fee income challenges · mobile banking, smartphone and tablet forecast: mobile banking moves...

Fee Income Challenges

Best New Revenue & Cost Cutting Opportunities in 2012 & Beyond

Lee Wetherington, AAP Director of Strategic Insight, ProfitStars®

@leewetherington

Lee Wetherington Director of Strategic Insight

• Develops actionable insight and strategy for the financial services industry

• Delivers keynotes nationwide • Technology Faculty Chair and guest

lecturer for graduate banking schools • Authors articles for industry trades • Degrees in Economics and English

from Duke University • Accredited ACH Professional (AAP)

Presenter

@leewetherington

Agenda

• 3 Things You Need to Know

• Fee Income Challenges – Regulatory Hits to Payments Revenue

• Top Cost-Cutting Opportunities

• Top New Revenue Opportunities

• Strategies & Approaches

Mega Trends

Too Much Data

October 9, 2012

Data Creation Explodes

SOURCE: www.hadapt.com

90% of data has been

created in last 2 years

We created

1.8 zettabytes of data in 2011…

…and it is doubling every 2 years.

While 75% of digital data is created by individuals, FIs and other enterprises have some liability

for 80% of it. 11 http://www.emc.com/collateral/about/news/idc-emc-digital-universe-2011-infographic.pdf

Too Many Connections

October 9, 2012

FIs, Data, Privacy & Trust

• FIs have 3-to-1 trust advantage over non-FIs • FIs can profitably mine data, but must:

– protect customer privacy

– enable customers to understand when and how they will benefit from sharing information and access

– err on the side of transparency

• Beyond better disclosure, FIs can build trust via: – financial alerts

– PFM and other random acts of kindly fiduciary behavior

October 9, 2012 15

Too Many Choices

120+ Drink Choices: One Machine

Choice Fatigue

Too Many Choices

How much is simplicity

worth?

U.S. consumers will pay a 4% premium for simplicity.

--Siegel+Gale

“Ban

r It”

Simplicity Commands a Premium

How do you simplify?

Text Touch / Sound / Move Graphical

UI Revolution: Touch / Sound / Move 1980s 1990s 2000s

Where and how could “touch”

simplify our UI? October 9, 2012

PNC Money Bar

October 9, 2012

Where and how might “voice”

simplify our UI? October 9, 2012

Siri sucks. But…

Siri is Better than No Siri… • 87% iPhone 4S owners

use Siri monthly • 33% use Siri daily

– Initiating calls and texts most common Siri activities

• 26% use Siri to send email daily

What’s my balance?

Pay my power bill.

Buy 500 shares of Apple.

Why are my lips so red and puffy?

Send my son $50.

“Nina”

Fee Income Challenges

Card Regs Timeline

Payments Revenue

1 Payments revenues are from 2011

Payments Generate $271B in Fees/NII

Consumer DDA Profit Margins Down

Regs Cut $120B in Revenue thru 2016

1 Lost revenue assumes pre-regulatory interchange rates and NSF/OD occurrences

Average Debit Interchange Down 45%

October 9, 2012

Interchange Before & After Durbin

October 9, 2012

Transaction Value Approximate Pre-Durbin, Traditional Interchange

(1.5% + $0.02)

Post-Durbin Interchange for FIs with >$10B

in Assets ($0.21 + 0.05% + $0.01)

$8.00 $0.14 $0.22 $1,000.00 $15.02 $0.72

* Approximate rate based on issuer average for signature debit transactions of 1.53% reported to the Federal Reserve.

Durbin dramatically affects cost/revenue associated with different transaction values!

Big Banks Take Big Hit

Hit to debit interchange fee income for banks >$10B

October 9, 2012

But how much will small banks

lose in debit interchange?

Debit Interchange Rates After Durbin

SOURCE: Oliver Wyman/PULSE 2012 Debit Issuer Study

Durbin Effects Update: Fed Study

• Average per-transaction interchange fee collected by regulated FIs (>$10B) declined 45% in Q4 2011 to 24 cents from 43 cents in 2009.

