Banks have a reputation for being stodgy and conservative. But Credit Agricole (CA) has broken the stereotype. I had a great discussion a few weeks ago with Bernard Larrivière, Director of Innovation, and Emmanuel Methivier, the CA Store Manager, about the CA Store launched last fall. The store houses new services developed by third-party developers using the bank’s secure customer data — one small step for CA, one giant step for the banking industry and the data economy.
The CA Store was not only inspired by the Apple Store model but also by government open data initiatives. The public sector provided the model of exposing APIs to internal data and working with independent developers to encourage application creation. However, in a move that will likely be carefully watched by their public sector brethren, CA recognized the need for a better business model to incent developers to use the data, and to sustain the development and maintenance of the applications.
. . . Nor has it ever really been. Government data has long been a part of strategic business analysis. Census data provides insights into local standards of living and household budgets, health needs, education levels, and other factors that influence buying patterns for all kinds of goods and services. The US Bureau of Labor Statistics and the International Labour Organization provide data on employment and the availability of skilled labor that helps inform decisions on where to locate manufacturing or other facilities. The World Bank and UN data provides insights into global trends.
Moreover, the release of government data has itself spurred billion-dollar industries. Think weather data released in the 1970s by the National Oceanic and Atmospheric Administration – which gave birth to the weather industry and services like Accuweather, weather.com, wunderground, and newer services like ikitesurf.com’s “wind and where.” Data from the US Global Positioning System (GPS) was opened to civilian and commercial use in the 1980s and has given rise to thousands of location-based services. Think FourSquare, Yelp, and Where’s The Bus?
I was both encouraged and perplexed by an article in The Wall Street Journal that described the internal debate at Bank of America over how to grow revenue. One side of the debate wants to charge new fees for basic services like checking accounts. And who do they want to charge? Their unprofitable customers who “typically have less than $50,000 in annual household income.” Those customers do little business with the bank, and Bank of America reportedly loses a couple of hundred dollars a year on them.
The other side of the debate wants to raise revenues by getting these unprofitable customers to buy more financial products from the bank — for example, get a credit card or buy a CD or take out a mortgage. If that happened, the problematic customers would generate enough revenue to become a money-making proposition for Bank of America.
If I were picking the winner of this debate, the decision would be easy. A growth plan that depends on extracting ever-increasing fee revenue from the very people who can least afford to pay it – for services that were formerly free – doesn’t seem like a growth plan at all. But getting a bigger share of those same customers’ wallets by selling them products that they’re going to buy from someone is a strategy that’s already working today for a bank that I’ll talk about in a minute.
The real question in this debate should be, how can Bank of America get its unprofitable customers to do more business with it? The answer: Provide a vastly improved customer experience — toe-dipping will not get the job done.
Recently, Forrester released a report entitled “What Drives Retention and Sales In US Banking?” that tackles this question from the consumer point of view. Using regression analysis, we uncover how these drivers vary for acquisition, retention, and cross-selling in US retail banking.
What did we find? For one thing, consumers value trustworthiness from a bank above all else for both sales and retention. This comes as no surprise to us; with so many financial institutions to choose from, consumers want to do business with a bank that they trust. This finding also supports the key theme that Harley Manning and Kerry Bodine focus on in their recent book, Outside In: Treating your customers well and providing them with a positive customer experience pays off.
The graphic below shows the drivers of retention for the US retail banking customers: The perception of trustworthiness is off the charts as a driver of retention, and offering good customer service is the second-most influential driver. What our analysis shows to not impact retention — and even shows a negative relationship with retention — is having low APR and many locations.
Australian Banks have often been at the forefront of global banking trends, or at the very least, fast followers that learn quickly from the mistakes of others. In Australia, mobile banking has quickly become a "war" amongst the majors with a range of different banking services and approaches - from basic access to transactional histories, transfers, payments, integrated retail services, and even near-field-communications-based micro-payments systems.
But how much of the mobile banking channel do banks really need to own? Most banks no longer own or operate their own ATM networks. They control the flow of transactions through that channel, but they generally have little to no interest in owning the assets or operating ATM cash management processes. Mobile banking is a complex and costly business to be in. With the advent of Internet banking, it quickly became clear that the cost of delivering online banking services through the internet was rarely, if ever, a more cost-effective channel than the bank-owned and operated PC-based products (remember the dedicated dial-up modems!). But in theory it should have been. All of the cost modeling showed that it should be cheaper. Yet banks have continued to invest more and more in building out, maintaining, operating - and particularly securing - their Internet banking channels.
Apparently Citigroup is about to join a “growing number of banks and credit unions” that have adopted some version of a one-page disclosure form. That form makes it easier for customers to see and understand fees.
