Online Banking Engagement: Data from Digital Insight

Digital Insight has been conducting a comprehensive and ongoing study of financial institution customers. From these studies, the company has been able to provide a deeper view of banking customer behavior across several categories, such as mobile and online banking. Earlier this year, we examined mobile banking behavior and now we are taking a look at how online banking is an integral engagement tool for financial institutions. Below are key findings from Digital Insight’s online banking study, and you can view a more in-depth analysis here.

As we continue this series of data, we will be publishing blog posts on additional topics on Banking.com. *For information on the on the methodology used for the study you can download the PDF

Fast Facts: What You Might Not Know About Prepaid Cards

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more. This iteration focuses on the ins-and-outs of prepaid cards: a flexible financial alternative for underbanked individuals.

A flexible financial alternative for underbanked individuals, prepaid cards are among the fastest growing payment products in the United States, proving to save money both for users and the American taxpayer.

FACT: Prepaid cards provide an effective alternative for millions of consumers who don’t have access to a checking account and, increasingly, a convenient additional financial tool for many consumers who have checking accounts. Almost $1 trillion in payments from employers and the government are made to 80 million adults in the U.S. who are financially underserved. For many, replacing paper checks with direct deposits is not an option.

FACT: Prepaid cards allow the 11 million households in the U.S. without bank accounts to be part of the mainstream American economy, make electronic payments, and receive electronic fund transfers.

FACT: A 2012 study finds that 73% of prepaid card holders are highly satisfied with the product, 61% prefer prepaid cards to credit cards, and only 37% prefer to use cash.

FACT: Prepaid cards are inexpensive to use. According to a 2011 Bretton Woods study, prepaid cards only cost users an average of $185 per year, while it costs on average $273 per year to use a basic checking account and $256 per year to use a check casher.

FACT: A 2012 Pew study found that prepaid cards are less expensive than checking accounts for financially inexperienced consumers.

FACT: Prepaid cards are widely accepted. Cards from large brands, such as Visa and MasterCard, can be used everywhere debit cards are accepted and at millions of ATMs worldwide.

FACT: Prepaid cards are safe by allowing consumers to make purchases and pay bills without carrying large amounts of cash. In addition, prepaid cards frequently provide zero liability to the cardholder if it is lost or stolen.

FACT: Nearly all prepaid cards in the U.S. are issued by banks, as a 2012 survey found 47 percent of banking customers are more likely to use prepaid cards if offered by their financial institution.

FACT: Prepaid are useful for all kinds of people in a variety of contexts. For example, they facilitate inclusion and build financial literacy skills by helping families limit spending and stay on a budget.

FACT: Prepaid cards are used by people of all income levels. Of those who are likely to use prepaid cards, 26.4% earn less than $35,000 per year, 36.7% earn between $35,000 and $65,000 per year, 22.1% earn between $66,000 and $100,000 per year, and 14.8% earn over $100,000 per year.

FACT:  Governments are turning to electronic payments because they are efficient and cost effective. Prepaid cards allow those without bank accounts, including 4 million Social Security recipients, to still receive their payments in an easy, electronic way.

FACT: Prepaid cards save taxpayer dollars. While it costs the federal government $1.03 to issue each paycheck, it only costs 10.5 cents to issue an electronic payment. The U.S. Treasury estimates it will save more than $1 billion over 10 years by switching from a check-based system to electronic payments with a prepaid card option.

FACT: Prepaid cards save paper. The U.S. Treasury estimates it will save 12 million pounds of paper over 5 years from making Social Security payments electronically.

FACT: A spring 2012 study finds that 95% of recipients are satisfied with the Treasury’s electronic benefit payment system and 93% would recommend it to friends and family.

You can view all previous Fast Facts at www.RoundtableResearch.org. Copyright © 2013 The Financial Services Roundtable, All rights reserved.

