basis. It’s important to note that Vantage is currently developing more traditional mobile banking apps and plans to offer them to members late this summer. We will have a native mobile banking app for the iPhone, Android and iPad.

Q: What (if any) benefits do members receive from using TweetMyMoney versus SMS banking notifications?

A: There isn’t much difference between the two technologies since TweetMyMoney operates in a similar way to SMS. From a cost standpoint, using TweetMyMoney is a much cheaper option for Vantage since we did not have to invest money into a SMS infrastructure. For members who are Twitter users, the benefit is using a familiar technology to quickly and safely obtain information about their accounts. Obtaining information via TweetMyMoney is faster than using a web page (or even a mobile app) since TweetMyMoney does not require the same log-in steps.

Q: How have you addressed security concerns/questions around using Twitter to send and receive confidential banking information? Do you get many member inquiries about security concerns over using Twitter, or are they excited to have a new way to access financial information?   

A: Like other technology innovations launched in the past, TweetMyMoney quickly generated a lot of passionate commentary and opinions in the technology blogosphere after we announced its launch. We have incorporated several security layers and measures to ensure it is safe to use. When members use TweetMyMoney, the information contained in their tweets, as well as the information sent back to them, is generic, e.g. transaction commands, dollar amounts, dates, account code types, etc. In fact, most of this type of information is sent to millions of people every day by virtually all financial institutions in the form of e-alerts. If a member’s Twitter account was somehow compromised, all a hacker would see is this generic information, which is useless to the hacker. The key point is: no account number, nor other sensitive personal or account information, is displayed in TweetMyMoney. All the sensitive information is kept safe at Vantage behind the online banking firewall. Vantage also implemented a new security feature called Correspondence Authentication Codes inside our online banking service. So, every outbound electronic communication originating from Vantage (including tweets from TweetMyMoney) contains a unique code for each day of the week, thus ensuring the message is authentic when the member recognizes their unique code. Members can view and change these codes from their user profile section of our online banking service. In summary, we have taken extraordinary steps to ensure TweetMyMoney is safe. We ran its design and security controls by an industry-leading firm that has an exceptional track record in their line of work. They provided an unbiased opinion and helped validate our approach before we launched TweetMyMoney. Just for the record, in the nearly three years of the TweetMyMoney service being live, we have experienced ZERO security problems. Not one single security breach of any kind has occurred with TweetMyMoney.

Q: Vantage CU is socially savvy, with Twitter, Facebook and YouTube channels. What platform do you see the most member engagement on? Are members more interested in interacting with Vantage CU via Twitter or Facebook?

A: We are active on our Twitter handle and Facebook page. Our YouTube channel has few subscribers and we plan to utilize this platform more in the future. But, we see the most engagement with our members via Twitter.

Q: Final thoughts before we wrap up this interview?

A: The real beauty of TweetMyMoney is we have devised a safe and innovative way to communicate important financial information via an unsecure social media network. TweetMyMoney was our first (and boldest) mobile banking step, but we are excited to be bringing the native mobile banking apps for iPhone, Android and iPad users later this summer.

Want to see more of TweetMyMoney? Check out VCU’s videos about the program or connect with VCU on Twitter.

Social Media Statistics: By-the-Numbers, July 2012

It’s been a few months since we published a social media stats post, and there has been a lot of social activity this summer! Below are some interesting statistics on social media usage. Feel free to share your favorite social media statistics in the comments section or Tweet @bankingdotcom.

  • 250,000,000 The number of accounts that have upgraded to or signed up for a Google+ account (Source: Google)
  • 17: the percentage of cell phone owners who do most of their online browsing on their phone, rather than a computer or other device (Source: Pew Internet)
  • 3.6 billion dollars in gross revenue is projected by the end of 2012 for video sharing platform YouTube (Source: Citi)
  • 52: the percentage of all cell phone owners who use their phones while watching television (Source: Pew Internet)
  • 18: the percentage of teens who would stop communicating altogether if their favorite technological channel of communication disappeared (Source: AWeber)
  • 7.56: the average percentage of traffic to Facebook Pages from external referrals (Source: PageLever)
  • 41.7: the percentage of the top 10,000 websites that have some form of Twitter link on their homepage (Source: Pingdom)
  • 36.6 billion online content videos were viewed by US Internet users in May 2012 (Source: comScore)
  • 152,000,000: the number unique US visitors to Facebook.com in May 2012, placing the social network in second place behind Google (Source: Nielsen)

Curious if LinkedIn Groups are useful? Here are some tips on how marketers can benefit from participating in LinkedIn Groups.