Now don’t get me wrong: Making it easier to understand fees is a step forward. After all, ease of doing business is the second level of the customer experience pyramid and only slightly less important than meeting customer needs.
What has me shaking my head is the next part of the article. It says that these new summary pages come in response to complaints about rising fees, including fees that few customers knew about in the first place, like a fee for getting a paper statement and — my personal favorite — a fee for closing an account.
A fee for closing an account? Really? I may be old-fashioned, but I’m used to paying people to perform a service for me, not paying them to stop performing a service for me.
Here’s why the whole “fee transparency” thing misses the point: Your bank really, really wants you to open more fee-generating accounts with it. When you add a savings account or CD to your checking account, or take out an auto loan or a home equity loan, you ring its cash register.
During the past decade, I have worked with many analyst relations (AR) people as well as specialist AR firms. I have never blogged about them in the past, and I have no intention to do so in the future. Earlier this week, however, I saw that an employee of one of the specialist AR firms authored and published a comment on my most recent report: “Global Banking Platform Deals 2011: Functionality”.
This comment gives the impression that my report only provides common wisdom in that it only suggests that “one of the key differentiators for system selection is a strong track record.” The author also explains that this “may be at odds with the current market landscape as new regulations are set to change the way that the capital markets work and vendors are all developing new functionality to cope” – just to mention a few examples.
My perception is that the author either did not read my entire report or preferred to focus on the six-and-a-half-line summary of an eleven-page report – with a comment that is longer than the summary. Why this perception? First of all, the report is about banking platforms, and Forrester’s definition of banking platforms does not even mention capital markets. More importantly, I do not disagree at all with the author’s statement as far as the relevance of supporting new regulation is concerned – just the opposite, albeit more from the perspective of retail/consumer, private, or corporate/commercial banking.
Customers today have more choices than ever. Not only that, they have more information about those choices than ever. And they can get that information anytime, anywhere, and on whatever device they happen to be using at the moment. These changes have collectively put customers in the driver’s seat.
If you’re a fan of strategy guru Michael Porter, you can think of this as a shift in one of his five forces of competition: buyer power. But even without a sophisticated analytical framework, you can feel this change in your daily life. That’s because you’re a customer, too, by virtue of the fact that you buy goods and services, day in and day out.
Try comparing the power you used to have as a customer with the power you have today. I recently tried this exercise by comparing the way I picked my bank in 1998 — when I moved to the Boston area for a job — with the options I have for picking a bank today.
In June of ’98, I wanted to switch to a local-area bank but didn’t know where to begin. I dreaded doing the research on top of moving my home and starting a new job. The woman who recruited me suggested that I sign up with Bank Boston because it had the most ATMs in our area. With a sense of relief, I did just that and went on with my life.
Over the intervening years, Bank Boston was acquired by Fleet Bank, which was later acquired by Bank of America. Today that makes me a Bank of America customer, even though I never decided to do business with it. Fortunately, the relationship has worked out okay. But what if it stopped being okay and I wanted to switch? How hard would it be to pick a new bank and switch in 2012?
When designing application infrastructure strategy, planning for the renewal of their application landscape, or assessing their overall strategic position, banks and other types of firms in financial services typically like to know the answer to the question: “What are the others doing?”
It is time now to update the survey results: Forrester has just started surveying banks in North America, Europe, and further geographies about the current state of their application landscape, their key issues and concerns, and their plans for the future. At a high level, the survey is designed to answer the question: “What are others doing?” Phrased in a different way, it targets the question: “What are the key trends regarding the transformation of the application landscape in financial services in its multiple facets?”
To make this survey successful, Forrester needs your help. If you are working in financial services in any role that is related to financial services architecture and application delivery (including the more planning-and-strategy-oriented aspects of application delivery), please participate in Forrester’s Global Financial Services Architecture Survey 2012. Please contact Reedwan Iqbal (firstname.lastname@example.org) who will send you a link to the online survey.
Technology is radically changing the way bank customers interact with their providers, and mobile touchpoints are at the forefront of this change. In the past five years, mobile banking adoption in the US has more than quadrupled, hitting 17% by the end of 2011. This represents a compound annual growth rate (CAGR) of more than 33%.
As such, eBusiness professionals and mobile strategists at banks are in a white-knuckle contest to out-do each other in the mobile space. To evaluate and gauge banks’ mobile offerings, we applied Forrester’s Mobile Banking Functionality Benchmark to the four largest retail banks in the US.
What we found:
Big US banks offer solid, not-yet-splendid, mobile services. We employ 63 individual criteria in our Mobile Banking Functionality Benchmark methodology. The combination of weightings and scores for the criteria generates an overall score based on a 100-point scale. In our inaugural ranking, the four largest US banks posted an average score of 63 out of 100 – above our minimum standards but far from perfect.