Taking Advantage of the Largest and Fastest Growing Business Banking Segment (Infographic)

There is a significant business market that is being ignored by almost every major bank. Many know this market as the small office/home office (SOHO), non-employer or personal business segment (generally thought to be businesses with less than $100,000 in annual sales revenue). With over 20 million entities, the SOHO market is over twice the size of the small business segment ($100K-<$10MM), representing seven out of ten businesses under $10MM in annual sales. This is not only the largest business segment, but the fastest growing as well. Barlow Research recently completed a comprehensive, multi-sponsored study that gathered the information needed to segment the SOHO market, examine their financial management, payment and credit card behaviors, measure the value of the SOHO customer, analyze product usage and explore business Internet banking and mobile device habits.

For more information, you can view the press release that was issued here.

Money Sense: Financial Literacy in the US

Did you know that 2 in 3 adults don’t prepare written or digital household budget or that spending went down 3 percentage points in 2013?

Gauging the financial literacy of your members and customers is a necessary step to offer them the best services, tools and education to manage their money.

Below is an infographic from Online Accounting Degrees which details some interesting statistics about financial literacy in the US.

What do you think? How are you serving these knowledge gaps?
Dollars and Sense: How Wise Are We With Money?

Source: Online Accounting Degrees

The National Debt: How Do Uncle Sam’s Accounting Skills Measure Up?

How good are Uncle Sam’s accounting skills? With the national debt approaching $17 million, where does this borrowed money come from? Did you know that the D.O.D. cannot explain missing $1 trillion + 56 airplanes, 32 tanks and many other missiles?

Reader Dave Sawers shared the infographic below from Masters in Accounting which includes more interesting stats on the subject.

Take a look and let us know what you think by posting in the comments below or tweeting at @Bankingdotcom.

 

Missing Money
Image compliments of Masters in Accounting Degrees

Fast Facts: National Small Business Week

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more. This iteration focuses on Small Business Week, a local and national event celebrating small business in the United States.

This year marks the 50th anniversary that the U.S. Small Business Administration has been highlighting the impact of small business owners and entrepreneurs through National Small Business Week.
FACT: President Obama declared June 16-22 National Small Business Week, calling small business the economy’s engine and our biggest source of new jobs. This year marks the 50th anniversary that the U.S. Small Business Administration has been observing this event.

FACT: In the United States, there are an estimated 27 million small businesses, which outnumber corporations 1100 to 1.

FACT: One-third of small businesses rely on credit for financing and 60-80% of new jobs come from small businesses.

FACT: In 2010, small and medium-sized enterprises accounted for 97.8% of all U.S. exporters and 97.2% of importers.

FACT: Small businesses are innovators and produce 16.5 times more patents per employee than large firms.

FACT: 73% of small business owners feel successful and 47% are optimistic about the national economy improving this year. 44% of owners feel more confident about their local economy than the national economy, 23% feel more confident about the national economy than their local economy and 33% were not confident about either.

FACT: There is still work to do–There is a hiring standstill among small businesses, as 68% of business owners have not hired in the past year and 63% do not plan to hire in the next year.  Of business owners who have hired in the past year, 70% hired only one or two employees.

FACT: Small business owners who have not hired in the past year say they cannot afford to, their business isn’t growing, or they are taking on additional responsibilities themselves; only 14% cited a lack of qualified talent.

FACT: Since 1963, the U.S. Small Business Administration has highlighted the impact of outstanding entrepreneurs and small business owners through events across the country.  This year’s events will be held June 17-21, in Seattle, Dallas, St. Louis, Pittsburgh and Washington, D.C. and will offer tips, tools and training for small businesses to start, succeed and grow.

FACT: Small business owners will contribute to National Small Business Week by participating in online panel discussions on hot topics like social media and business financing starting daily at 4pm ET. All events will be streamed live.