What We’re Reading: Tweens & Mobile Banking, the Olympics and Money Experts on Twitter

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

  • Mobile Banking Advocates Open North American Unit

American Banker

Mobey Forum, a bank-led nonprofit focused on increasing the use of mobile financial services, has launched a North American division. Mobey Forum North America will bring together experts in the industry to resolve issues affecting mobile financial services, the group said Monday. Members will include representatives from American Express (AXP), Bank of America (BAC), Capital One Financial (COF), CIBC (CM), MasterCard (MA), TD Bank Group (TD), U.S. Bancorp (USB) and Visa (NYSE:V). Established in 2000, Mobey Forum works with financial institutions, mobile network operators, mobile handset manufacturers and payment processors and vendors to increase the use of mobile financial services.

Read more

  • 15 Money Experts Everyone Should Follow On Twitter

Business Insider

Who doesn’t get their news and information from Twitter these days? At @BIYourMoney, it’s practically a requirement to stay in the loop. Knowing who to follow isn’t as easy, so we’ve compiled a handy list of the best money experts on the Web who tweet. Our criteria: These people and sites are respected in their field—be it credit, housing, or retirement—tweet often, and have developed a following on Twitter, thanks to their razor-sharp insight.

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  • Payments and the London Olympics

Celent Banking Blog

There has been an increased interest from our clients and press in the Olympics-related payments topics as well. Is Visa right in monopolising payments for the Olympics? Will all those who receive Samsung Galaxy S III NFC phones to try out new NFC payments be aware of the potential security risks? And why were the ambitious plans to upgrade the London transport infrastructure to accept NFC delayed?

Read more

  • Mobility Matters: Tracking the Mobile Banking Revolution in Credit Unions

Credit Union Times

Get the headline news: mobile banking is not simply a new channel, it is a game changer – and without it, many institutions can expect to perish. “Mobile puts the bank terminal with the user. We have never before had that kind of computing power,” said Wade Arnold, CEO of Banno (formerly T8 Webware). David Albertazzi, an analyst with the Aite Group, pointedly added: ”Mobile banking is not online banking lite. It is a unique channel with its own features.

Read more

  • Where Banking Meets Tech: Why Businesses Must Adapt, Or Else

Forbes.com

If your business isn’t relevant, is it outdated, and virtually obsolete?  There should be no grey area when it comes to relevance. In my recent review of Brett King’s book, “Branch Today, Gone Tomorrow,” Frank Sorrentino of Forbes discusses how important it is for banks to stay relevant in order to survive. Today, we are seeing a shift in consumer behavior that requires companies to work harder to matter more.

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  • Mobile banking and tweens

Mobile Marketer

Tweens – there are nearly 5 million of them in Britain alone.  Aged between 10 and 16, they play a significant role in most family financial decisions. They directly influence up to $155 billion in spending annually, and have access to the Internet, money and smartphones. With the advent of new technology and greater freedom from parents, they are ready and willing to spend online.

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Tips: How to Choose a Bank for Your Small Business

Banking is one of the first things you’ll need to make a decision about as you get your business up and running. From business security systems to online marketing, everything about your business relates directly to your company’s financial sector. You’ll want to make sure things are efficient and glitch-free. As a small business, choosing a bank can sometimes be daunting. Here are three things to consider when choosing your banking company.

Location, Location, Location

As they say in the real estate world, the most important thing is location. Depending on the size and nature of your business, you may need a bank with numerous locations or a small bank in your immediate area. Location plays an important role when choosing a bank.

  • Does operating your business entail numerous runs to a bank in one day? If so, you’ll want to make sure you choose a bank with a branch local to you to cut down on time and gas accrued from running back and forth.
  • If your business transactions occur mostly online, location isn’t as important and you can focus on other features each bank has to offer.
  • Are you going to need lending? In today’s market, small banks are more likely to take chances on small businesses. If the bank is in your community, they may be more flexible and provide greater customer support.

Online Banking Selections

Regardless of whether you choose a banking corporation or a small business, you may want to choose a bank that provides online banking. Online banking has its perks, but there can be drawbacks if you choose a company that is only online.

  • Making the most of online banking can help your company reduce its environmental impact. If your company wants to be as green as possible, online banking can help you do just that.
  • Strictly online banking accounts typically pay a higher rate of interest than you can get from a brick and mortar competitor.
  • Online banking accounts may save time with the constant use of direct deposit, but because there are no ATMs, depositing checks and withdrawing cash become more difficult.
  • Open 24/7, accounts that offer online banking are convenient and allow for constant monitoring of payment and spending. You can catch fraudulent actions quicker than if you wait for a monthly statement.