• Debit interchange for exempt debit card issuers remained steady at 43 cents.

• Signature vs. Debit – Signature-debit interchange plunged 57% for

regulated issuers and slipped 8% for exempt issuers.

– In contrast, PIN-debit interchange declined less than 1% for big issuers but rose 32% for exempt issuers.

October 9, 2012 48

“New Fed Data Give a Glimpse of the Durbin Amendment’s Early Effects” Digital Transactions; May. 1, 2012

Upon Closer Analysis of Fed Data…

• While the Fed says exempt issuers’ interchange revenues held steady, a review of the Fed’s data shows their average interchange revenue actually fell from 1.16% of the sale in 2011’s first 9 months to 1.10% in Q4, a decline of 5%. – Analysis by Electronic Payments Coalition, a

Washington, D.C.-based lobbying group of payment card networks and banks

• Doesn’t look at data post April 1st routing deadline. • Stay tuned…

– http://www.federalreserve.gov/newsevents/press/bcreg/20120501a.htm

October 9, 2012 49

“New Fed Data Give a Glimpse of the Durbin Amendment’s Early Effects” Digital Transactions; May. 1, 2012

What Drives Choice of Way to Pay?

h; “P

ers”

0% 10% 20% 30% 40% 50% 60% 70%

Don't have a credit card

For privacy reasons

No overdraft fees

Don't add to credit card balances

For security

Don't have a bill to pay after purchase

To earn rewards

To control spending

It's easy and convenient

Percent of Consumers

Underbanked

All consumers

Q4: What are the primary reasons that you prefer to use [your preferred payment option] most often for any type of purchase? (Select up to three)

October 2011, n= 753, 298, 3,088Base: All consumers.

Primary Reasons Consumers Use Their Preferred Payment Option by Consumer Type

Half Won’t Switch for Less Than 10%

October 9, 2012

0% 10% 20% 30% 40% 50%

No discount below 10% would persuade me to switch.

8%-9.9%

5.1%-7.9%

1%-2.9%

Q32. If a merchant offered you a discount on a purchase to use an option like a prepaid card, cash, or another option rather than a credit or debit card, how likely would you be to use the option instead of a credit or debit card?

September 2010, n= 4,998Base: All consumers.

Required discount to persuade consumers to switch payment choice

Consumer Debit Card Usage/Spend Consumer Debit Card Usage and Annual Spend, 2010 and 2011

: Oliv

Debit Growth Projections for 2012

Biggest Opportunities for Debit Issuers

Opportunities for Community

Banks October 9, 2012

Potential Bank Switchers

• 11% of consumers in 2012 – 25% of Citibank customers; 21% of BoA customers

• Maintain 30% more deposits than consumers who do not plan to switch – Represent $675B in deposits

• Willing to pay $92M in fees – Money orders; cashier’s checks, safe deposit boxes, and

mobile remote deposit.

• Place a premium on personal finance and simplicity (Javelin Strategy & Research)

October 9, 2012

“201

ion”

Big Banks Vulnerable to Switching

“Onl

2”; S

Javelin Bankographic Benchmark™: Likelihood to Switch Primary FIs in Next 12 Months

Opportunities for Community Banks

1. Capturing DDA share from big-bank fee defectors

2. GPR prepaid cards (co-branding partnerships)

3. Serve growing population of unbanked, under-banked and Gen Y (25% of consumers)

4. Generate new fee revenue with merchant-funded rewards offered inside online statements and ultimately in real-time via mobile texts

5. Leveraging merchant rewards to incent/compel migration of offline customers to online self-service

October 9, 2012

Tapping the Opportunities

1.Cut costs 2.Generate new fee revenue

Cost-Cutting Opportunities

Cutting Costs

1.Increase self-service 2.Streamline branches

So, how much cost can FIs cut

by increasing self-service?

