Customer World

Preparing for a world when customer transactional behaviour changes!

The way customers pay and transact is undergoing a huge change. Today, most financial institutions have a trail of the payments, spends or usage in their transactional systems thro' many traditional payment methods. But, as these trends below show, there is a huge new revolution underway. If you are in the business of customer data & insight mining or in marketing to these customers, then get ready for paradigm shift in tracking & influencing their purchases.( Thanks David for this post)

Take a look at the trends:

1. Digital money
According to AC Nielsen, 90% of transactions in the US will be cashless by the year 2020. PayPal already has 63 million accounts, which makes it larger than most national banks,while in Korea during the month of June 2004, 300,000 people purchased cellphones into which you can insert a memory card containing all your financial data. So will physical money soon be a thing of the past? Most observers say yes, but don’t underestimate the power of human nature and tradition.

2. Contactless payment
McDonald’s is testing ‘contactless’ payment technologies in the US (and elsewhere). Just drive-in, grab your goods and drive off. Payment is made automatically by a wireless device on your windscreen linked to your bank account. Mobile phones can and will do much the same thing.

3. Pre-pay and stored value cards
10 million households in the US don’t have bank accounts and many of these use their pay cheques to buy pre-paid credit cards. Around 8.5% of households without bank accounts own pre-paid credit cards but this figure is expected to rise to 25% by the end of 2006. This is one reason why companies like Visa and MasterCard are getting into the act by signing up Rap moguls and singers like Russell Simmons and Usher to put their names on prepaid cards.

4. Private currencies
Pre-pay is a type of private currency in that you can restrict where people spend their money, in some cases to a single brand, outlet or service. This is good news for loyalty and also good (or bad) news for privacy depending on your point of view. For example, parents can give their children pre-paid cards with certain categories or locations locked off. However, the big news in private currencies is what’s happening in the air and in cyberspace. According to the Economist magazine, airmiles are now technically more valuable than the US dollar while over in cyberspace gamers are exchanging cyber dollars for the real thing.

5. Debt
The level of credit card debt in Britain has increased by 73% since 1997. The UK now holds 60% of all credit cards issued in Europe and has 75% of all European credit card debt. Spending on credit cards now represents 11% of GDP and 40% of people say they expect to use their cards more with the advent of new technology. Meanwhile, the amount owed to credit card companies in the UK now stands at GBP £53 billion. Figures for other countries such as the US and Australia are following a broadly similar trend. So what happens if (when) interest rates really go up? Trouble, that’s what.

6. Everyone is a bank
If everyone from supermarkets and search engines to phone companies and airlines offer banking services where does this leave the banks? The answer could be as back office low margin sub-contractors or maybe banks will re-frame themselves as ‘wealthcare’ businesses.

7. Micropayments
Once upon a time people used credit cards for big purchases like holidays. Not any more. Now you can buy a 99cent song on i-Tunes with your credit card or charge your hamburger at McDonald’s to your plastic. In 2004 the average credit card transaction in the US was $67.81. Back in 1999 it was $72.83. Add to this the possibilities created by contactless payment, stored value cards and pre-pay and you have a recipe for radical change in the financial services sector.

8. Proof of identity
With cases of identity theft going through the roof in most countries, there will be a boom for companies and technologies offering electronic and other forms of identity verification. There will also be an increase in products and services aimed at helping people get their identify back after its been stolen.

9. Mobile phones becoming wallets
Have you noticed how fewer people are wearing watches these days? Under the age of 21 a watch is almost a novelty as people use their mobile phones to tell the time instead. And so, the theory goes, phones will replace wallets too as people find it more convenient to carry their cash digitally inside their phones.

10. The death of cheques
  Seriously, who under the age of thirty uses cheques these days?

Gartner CRM 2008 Summit

I was just going thro' some reports on the Gartner CRM 2008 summit. There are some highlights which I  saw was not new or earth-shattering but definitely makes a lot of sense to reinforce once more:

• Act on feedback, deploy changes and communicate actions to employees and customers - companies should view every contact with customers as an opportunity to deliver brand values and standardise on the business feedback management tool across the organisation and for all communication channels.
• Design processes from the outside in - most process redesign is done with the objective of improving operational efficiencies rather than to improve the customer experience; which requires the organisation to identify which processes matter most to customers then set about identifying what to improve: an outside-in approach.
• Act as one organisation to ensure consistency - the customer may interact with many parties as part of his or her business with a company. The challenge for the company is to ensure that information gleaned at one interaction is not forgotten in the next channel.
• Be open - organisations that want to improve the customer experience often become more open. Being more open may just mean opening up more channels or opening hours but it can mean much more. For example, some firms establish an environment where customers can support, promote, defend or refer their products and services through an online community.
• Personalise products and experiences - some personalisation options are simple, such as a website that enables customers to monogram products, while others are more complex, such as tailoring and personal pricing.
• Alter attitudes and employee behaviour - employees’ actions are often the most powerful improvements in a customer’s experience. Companies can alter employee behaviour in three primary ways: recruit the right types of employees, ensure standards such as policies, procedures and governance structures, and create training programmes and incentives that can modify employee behaviour patterns.
• Design the complete customer experience - many organisations have no plan or design for the customer experience. Companies with a focus on selling experiences focus on designing experiences. Customers of Disney, for instance, told it that difficulties in leaving the amusement parks often spoilt the experience, so the firm has worked to improve parking and traffic at its facilities.