Figuring Out Fee Structures

As you come closer to choosing a bank for your business, you’ll need to look at the fee structure of each bank. Some charge fees after a certain amount of transactions or for various financial services. Determining what you need and the fees associated will benefit your business in the long run.

  • If you’re going to need financial advice and the bank you are considering offers such services, look into the related costs, if there are any. See what extras are associated with your account and which aren’t.
  • Larger banking corporations are more likely to issue corporate credit cards to small businesses, which can be used for financing. Rates are also usually less with larger banks.
  • Some banks will also charge small businesses for online banking services, even though they do not charge individuals.
  • If you will need a loan, what are the rates? You’ll want to figure out what kind of loan you’ll need and the rates associated. Banks often limit loan amounts so asking what each bank’s limit is might be a good idea.

Always ask questions about fees and services associated with your account. Pin down what you need and make sure the bank you choose has those options available. Don’t forget to occasionally shop around. Your business changes and so do the banks’ rates and available options. As your business expands and shifts around, you may have different needs that your current bank doesn’t provide.

Contributed content by: Erica Bell: Erica is a small business writer who focuses on topics such as business plans and social media trends. She is a web content writer for Business.com.

What We’re Reading: Mobile Risks, Small Biz RDC and Facebook’s Online Bank Plans

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

  • Retail banks increasing their mobile investments   

ABA Banking Journal

Responding to consumers’ growing interest in banking from their mobile devices, retail banks plan to invest more money to enhance their mobile offerings, according to a survey of Consumer Bankers Association members conducted by Forrester Research Inc. CBA members reported they will spend one-third of their total digital budget on the mobile channel this year. The joint research project surveyed digital executives at 19 leading U.S. and Canadian banks. The findings are summarized in a two-part report, “The State Of North American Retail Banking eBusiness 2012.”

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  • Tackling Emerging Mobile Risks

Bank Info Security

So how are banking institutions addressing mobile security risks? Keith Gordon, who oversees authentication and security strategies for Bank of America’s consumer online and mobile banking units, says most institutions are just now forging ahead in the mobile space, and new security gaps are areas for which they all must prepare, proactively.”Customers are now using their mobile phones much like they use their PCs,” Gordon says in an interview with Information Security Media Group’s Tracy Kitten (transcript below

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  • Why Small Business RDC Matters

Celent Banking Blog

Celent recently completed the analysis of some small business research among a random sampling of 500+ small business owners with annual revenues up to $2.5 million. The universe of U.S. SMBs excluding those making less than $50k/year is roughly 25 million. The research underscored the centrality of check payments among small businesses – like it or not. For example, 90% of responding SMBs accepted checks compared to 70% accepting cash, 33% credit cards, 31% debit and 28% PayPal (with large variations depending on type of business).

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  • New Metric For Buying Decisions

Credit Union Journal

Aite Group has developed what it says is a better metric for calculating consumer likelihood to buy products and services from a bank or credit union than a broader business metric developed about a decade ago. Aite Group’s senior analyst Ron Shevlin has created something he calls the Referral Performance Score, which he says he’d like to see replace the Net Promoter Score. It’s based on this simple premise: those who actually take the time to refer their financial institution to others, or who expand their relationship with more products or services, are better indicators of potential new business than those who express only an intention to refer the institution or to deepen the relationship. The Net Promoter Score was invented by Fred Reichheld, a consultant for Bain & Co., who introduced it in a Harvard Business Review story in 2003. It uses a 10-point scale to calculate consumer likelihood to refer a company to family and friends.

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  • Mobile Payments, Online Bill Payment Usage Grows: IDC

eWEEK

Americans are fast adopting mobile payment services, but are more likely to buy physical goods than digital downloads. Mobile payments have more than doubled in popularity, reaching more than 33 percent of U.S. residents, according to the results of a report, “Business Strategy: Results from the 2012 Consumer Payments Survey” by IT research firm IDC’s Financial Insights division. More than half of those who made a mobile payment used PayPal Mobile (56 percent), with Amazon Payments and Apple’s iTunes service statistically tied at about 40 percent, according to the report. More respondents reported buying physical goods with their phones than online services, digital goods or virtual currency, despite the general popularity of digital downloads, such as applications and music, the report noted.

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  • Facebook wants to be your online bank

Fortune Tech

The social media giant is quietly supporting new services for banks that want to engage socially with their customers: The decidedly unsocial business of online banking. Someday soon, Facebook users may pay their utility bills, balance their checkbooks, and transfer money at the same time they upload vacation photos to the site for friends to see. Sure, the core mission of the social media network is to make the world more connected by helping people share their lives. But Facebook knows people want to keep some things — banking, for example — private. And it wants to support those services too.