Growing Online Usage Can Cut $8.3B in Costs

“201

n”; J

Click to edit Master title style

Moving Offline Users Online $167 in Cost Savings Per Customer Converted to Online Banking

“201

n”; J

Online: Cut $167 in Costs/User

Mobile

October 9, 2012

2012: Year of the Smartphone

h: “2

s”; D

U.S. Consumers’ Adoption of Smartphones and Feature Phones, 2008–2016

Mobile App Time Exceeds Web Time

Mobile Savings

Mobile: Cost Savings/Call Deflection

Preemptive text alerts can prevent… • In-Person Customer Calls

– FI cost: $3.00 to $15.00

• Automated Calls (IVR) – FI cost: 3¢ to 30¢

NOTE: BoA saved $110M deflecting calls with mobile self-service

Extend self-service with mobile RDC!!!

Javelin predicts 100 million mBanking users by 2014… half of which see mRDC as

highly desirable (50 million users for Mobile Deposit)

Who Wants mRDC Right Now?

October 9, 2012

40% of Smartphone Owners and 50% of iPhone Owners want mRDC

0% 20% 40% 60% 80% 100%

All consumers

A smartphone

Android-based phone

BlackBerry

Windows 7-based phone

iPhone

Very desirable 5 4 Somewhat desirable 3 2 Not desirable at all 1

r a se

ice to

: All c

s with

lin St

Physical Check Deposits Expensive

October 9, 2012 75

Cost Savings of Mobile Deposits

October 9, 2012 76

Mobile Remote Deposit Fee Income?

• 80% of FIs planning/considering mobile RDC (Celent)

• 65% of consumers "at least somewhat likely" to switch FIs for mobile services said that mRDC would be the main reason for the switch. (AlixPartners)

• US Bank charges $.50 per mobile deposit

– "We haven't seen any negative impact of the fee on adoption and usage." --Niti Badarinath, SVP

• First Tennessee also charges a fee for mRDC

“Mobile Remote Deposit Capture: Putting a Price on Convenience” www.banktech.com; By Olivia LaBarre

But what about the risk?!

The Truth about Remote Deposit Risk

• While over 13% of checks are remotely deposited, RDC items comprise only .01% of check fraud reported to FinCen between 2005 and 2011.

• There were “no real differences in the various fraud and money laundering schemes perpetrated through the RDC check deposit channel when compared with the check deposits completed through more traditional means.”

• “Overall, RDC-related filings have been minimal,” and they “comprise a miniscule portion of all check-related SARs.”

Mobile Payments

gy”;

Mobile Banking to Mobile Payments

gy”;

Evolution and The End Game

October 9, 2012 83

Mobile Banking

Mobile Payments

Mobile Marketing

Things We Know

Mobile Buys of Physical Goods Triples

“Bat

tle fo

trol o

t”; S

2 Purchasing Pattern on Mobile Devices

Mobile POS to Grow 25% Annually

“Bat

tle fo

trol o

t”; S

Mobile POS Purchase Dollar Volume Forecast, 2011–2017

66% of Mobile Bankers Buy w/ Mobile

gy”;

Mobile Online Commerce by Channel Use, Past 12 Months Among Mobile Bankers

Preference for Wallet Providers

“Bat

tle fo

trol o

t”; S

1%1%1%

3%3%3%3%

4%4%4%

13%15%

0% 10% 20%

FacebookCitibank

MicrosoftWal-MartU.S. Bank

AmazonDiscover

GoogleSprint

T-MobileApple

American ExpressWells FargoMasterCard

Bank of AmericaChaseAT&T

VerizonPayPal

All Mobile Phone Owners

Q29_A: If you were choosing a mobile wallet provider, which of the following would you be most likely to choose?

June 2012, n=3,492.Base: All mobile phone owners.

Things We Don’t Know

Which mobile payments techs, channels, and functions will prevail?

Digital Wallet Features

“Bat

tle fo

trol o

t”; S

Loyalty, Coupons, etc.

Membership, Access, etc.

Transacting

VirtualPhysical

Functions

Channels

Bar Code NFC Cloud

Technologies

FIs’ Role in Mobile POS

“Bat

tle fo

trol o

t”; S

2 FIs Play Different Roles in Different NFC Solutions

PROBLEM 1: Most likely NFC models

do not put FIs in control.