My View:  The key question really though, is how do we enable all of this in organizations - to me it is about execution-employee focus. I think there is only a small mention on how do we reward, appraise and evaluate employees who should make this happen. This is really where the pieces begin to fall. There are conflicting KRAs in different departments and hence there are no compelling reasons to deliver a consistent customer experience. To put it bluntly, "if it does not hurt, it does not matter!"  This is where it needs to begin and end as the puzzles in the middle are put together!

Forrester’s 2007 Customer Experience Rankings

Bruce Temkin writes about the recently released Customer experience rankings by Forrester:

#1 ranking in Forrester’s 2007 Customer Experience Index (CxPi)…

The 2007 CxPi ranks 112 firms across 9 industries: Banks, Credit Card Providers, Health Plans, Insurance Firms, Internet Service Providers, Investment Firms, Retailers, TV Service Providers, Wireless Phone Carriers. The CxPi is based on consumer evaluations across three areas: 1) usefulness; 2) ease of use; and 3) enjoyability (see the methodology section below).

Here are the full 2007 CxPi rankings…

Costco took the top spot in the CxPi rankings - just barely beating out Borders. At the other end of the spectrum, Charter Communications landed at the bottom of the CxPi rankings. Here are some additional insights about the overall results:

• Retailers take nine out of the top 10 spots. All but one of the top 10 firms in the ranking is a retailer - and the only non-retailer isn’t a single company but a segment of banks called credit unions. Interestingly, all three wholesale clubs - Costco, BJ’s Wholesale Club, and Sam’s Club - made it into the top 10. Another retailer, Walgreens, came in at No. 11 to round out the firms that received an “excellent” rating.
• Communications firms, health insurers, and banks dominate the bottom. Four organizations ended up with “very poor” CxPi ratings: Charter Communications (for both TV and Internet), Medicaid, Cablevision/Interactive Optimum, and Aetna. Two other health insurers (United Healthcare and Anthem), two large banks (Citibank and JP Morgan Chase), and Sprint filled out the bottom 10.

CxPi Results Across Industries

We also looked at the overall results for the 9 industries included in the CxPi. Here’s how they did across all three components of the CxPi … 

Our 27 retailers significantly outpaced the other industries with an average overall score of 78%. Retailers owned the top spot in each of the three underlying customer experience categories as well, winning both ease of use and enjoyability by wide margins.

Bank Customers Say Give Me Some Respect

According to a recent survey report by Allegiance - Pulse of America Survey, there are 4 key areas banks need to engage with customers.

Helpful Service:  Customers like doing business with a bank that saves them time and money. Banks have focused on wait times, and overall, they are meeting customer expectations. But saving time is not limited to waiting in line. For example, online banking services should be easy to use and understand, which creates a strong avenue to build engagement.
Clear Communications: Customers are reluctant to rely on banks for unbiased financial information, yet they thirst for knowledge about the newest and best products and services available to them. Customers are saying you can connect with me emotionally by telling me about a product that is relevant to my situation. 
Personal Connection: Customers say that their one-on-one experiences with bank representatives (tellers, loan officers, or managers) have a meaningful effect on their engagement, both positive and negative. Banks should not underestimate the power of each one-on-one experience in building lasting engagement, and they should establish training and processes to establish best practices. 
Respect:  Banks must do better at making customers feel respected. Engaged customers cite bank reps who deliver service with speed and confidence. Dissatisfied customers cite bank fees as causing stress, which makes them feel less respected. In particular, some customers feel disrespected when banks game the system to increase bank fees wherever they can. The message to banks: Engaged customer are also savvy customers and expect to be treated fairly.

I quite agree with personal connection as an important engagement pillar, as technology is taking away personalized service from banking. Hence, banks need to identify ways of building personal connection with customers as they invest more in self-service technologies.

Managing the multi-channel paradox in retail banking

Frost & Sullivan has released a report on managing the multi-channel challenges that retail banking is faced with today. According to the report, multi-channel banking has increased the potential for diminshed sales opportunities despite the expanded number of distribution channels!