FACT: Small Business Week 2013 sponsors include Northrop Grumman, Raytheon, Microsoft, National Association of the Self Employed (NASE), Arlington Texas Chamber of Commerce, AT&T, ADP, Western Pennsylvania Small Business Network, Staples, Dun & Bradstreet Credibility Corp., Visa, Women Impacting Public Policy, Lockheed Martin, National Association of Government Guaranteed Lenders, Business Forward and Office Depot.

 

You can view all previous Fast Facts at www.RoundtableResearch.org.

Copyright © 2013 The Financial Services Roundtable, All rights reserved.

 

Mobile Banking Engagement: Data from Digital Insight

Digital Insight has been conducting a comprehensive and ongoing study of financial institution customers. From these studies, the company has been able to provide a deeper view of banking customer behavior across several categories, such as mobile and online banking. In this first post, we examine mobile banking statistics and how they both impact and benefit financial institutions. Below are key findings from the study, and you can view a more in-depth analysis here.

We will be publishing data on additional topics in the coming months, so stay tuned via Banking.com. *For information on the on the methodology used for the study you can download the PDF

Fast Facts: Financial Abuse of the Elderly

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more. 

The elderly are frequent victims of financial abuse, exploitation that often goes unreported. The financial services industry has programs in place to prevent this abuse from occurring and to support victims of financial exploitation.

FACT: June 15 is World Elder Abuse Awareness Day (WEAAD).

FACT: On June 15, 2006, the International Network for Prevention of Elder Abuse and the World Health Organization introduced WEAAD to give an opportunity for people around the globe to educate others on the high level of abuse and neglect of older persons. Every year on or around June 15th, communities and neighborhoods plan activities to raise awareness of the social and financial abuses elderly people currently face.

FACT: In 2010, elderly victims lost at least $2.9 billion to financial exploitation, a 12% increase from 2008, according to a 2011 MetLife study of Elder Financial Abuse.  Today, although people ages 60 and older make up 15% of the population, they account for 30% of investment fraud victims.  According to NAPSA, 90% of abusers are friends and family members.

FACT: The elderly are a target for financial abuse because they may be more likely to depend on others for help, have predictable patterns, usually have less understanding of modern financial management, and have accumulated financial savings. Persons over the age of 50 control over 75% of the nation’s consumer financial assets (about $16 trillion), according to the SEC in 2006. In 2009, the net worth of households 65 and older was about $18 trillion.

FACT: Men and women of any race, economic level, or health status can become victims of elder financial abuse.

  • Women are twice as likely as men to become victims.
  • Most victims are between the ages of 80 and 89.
  • AARP found the average age of investment fraud victims to be 69.
  • Most victims live alone and require help with health issues and home maintenance.

FACT: Signs of elderly financial exploitation include unpaid bills, changes in banks or attorneys, unusual transactions or changes to accounts, changes in spending patterns, new individuals accompanying the customer to a bank, unfamiliar signatures, missing property, and a lack of personal amenities. FACT: Financial institutions are often the first line of defense against financial elder abuse.

  • Financial institutions use sophisticated technology, modeling, and training to be on the forefront of fraud detection.
  • Many financial institutions have extensive programs to educate employees and customers on detecting abuse and steps to secure accounts from the lure of fraudsters.
  • Financial institutions work with law enforcement and community organizations to prosecute and prevent elderly fraud abuse. The 2010 Elder Justice Act authorizes $777 million to establish a more ample response to fighting elder abuse.

FACT: Ways senior citizens can protect against financial abuse: establish a budget, determine appropriate products for you, plan your estate, prepare for unexpected expenses, choose someone you trust when providing Power of Attorney, respond cautiously to internet, mail, or phone inquiries, contact your bank if you suspect anything, protect passwords and account numbers, look out for scams, keep details of deals in writing, frequently check your credit report, and don’t be afraid to ask for help. FACT: You can contribute to World Elder Abuse Awareness Day by visiting “Join Us in the Fight Against Elder Abuse.” You can view all previous Fast Facts at www.RoundtableResearch.org. Copyright © 2013 The Financial Services Roundtable, All rights reserved.