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How Banks Charge Fees Without Jeopardizing Customer Satisfaction

*Guest post by Karen Licker, Social Banker & Content Contributor (Independent) at J.D. Power and Associates

As banks continue to explore ways to manage the sensitivity around charging fees while minimizing the impact associated with charging those fees, it’s important to focus on the following three areas:

1. Stability
The data from our 2012 U.S. Retail Banking Satisfaction Study shows that fee structure changes not only have a significant impact on customer satisfaction, but they also lead to an increase in problem incidence and intended attrition. The following are some best practices banks should consider when making changes to fee structures:

  • When changes are necessary, focus on limiting the number of changes customers are forces to accept. For example, making two or three changes to fee structures per year may be more confusing and less satisfying than making multiple changes at one time.
  • When fee changes are necessary, it is critical to communicate the changes well in advance so that customers are not caught by surprise.
  • While communication of fees is mandatory, there are some other ways for financial institutions to help ensure customers are aware of changes—e.g., communicating changes more than once and preferably via multiple channels, such as mailed letter and online notification.

 

Source: J.D. Power and Associates 2012 U.S. Banking Satisfaction Study

2. Communication

The impact of communication on the fee experience goes far beyond simply providing advance notice of any changes to the fee structure. There are other best practices that banks can follow to provide their customers with more information regarding fees or information on other product pricing options available:

Account initiation: Starting with account initiation, it’s vital that representatives perform a detailed needs assessment and identify the products that meets customers’ needs. Performing a detailed needs assessment during account initiation provides a big lift in fee understanding (22 percentage point difference for “completely” identified needs) , while also providing a significant lift in satisfaction.

Online account information: It goes without saying that providing customers with clear and concise access to account information and other pertinent information via the bank’s website is crucial. Clarity of account information and Clarity of information provided on the website provide considerable lifts in Fees satisfaction, while also improving fee understanding by 16 percentage points.

Outbound communication: Proactively contacting customers three or four times per year regarding banking products and services enhances satisfaction and understanding of both fees and product offerings, without creating information overload. Study findings show that satisfaction and understanding both begin to decline when customers receive five or more proactive contacts per year. This also includes performing account reviews to ensure customers have the right products. Empowering branch tellers and call center representatives to proactively review customer accounts and make recommendations for alternative products and pricing options provides lifts in Fees satisfaction and understanding and significantly improves the bank’s Brand Image rating for being Customer driven.

3. Value-Based Pricing

Despite the current level of price sensitivity related to service charges, such as maintenance fees and minimum balance requirements, there is still an opportunity for banks to generate revenue through maintenance fee charges by creating a clear value proposition aligned with the differing needs of their customer base. It’s also important to review the options that banks currently provide their customers with respect to maintenance fee charges.

Many banks have installed a minimum balance requirement so that customers are able to avoid maintenance fee charges, but it has created various levels of dissatisfaction. At the same time, customers indicated that discounts for students, senior citizens, military personnel, or multiple products are not widely offered, which may be related to poor communication of the discounts by the institution and, thereby, low customer awareness. But most importantly, many banks do not clearly communicate the benefits customers will receive in exchange for the maintenance fees they pay, nor are banks providing different pricing options based on channel and product usage.

By understanding the key drivers of high fee/above-average satisfaction across segments, as depicted above, banks should consider the following strategies:

Explain the value proposition—When considering how to roll out a new monthly maintenance fee structure for customers in a particular segment, banks should emphasize the offerings most important to that specific segment. For example, in their explanations to customers in the Affluent segment, banks should promote their mobile banking applications/improvements; their ability to provide proactive advice on accounts; their focus on an efficient and courteous branch experience; and their product offerings, such as debit card with rewards and mortgage discounts.

Develop unique pricing options—By understanding channel preference and usage, banks may potentially create unique pricing strategies. For example, since data shows that customers in the Affluent/Emerging Affluent segment tend to have lower levels of branch usage and preference than do other customers, banks may potentially offer these customers a special rate for low branch usage, such as visiting a branch once every 4 months. From the perspective of customers, they are getting a special deal for something that relates directly to them, and from the bank’s perspective, they tend to benefit by minimizing branch traffic and staffing needs.

The Bottom Line:
There are a few banks across the industry that are able to charge customers maintenance fees without jeopardizing satisfaction, including Frost National Bank, Woodforest Bank, Hancock Bank, and S&T Bank. Customers of these institutions are more likely to be charged maintenance fees, compared with industry average, yet Fees satisfaction remains significantly above average.