The report says:

"...the number of bank channels and touch points have proliferated and so has the complexity of the service delivery which has added to the overall cost structure. Rather than lowering the overhead, the greater number of touch points actually prompted customers to increase their transactions - resulting in higher overall costs...."

Some of the best practice recommended are:

1. Meet and exceed the needs of the high value customers - Find ways to creatively service the needs of these customers.
2. Provide "consistent" quality of multi-channel  experience - Don't create a fragmented feel of interactions across multiple-channels.Create an organization-wide customer experience strategy.
3. Integrate across channels.
4. Provide action-oriented intelligence - Integrated data can provide proactive customer interaction measures.
5. Employ Event-based selling

I believe the key point here is getting different silos of retail banks to work together with a common customer experience strategy across mutiple product offerings, agreed metrics around different channels( for acquisition, retention, cross-sell and customer service issues) and drawing-up proper handshake processes between channels when customers interact with banks.

Credit Card marketing in Facebook

Rob Walker has an interesting article on how Chase has developed a credit marketing  program in Facebook.

“We felt Facebook would be a good partner for us, since they had such strong credibility in the students’ world,” explains Sangeeta Prasad, who oversees branding for Chase Card Services. “And we felt, you know, financial institutions lacked credibility. Students don’t see credit-card issuers or financial institutions in general as meeting their needs.” Thus the company started offering a new card it called +1, primarily by way of a “sponsored” Facebook group.

The +1 program was largely devised by Noise Marketing, a company that specializes in reaching young adults with nontraditional branding tactics. Making Facebook central to a college-focused effort had obvious advantages. “Everyone talks about the fragmentation of the media,” observes Noah Kerner, the C.E.O. of Noise Marketing. “Yet there’s never been such a concentration of people from one segment in one place before.” The Chase + 1 group has attracted so many participants in large part because of a rewards-program scheme. One tweak of this familiar tactic is that some of the rewards are tied to “credit education” material. Kerner maintains this coupling is what’s “really resonated” with students. “It’s connecting with them on a basic level: ‘O.K., you’re not trying to pull the wool over my eyes, and I appreciate that,’ ” he says.

That said, the education component doesn’t use precisely the same curriculum that, say, Consumer Reports would design. Students are advised not to spend money they don’t have, which is hard to argue with. But some might replace the counsel to “Pay at least the minimum due on time so you don’t waste money on late fees” with a blunt example of how fast debt can accumulate if the minimum is all you pay.

Kerner says that more good-behavior incentives are in the works — like rewards for paying your bill on time. And it’s the rewards that really seem to draw people in. The +1 system involves racking up “karma points.” You get 1 for joining the group, 15 for registering your +1 card, 5 for taking a brief “credit essentials” quiz and so on. These points can be disposed of only within Facebook: either spent at a special store (White Stripes’ “Icky Thump”: 10 points; Ticketmaster gift card: 35 points; Facebook T-shirt: 10 points), donated to one of several designated charities or given to other Facebook members.

Interesting isn't it? Looks like there is a convergence of traditional direct marketing thinking with web and loyalty for which Facebook seems to be a great platform to begin with.

American Express brings its customer community together

American Express has launched a unique online initiative called The Members Project that enables its cardmembers to come together as a community by submitting and sharing their project ideas for making a positive impact in the world. Cardmembers can rate and discuss the project ideas on message boards and will ultimately vote and choose one innovative winning idea that American Express will help
bring to life with up to $5 million. The Members Project, which is a part of American Express' new brand campaign, "Are You a Cardmember," highlights the value of being a Cardmember and part of the American Express Cardmember community. "Our Cardmembers make up a unique community -- one that is highly engaged and passionate -- and we know that they care about the world around them," said Jud Linville, president of American Express Consumer Card Services Group. "Through the unique experience of The Members Project, our community of Cardmembers is pulling together and collectively shaking up the world just a little bit to do some good."

Cardmembers can go register and submit their project ideas for making a broad positive impact in one of the following categories: Arts & Entertainment, Business & Finance, Education, Environment & Wildlife, Fun, Health & Fitness and Community Development. Cardmembers can also participate by rating or posting comments about project ideas already submitted. For every Cardmember that registers, regardless of whether they come up with a project idea or just add their input on project ideas already submitted, American Express will contribute $1 toward the winning idea. The more Cardmembers registered, the more dollars available. American Express will commit at least $1 million and up to $5 million for the winning idea.

I love the deep engagement that this idea will create with their cardmembers.

Why not skin for credit cards?

Financial services products are sometimes too intimidating for consumers or too transaction focussed. How can you make an age old financial product like credit card interesting. Why not skins for credit cards that you have in your wallet? I read about this idea and thought it was quite interesting. It just makes the category interesting and financial services brands can make it a conversation starter for consumers.

..a company called CreditCovers started selling "skins," with special designs that consumers can stick over the fronts of their cards, theoretically transforming them from mere financial tools to emblems of identity...