Big Picture, Small Details: Improving ROI in Bank Customer Satisfaction

Given the pace of change in the contemporary business environment, it’s easy to focus almost all attention on short-term trends and pressures.  New mobile initiatives? Check. Expanding into new markets? Sure. Rethinking the retail banking approach? Absolutely. But it’s also important to periodically step back and assess the big picture, if only to identify what might have worked earlier but isn’t any more.

In that context, a new report from J.D. Power & Associates offers an interesting, and perhaps contrarian, outlook on common beliefs and practices in the banking world. Titled, “Improving the Return on Investment in Bank Customer Satisfaction—Focusing on What Really Matters,” the study shines a light on issues may seem obvious but have slipped off the radar. This has potentially serious implications for many corners of the industry.

In the past few years, conventional wisdom in general and industry policies in particular have favored initiatives around increased advertising and severe cost cutting, among other areas, to boost revenue.  The new analysis from J.D. Power, however, reveals that despite the business justification for these moves, they do more to bring customers in than to keep them engaged, and this in turn hurts margins. By contrast, there’s a clear connection between enhanced customer satisfaction and a bottom-line boost. In fact, even a 50-point increase on a 1,000-point satisfaction scale could drive an 8.5% boost in pre-tax revenue.

So what can banking institutions do to keep customers happier? Many of the study’s recommendations are quite specific and tactical. In fact, that may be the point of such an exercise—a step back to gain a strategic view of the big picture helps uncover problems with the details.

Banks clearly need to place greater emphasis on maximizing account opening and onboarding activities, such as by highlighting account pricing and other features available, specifically in response to unique customer needs. It’s been found that share of wallet typically doesn’t grow much after the first year. Failing meet the most basic needs, such as those around understanding account fees and terms during initial contact, sets the groundwork for a relationship that can’t be enhanced or even sustained—new customers become former customers very soon.

Next, with Baby Boomers moving into retirement mode, it’s vital to broaden relationships with customers and increase awareness of, for example, investment opportunities. Here’s one stat that should be on the mind of every banking professional: Just by providing financial advice, banks can increase their share of investable assets by 11 percentage points.

And if you want to find banks with the highest attrition rates, look for those that take too long resolving customer problems. We don’t live in fantasyland—there will always be problems, and we have to deal with them. But in an age of technology-enabled instant gratification, the window for resolution is getting smaller. Customers know that many alternatives are just a click away.

None of this is to suggest that big-picture strategies should be set aside—in a time of enormous change, banks need to make bold moves in all areas, from infrastructure implementations and mobile apps to refocused retail approaches. But there are times when it’s important to do the same things better, and the new study helps provide exactly that focus.

Mobile Only Banking: The Pros & Cons for Financial Institutions

If you commute to work, go to the grocery store or walk down a busy street, chances are you will see someone using their smartphone. As a mobile-only lifestyle becomes more common, financial institutions have started offering additional mobile products to keep customers engaged across a variety of platforms. But, with this shift to mobile only banking comes a challenge to financial institutions: the ability to effectively cross-sell, especially as mobile users rely predominately on their mobile devices to conduct banking tasks and visit the bank branch less frequently.

Woman Holding Phone 2

According to the Online Banking Report[1], “We are almost at the peak of online access, with just one million new online households added last year, the fewest annual total since Internet banking came on the scene in 1995. The growth going forward will almost all be on the mobile front.  It’s been a fantastic five years in mobile, growing from less than 1 million U.S. households to about 28 million.”

Adding to this, a Digital Insight study of financial institution customers found that mobile only consumers are more actively accessing their financial information than consumers who only use a PC.  Online only logins per customer average 9.96, while mobile only logins per customer average 16.6.[2]

Mobile banking has many of the same benefits that are commonly used in PC banking, such as transaction history, bill payment and transferring money between accounts. Other positive outcomes to promoting mobile only banking include a lower cost to the financial institution per customer, as well as sustaining the generational aptitude to use mobile banking products. Javelin[3] “estimates that each in‐person transaction at a bank branch costs financial institutions an average of $4.25, while use of the online channel averages $0.19 per transaction and the mobile channel averages a mere $0.10.”

There are also many benefits to the financial institution to promote mobile only banking as the upcoming generation is focused on mobile and have a higher earning potential compared to older generations. An internal Digital Insight study of 27 financial institutions[4] found that 84 percent of mobile bankers are Gen Y and Gen X, and Javelin pointed out that by 2025[5], Gen Y will account for almost half of the nation’s personal income (46 percent). Targeting these specific users is a strong opportunity for revenue growth for financial institutions in the future.

Financial institutions will need to consider altering their branch banking methods as more consumers switch to mobile only banking versus online only. One challenge that financial institutions face from mobile banking is the inability to grow cross-sell opportunities through the online and/or branch channel, especially to Gen X and Gen Y.  These generations are the future of banking.  Mobile vendors are working on features to solve how financial institutions will handle cross-sell when fewer customers are entering the branch and less are logging online because mobile only is taking over.

Ilya Shalman, a Senior Certified Project Manager at Cap Tech Ventures wrote[6], “Financial institutions continue to struggle with creating cross-selling opportunities across their mobile channels… while the entire product offering from the online consumer site could be integrated into a mobile app, most options are not available. The failure to focus on cross-selling across channels is not only detrimental to your channel integration strategy but ultimately a threat to your bottom line.”

Ilya offers three threats to cross-sell on mobile banking: lack of mobile real estate, mobile platform immaturity, and code rigidity to incorporate. However, there are possible solutions for these threats. In addition, Andera’s Melanie Friedrichs wrote, “When it comes to cross-selling, experts suggest that less is more – consumers who haven’t thought about other products are likely to gloss over the heavy text and hit next as quickly as possible. If they are presented with a small number of choices and they can absorb the offer with only a few words, they are more likely to pause and consider the offer.”

A majority of the customers enter the branch for deposit only interactions. The issue with deposit only transactions at the financial institution is that once mobile remote deposit capture grows and the younger generation begins to deposit checks through their mobile device versus the branch, branch interactions will decline[7]. There will be a need for customer service representatives at banks and credit unions to morph into cross sell warriors, targeting those customers that still enter the branch.

As mobile only banking continues to grow, one cannot help but consider the positive and negative aspects this situation may bring. Mobile only banking will surely decrease transaction cost to the financial institution, as well as targeting a high earning potential market in the upcoming generations. However, the challenge of cross-sell efficiency will need to be combated with new practices. In addition, with the rise of Mobile Remote Deposit, comes declining deposit activity in the branch.  What do you think about the idea of mobile only banking? Will this become a strong benefit to the financial institution, or will it begin to cause challenges that the financial institution will have to consider and combat?

About Heather Youngo:  Heather is a business analyst with Digital Insight and leads the initiative on generating and maintaining the accuracy of financial institution profitability data.  Heather holds a Bachelor of Business Administration degree in marketing from the University of Georgia.


[1] Online Banking Report, Number 212, January 5, 2013, page 5

[2] Digital Insight Internal Internet Banking/Mobile study of 7 Digital Insight financial institution customers, February 2013

[3] Javelin Strategy & Research, A Tale of Two Gen Ys: On the Road to Long-Term Banking Profitability, page 6, January 2013

[4] Internal study of 33 Digital Insight financial institution customers, June 2010 through February 2013

[5] Javelin Strategy & Research, A Tale of Two Gen Ys: On the Road to Long-Term Banking Profitability, page 9, January 2013

[6] Ilya Shalman, with Michael Tevebaugh, Chris Crawford, Debbie Miller, Craig Miller: From “The Handheld Billboard – Cross Selling with Financial Services Mobile Applications”, from CapTech Blogs, July 2012

[7] Internal study of one Digital Insight financial institution client, November 2012