Looks quite cool to me.

Loyalty drivers in financial services

Peppers & Rogers along with Carlson Marketing have come-up with an interesting report on the key drivers of loyalty in financial services. Some of the key drivers are:

1. Switching costs: The customers' perception of the effort to change from one financial services institution to another is 'switching costs'. As switching costs rise, so does the strength of the relationship.

2. Service:  This is a key driver. Financial institutions must resolve issues quickly, be easy to work with,  help customers find the best products etc. are very important.

3. Free Benefits: These benefits include online bill pay, free checking account, free entry into loyalty program etc. were deemed extremely important.

4. Location: While there is a lot of talk in financial services institutions about alternative channels, location seems to be an important driver of loyalty. Key aspects like ATM network, convenience of retail branches, distance to work or home etc. play a vital role.

Customization, Relevance and Frequency of communication drives relationships.

Download financialservicesloyalty.pdf

Soon, your phone will become your wallet

The world's largest credit card network is ready to replace plastic with silicon.

Visa hopes to turn hundreds of millions of cellphones into electronic wallets that are simply swiped in front of a merchant's scanner to complete a transaction. This form of "contactless" payment won't require a signature or a personal identification number, but will be limited to purchases of $25 or less, Mr. Gauthier said.

Visa expects about $140-billion (U.S.) worth of the transactions it processes will be done with cellphones by 2010. As large as that amount is, it would represent just a fraction of Visa's $4-trillion worth of transactions each year.

A second form of mobile phone payment that Visa hopes to test is transactions between individuals. How such deals would be authenticated remains to be worked out by the card issuers, but they could be much bigger transactions than the contactless ones, he said.

thro' globeandmail

Thumb-Print banking debuts in India

Wired reports on a new banking innovation that is taking place in India. Thumb-Print ATMs are being installed to take the power of 'anytime, anywhere' banking to rural India:

Banks and ATM machines are an unfamiliar sight in the rural countryside here, but the government hopes to change that with new technology that could ease the transition from cash to computers.

A pilot program will put 15 biometric ATMs at village kiosks in five districts across southern India. The machines are expected to serve about 100,000 workers who will use fingerprint scanners, rather than ATM cards and PINs, to obtain their funds.

Biometric ATMs are already in use in Colombia and a few locations in Japan, but haven't caught on in much of the rest of the world. As a result, biometrics companies are watching the experiment closely as a potential watershed for the industry.

Nagaraj Mylandla, managing director of Financial Software and Systems, which helped design security protocol for the new system, said there are 35,000 non-biometric ATMs in India today. In three years the number of machines is expected to triple to more than 100,000, leaving a window of opportunity for suppliers to make the new technology standard issue for all new machines.

The increase will mean that just about every rural village and outpost will have access to the world's financial backbone and, if the pilot program is successful, fingerprint identification could become standard, even for private bank transactions.

"Many banks here are keen on this idea of doing away with ATM cards," said Sunil Udupa, CEO of AGS Infotech, the company supplying the first batch of ATMs to the five districts in India. "Whether it is practically possible is a very different question, but the interest is huge."

Building a financial planning social media

The business model of financial planning is being turned on its head by the web. How about consumers themselves acting as financial planners and learning from each other! I think this is a great idea as there is so much more trust, transparency and honesty to this approach.

The web indeed can be a potent tool for building a  rich financial community. Imagine learning from peers on how to save money from people like you. Knowing from the community on how the group spend their money across different categories. Also, recommendations on the stores that help save money basis your spending pattern. I think there is a lot of potential for such a community.

Wesabe is one such example of a business model taking shape. Wesabe makes it easy to better understand how you spend your money and links you to a community of people dedicated to helping each other make better financial decisions.

Take a look at this video and this explains what am talking about in a beautiful and simple manner.

WOM is what attracts bank customers

Customer advocacy may be the greatest single indicator of institutional health, and what bank consumers hear from their customers may be more important than the ads they read, see or hear. Those are two of the findings of RKM Bank Advocate, a new research report authored by RKM Research and Communications, Inc., and powered by Global Market Insite, Inc.

The report indicates that emotion and self-esteem matter to a bank's bottom line and that the customer who feels the strongest positive emotions toward his or her primary financial institution keeps a significantly higher share-of-wallet at that bank than other customers.

For a bank with $1 billion in deposits, that emotional connection difference can translate into a difference of $20.2 million in deposits under management. This same slight difference in emotional value yields a difference of 1.2 positive statements, on average, from customers. For a bank with 200,000 customers, that translates into a difference of 240,000 positive buzz statements in the marketplace.

Download WP-Advocate-banking.pdf

What do customers prefer ?- Mobile TV or location based information

According to an In-Stat study, mobile users are more interested in getting directions and location-based information on their mobile phones than they are receiving mobile TV. A survey of 1,000 mobile early adopters and businessmen, only 15 percent expressed a strong interest in mobile video, while local directions and navigation services garnered 53 percent. Third-generation networks, the study found, are enhancing the utility of existing mobile Web services by making them faster to load, rather than generating interest in multimedia services.

Can a bank be a lifestyle brand?

Susan Abbot writes:

Umpqua bank has charmed us before with their gorgeous web site and their coffee-serving branches that feel like living-rooms or hotel lobbies. They continue to push the envelope.

Go, Reach, Savor and Cruise - these are bank accounts?

Bank products and packages are well known for their mystifying names, usually all about the bank, or pointing to a specific feature of pricing or interest rate. [See samples of Wachovia here and BMO here]

Umpqua's packages have names that speak to life-stage aspirations. They may not tell you much about the account, but they at least appeal at an emotional level.  And there are other goodies too:

"Club Carefree 50 is an exclusive club geared toward people 50 or better with tons of great benefits such as travel discounts, The World's Greatest Reads Book Club, Club Carefree 50 Community Connection Corps, and much, much more. Visit your nearest Umpqua Bank to get involved or to find out more."

To me it seems like a refreshing way of marketing financial services. It looks far more engaging, approachable and empathetic.

What do you think?

How customers feel with telemarketing support!

Colin has a great post and a chart on how customers feel with the current telemarketing processes. Sounds familiar? Surely, our customer tele-support needs to get a lot more personalized and empathetic!

Generations clash when it comes to usage of banking channels

There seems to be generation clash when it comes to how consumers want to bank according to a survey done by American Bankers Association.

According to the ABA, when consumers were asked what banking method they use most often, respondents said: Branches: 32 percent; online: 26 percent; ATM: 26 percent; telephone: 5 percent; and mail: 5 percent. However, generational differences had a strong influence on how respondents answered -- see this chart (PDF) that the ABA posted online.

For example, banking at a local branch was the clear favorite of nearly half of those over the age of 55, but only 17 percent of those under 34 said they use branches most often. In fact, younger customers ranked branches behind online banking (35 percent) and ATMs (33 percent). Older customers said the opposite with 47 percent saying branches followed by ATMs (20 percent) and online (13 percent).

Banks in 2015 - Customer-centricity will become critical

So, what will the future look like(for banks)?

How will banks continue to grow revenues and remain profitable? What will it take to create and maintain advantage in this highly competitive industry? The future will require superior efficiency and operational excellence from all banks, while industry leadership will be attained by those institutions most adept at harnessing product, service and process innovation to anticipate and meet customer needs. Ultimately, banks will have to focus on their core strengths—those activities in which they excel—and partner with best-in-class specialists for everything else: achieving more by doing less.

The IBM Institute for Business Value identified five major industry trends that will impact the retail banking industry:

• Customers redefine the rules of the game
• Universal banks and ultra-focused niche players thrive
• Changing workforce composition dictates new approaches
• Regulatory burdens intensify
• Technology improves inexorably.

Read more

Teaching kids to bank

Here's a great idea on how to get customers young and nurture them.

Dutch Postbank (part of the ING Group) recently started a campaign aimed at budding entrepreneurs.

Children who open an Easy Blue account receive a briefcase containing materials for printing their own t-shirts (aka bizznizz attire), stickers, letterhead, flyers, and business cards. To get started, the young business person logs on to bizznizz.postbank.nl and decides what type of business he or she would like to run. Postbank suggests washing cars, walking dogs, household chores and mowing lawns, as well as an intriguing 'entertainment' category.

Then it's time to pick a name, create a logo using an online design wizard, print promotional material and start advertising: throwing flyers through as many neighbourhood mailboxes as possible. Once a client has been secured and the first job completed, the kidpreneur can log back on to the website to print an invoice, and have the client transfer the carwashing fee to their bank account.

Although we hardly want to promote child labour, it can't hurt to nurture young people's inner entrepreneurs, teaching them about money, responsibility and the ABCs of doing business (including non-profit ventures). It'll keep 'em busy during those long summer holidays, too. ;-) Which bank/financial institution outside the Netherlands to follow?

thro' springwise

Back to branch banking - Is it really over?

Big banks have been on a branch building binge in the last few years, trying to grab and hold onto customers. But this recent push may be nearing its final frontier.

Banks view their branches as gold mines, not costs. Their checking accounts can generate a steady stream of fee income. Their tellers can sign customers up for new products, spurring overall sales. All the while, branches can collect millions in cheap deposits that can be lent out at higher rates. Even as they offer options like online banking and kiosks in convenience stores, banks still hope to lure customers inside a physical branch.

The upshot is that big banks are treating their branches more like traditional retail outlets than ever before.

“I just think the building frenzy in branch banking is probably nearing its peak,” said Vernon W. Hill, Commerce Bank’s chairman and chief executive, who is credited with igniting the branch building boom in Manhattan, starting in 2001. “Maybe I am dreaming, but I think we are going to look back at this period and say this is the top.”

Kevin P. Fitzsimmons, a banking analyst with Sandler O’Neill, thinks the retail banking revival may soon end.

“The boom in branch banking is over,” he said.

“You will probably see a radical scaling back of new branch plans for most banks. We are already starting to see that already.”

thro' NY Times

ICICI Leadership Secrets

Here's a great interview with KV Kamath, CEO of ICICI Bank, India's second largest bank. He had given this interview to Wharton Leadership Digest.

I have often been in awe of the ability of this organization to have scaled-up in the such a short span of time.  The interview gives insights into the man, his beliefs, his innovative and sharp business mind( esp. when he speaks about the rural India model).  Here are some excerpts:

• So our challenge is to invent a new business model where we can create a distribution base effectively in 600,000 villages in India, and to learn to do that at one-tenth the cost of urban India. Just to put that into a scale that someone could understand, we believe that to succeed in urban India, we need to do be able to do business at one-tenth the cost of the west. The reason is that the ticket size of the banking product in India is one-tenth that in the west. If it is a deposit of $10,000 in the west, it will be $1,000 in urban India and $100 in rural India. Loans operate at a similar scale.   

• First, I look for intellect or a high level of competence. Second, I seek out entrepreneurial leaders who have the ability to pick the right people – that means looking at how the person has performed in other contexts to build teams. People who have the ability to build and manage teams are very valuable. Third, the person must have a can-do attitude. What sort of reaction do you get when you talk to him or her about a challenge? Will he go for it or is it a problem? Fourth, the right people have the ability to withstand shocks without getting flustered or losing direction. Finally, whether this is an entrepreneurial quality or not – I think it is an important quality that I look for in people whom we pick as leaders – it is the ability to focus, focus, focus without getting diverted from the core business.

Read more

Why Wells Fargo bank is different

CNN Money writes:

According to Dick Kovacevich, CEO of Wells Fargo there's no such thing as an unprofitable customer - just one you haven't figured out how to make money on yet. And, he argues, if a customer is truly unprofitable, that's the company's problem, not the customer's.

Perhaps we have to work harder at the lower income levels. But it's our fault if a customer is unprofitable. It's because we haven't done a good enough job of convincing them to give us all their financial business instead of just a piece. And when you believe that, then you get more internally focused. You're the problem, not the customer.

Every transaction is an opportunity to engage a customer - both to satisfy a transactional need and also to sell him something. And the transaction actually gives you an understanding of customer needs or another new opportunity.

Lovely article.

Read more

Making financial institutions more responsive to customers

Colin writes:

Forrester says customer advocacy remains the best predictor of future purchase intent among financial services consumers. 

Five skills for making financial services more responsive:

#1 :Customer-Centric DNA — Maintaining An Enterprisewide Focus On Customers

# 2: Solution Management — Tailoring Offerings To Meet Financial Needs

#3: Cross-Channel Process Agility — Delivering A Seamless Experience Across Channels

#4: Integrated Merchandising — Making The Right Offer At The Right Time

# 5: Interactive Education — Helping Customers Make Good Financial Decisions

The effect of social computing on financial services

Jupiter has just released a research on the impact of Social Computing on Financial services.

The key as I see it, is the need for these large financial monoliths to change their world view on how banking will be done in the future. Look at what the topline findings of the report has to say:

Peer-to-peer technologies like user review sites, discussion forums, and blogs are contributing to a new era called Social Computing that empowers individuals at the expense of institutions like retail financial services firms. As consumers use the Net to share information, financial brands risk being undermined as marketers lose control of the message. But it's not all bad news for financial firms. Smart firms will use the same emerging technologies to communicate with customers, gather customer insights, and develop stronger customer relationships.

thro' bankwatch

American Express launches butterfly credit card

Who said there is no innovation left in the credit card business. 

Amercian Express seems to have come-up with one. At least it can catch the fancy of consumers. It is positioned as a new stylish companion!

Take a look

Banking with empathy

Wells Fargo has a launched a great mortgage product where they handhold the  customer till they become creditworthy to extend a loan product to them!

They will help improve the financial well-being of their customers who close on a new nonprime home mortgage loan. The program, "Steps to Success," will include education, tools and banking products designed to put customers on the path to financial stability.

How does it work?

• Education - Wells Fargo will leverage its nationally accredited bilingual  financial literacy program, Hands on Banking/El Futuro En Tus Manos, to  provide home mortgage customers enrolled in Steps to Success with modules  on establishing credit, budgeting and other topics. The educational  materials will be available online, via CD-ROM or in printed curriculum.
•   Tools - Customers enrolled in this program will have access to their  credit report in an easy-to-read, user-friendly print format. This will  enable them to monitor progress and understand all aspects of their credit  profile. Customers also will have access to credit education specialists  via dedicated toll-free numbers to answer questions about their report,  scores and how to resolve disputes.
• Banking Products - A portfolio of banking products -- including checking,  savings and bill pay -- will encourage solid, automatic money management.

Read more

Customer Loyalty Index - Managing expectations critical

Each year, the gap between what companies pledge and what customers want, grows wider.

According to Customer Loyalty Index (done by  Market Research firm Brand Keys) which surveyed over 16,00 customers, it was found that :

• Customer Expectations have increased  dramatically across all categories
• Customers expect to be thrilled as a matter of course!
• Take bottled water, for instance - a highly indistinguishable category. Expectations for bottled water rose 8% in 2006! They felt brands in the category have to be more refreshing!!! How do customer expect bottled water to be more refreshing? They are unclear.
• The gap between expectation and delivery is also to do with the category. In old fashioned packaged goods, it is easier to manage expectations but in technology related categories the expectations are ceiling high!
• Then, there are categories that lie in the middle ground with  21st century technology and old world products like Airlines, Hotels  etc. Only Southwest and JetBlue gained a point in 2006.
• Take credit cards, the top3 brands showed no movement. Credit card is a credit card and they have more than one in their wallets. That's why rewards have become important.
• Banking is getting highly commoditized. Every bank almost offers similar features. Why is Wachovia scoring better? Customer Service

Key take-away is that expectations need to be carefully controlled as promises. Download LoyaltyIndex06.pdf

thro' Brandweek

Customer driven Banking - Business with a twist

The web and business environment is abuzz with a lot of models on customer generated media(CGM), WOM( Word-of-mouth), viral marketing etc. 

Here's a great example of customer driven banking:

Yunus, 57, is the founder of Grameen Bank, headquartered in Dhaka, Bangladesh. (Grameen is the Bangladeshi word for "village.") He started the bank to provide desperately needed credit to his country's desperately poor villagers. The business model he pioneered -- called "microlending" -- broke all the rules of traditional finance. Yunus focused on making loans as small as $30, just enough to get a microbusiness started. He did not ask for collateral. Instead, he required borrowers to organize into small groups and guarantee one another's loans. And he ended up lending almost exclusively to women, who account for 94% of the bank's customers.

The results have been stunning. Over the past two decades, Grameen Bank has grown to include nearly 1,100 branches, covering every corner of Bangladesh. It has made more than 2 million loans worth a combined $2 billion. It boasts a loan-repayment rate of 98%. It's become a model for similar institutions in 50 countries.

There's more. Grameenphone too!

The company is offering "village phones" to rural residents. Grameen Bank lends money to individual entrepreneurs to buy the phones. These entrepreneurs then sell the service to their fellow villagers and use the income to repay the loans. Yunus's goal is to have at least one cell-phone in each of Bangladesh's 65,000 villages within six years.

Read more

Keeping banking simple

Here's a nice interview with Michel Tilmant, Chairman of ING.  ING Direct, the Internet-based savings bank has been highly successful in the US.

He talks about the success of ING Direct and has quite a few radical thoughts on banking and how it is done:

• "For us, cross-sell is not what we want to do, because we want to keep it simple. We know that out there, the largest pool of earnings in the retail banking world comes from savings and mortgage — those are the only two things that we want to do. If you try to cross-sell too many products, you confuse the clients about what you are and your costs escalate exponentially. "
• "..when you talk about banking, you think about branch networks. And branch networks add a cost that can only be justified by cross-selling. But we have chosen another distribution alternative, which is much more cost-efficient but also requires that we focus on what we try to do."

Read more

Bank Branches get ready for a makeover!

The staid bank branch is getting a makeover.

As competition for deposits intensifies, a number of banks are trying to capture customers' attention by revamping their buildings to look more like coffeehouses and retail boutiques, and less like the stodgy brick-and-mortar operations of old. The new designs stress more open spaces and softer lines to create a less-formal environment, and more common areas and activities to encourage people to linger longer -- and get them to shop for more banking products.

Big banks, too, are remaking their branches. Wachovia Corp.'s new outlets include more common areas for children and parents, and traditional teller stations are replaced by long desks that resemble hotel concierge desks. Wachovia plans to build 70 to 100 of the redesigned branches this year. PNC Financial Services Group Inc.'s PNC Bank is unveiling more than 40 newly designed branches this year that feature amenities such as Internet cafes and coffee bars.

Read more

Living without a bank!

Can we ever do it? Banks have become an inevitable part of our lives. But, Sunday Mail has some interesting perspectives on how the landscape is changing for banks. The take-out really is that banks have to find new ways of serving demanding customers and their competition seems to be not other banks!

With banking essential to everyone's financial lives banks have taken advantage of their central position, steadily increasing fees on many basic services. But a growing number of financial service companies have begun to offer basic financial services to compete with the banks.

• A small but growing number of conventional credit cards also come with features, such as EFTPOS, that allow them to serve as a cash substitute at some retail outlets. The credit union Rewarder card is one example of this.
• And for online or internet buyers, a PayPal account can now be linked to a bank account, rather than a credit card.
• Company-branded debit cards can make employers' finances more efficient and give employees more flexibility of use. Read more

The game for banks, I guess,  is all about being more innovative and they need to find new ways of helping customers manage their finances. It's no more about branches, ATMs, credit cards, line of credit, bank accounts etc. but serving customers in newer ways.

Bank Account Portability

Customers hate to get locked-in with any of their service providers. 

Hence, when mobile number portability was announced, it was a boon for customers  because if they wanted to switch to another mobile service provider, they could do so easily as the mobile number was owned by the customer and not the service provider. The reason for this switch could be bad service, inaccurate billing, coverage issues etc.

One never thought, we could do it with a bank. With the number of standing instructions for direct debit committed by them, it is extremely painful to switch bank accounts even if they are unhappy with their current bank's service.  The process is just too tedious. Here's an interesting banking service in Netherlands that is being implemented - Inter Bank Switch Support service.

The service aims to facilitate account holders who want to move their payment relationship  from one bank to another, thus increasing customer mobility and lowering switching costs for their current accounts.

I think this is just too good. Download bankportability.pdf

IBM Survey reveals businesses don't know what consumers want

IBM has released a report (Download IBMCustomerfocusstudy.pdf ) which has some interesting findings for companies to take note of how well they manage their customers.

• Seventy-nine percent of companies surveyed by IBM reported marketing and promoting products without clearly understanding of customer expectations
• Most consumers reported that a sense of dignity and empathy were more important than encountering friendly and informed employees.
• While only 17 percent of business leaders said they consider emotional factors when making consumer-related decisions.
• 74 percent of business leaders focus on efficiency and speed rather than understanding consumer values.
• Companies also use inspiration and emotion for branding but often fail to deliver on those promises when interacting with customers.

thro informationweek

Changing the way a bank responds

I had a chance to witness an interesting episode today at one of branches of a leading private Indian bank in Mumbai, India.

There was a bank customer at the bank's help desk who requested for additional cheque books. The bank officer on the other side said that she could request for one thro' the ATM( read channel migration!). The customer replied( slightly agitated) that she had already applied for one online but was in urgent need of some cheque leaves. The bank officer said that she can't help her very much but checked the status on the system and replied that the customer's new cheque book will reach them by courier in 3-4 days. The  customer told the officer since they were a working couple, the cheque book would be returned undelivered as there will be nobody at home when the courier arrived. The bank officer immediately replied that in that case the cheque book would be sent back to the processing centre and it will  then reach the branch in 10 days after which they could come and collect the cheque book!!  The bank officer told them that there was no other alternative but to wait without understanding the customer's urgent need.

The customer left the branch bewildered!  Welcome to the world of 24x 7 customer service. Is there only one way of delivering a cheque book for everybody? Can't the bank find a new of way of helping working couples with similar banking problems? It pays to remember - Not all customers are created equal.

Here's a rating of 33 banks  by J.D Power and Associates. It provides some great insights for improving customer relationships...Read more

Online account opening made simple

Try opening a new bank account online. The issues associated with required funds for the new account, identity verification and many such things are just too complex to complex to handle. Yodlee seems have found a solution for customers and banks. I think the integration of various customer information plus fund management components sound interesting to me.

Yahoo News reports:

Yodlee already addresses both real-time verification, via its AccountVerification product, and account-to-account money movement, via its FundsTransfer product. The third piece: identity verification, leverages Yodlee's patented data gathering techniques to check external database sources, matching as many components as required -- including address, phone number, driver's license, social security number, credit record, etc. -- for a complete, real-time 'decisioning dashboard' for the financial institution.

The three integrated components together make up Yodlee AccountOpening -- the most complete and customizable account opening solution available.

Consumer Retail Lending 2.0

Payment News reports:

In a comprehensive report that, in our opinion, is a "must read" for senior bankers interested in important emerging competitive trends, the latest issue of the Online Banking Report examines in detail the person-to-person lending business being pursued by Prosper.com and Zopa.

The report’s author, veteran financial services editor and Online Banking Report founder Jim Bruene, concludes that there are indeed promising niches to be mined by Prosper and its U.K. counterpart Zopa. However, the companies will first have to fend off threats from con artists and deadbeat