PROBLEM 2: Complexity of NFC

models forestall their arrival.

NFC Requires Complex Collaboration

“Bat

tle fo

trol o

t”; S

Secure Element(Credentialing)

NFC Chip(SIM or

Embedded)

Wallet(Rewards, Loyalty, Payments, Keys,

Tickets)

Merchant POS

Payment Networks

Issuer TSM

Secure Element

NFC (SIM or Embedded) Model

Transact

Acquiring Bank

Issuing Bank

PROBLEM 3: So what to do

before/while/if NFC arrives?

Mobile Wallet Tech Trajectory

Cloud NFC

BIG Question

So some think the big question is…

Would you tap that?

Swipe, Dip, Tap

How to reduce “time suck”?

Time Suck?

Coffees, Burgers & Dongles, Oh My!

Actually, the real BIG question is…

Who will control and monetize mobile marketing of payments data?

Isis Wallet

Google Wallet

How much is at stake?

October 9, 2012 112

$1 Trillion

E: “

” by

ital T

FIs Must Leverage Payments Assets • 3-to-1 Trust Advantage

– Custembers comfortable revealing more to you

• Mobile bankers most inclined to mobile payments

• Payments Data – How payments accounts are used

– Who the consumer is

– What resources the consumer has

– How risky the consumer is

– How, where, with what merchant purchases made

E: “

” by

ital T

Merchants Have Valuable Data

• Merchant Data

– Location of purchase

– Time of day of purchase

– Products purchased

– Payment methods used by consumer

• Combining payments data with merchant product (SKU) data and mobile-session data creates holy grail of offerings for product placers. SO

The Holy Grail

FI Payment

Merchant Product

The future of payments is more about data than

payments…

Geo-Enabled Mobile Rewards

Alerts, Alerts, Alerts

October 9, 2012 120

Click to edit Master title style

6 in 10 Consumers Consider Alerts Useful Usefulness of Alerts to Detect Fraud and Manage Finances

0% 10% 20% 30% 40% 50% 60% 70%

All consumers

Percent of consumers

Useful Not useful

November 2011, n= 5,494Base: All consumers, all consumers who

Q39: How would you rate the usefulness of financial alerts in helping you detect fraudulent activity or manage your finances? On a scale of 1 to 5, let 1 represent "Not useful at all" and let 5 represent "Extremely useful."

Top 5 Alerts Valued by Moneyhawks

October 9, 2012

0% 10% 20% 30% 40% 50%

Confirmation of a deposit

Notification when a bill is due or has been paid

Notification when balances fall below a pre-set level

Notification of a large withdrawal or purchase

Warning that an overdraft is about to occur

Percent of consumers

Moneyhawks

All consumers

November 2010, n= 5,494, 1,499Base: All consumers, all consumers who

Q38: If you were given the ability to receive alert messages (either by e-mail or SMS) from your primary bank on your immediate financial status, which of the following would be of value to you? (Select up to three) Top five reasons only, other options apply.

“Inte

d E‐

Alerts Bundles that Boost Income

1. Free basic alerts boost adoption of mBanking 2. Real‐time alerts augment credit‐monitoring 3. Bill‐pay alerts that trigger convenience fees and

boost expedited payments 4. Alerts that deliver or augment merchant‐based

offers, creating revenue‐sharing opportunities 5. Real‐time, actionable overdraft alerts that could

create convenience fees

October 9, 2012

Javelin Strategy & Research’s “Interactive Financial Alerts 2011: Using SMS and E‐mail Alerts Bundles to Drive Profitable Banking Behaviors”

Streamline Branch Delivery

Teller Expenses Rise, Transx Decline

October 9, 2012 125

“Zombie” Branches

• 18% (nearly 16,000) of U.S. branches face closure over the next three years. (Novantas)

– 2/3rds (11,000) could be salvaged by other FIs

• “Zombie branches” do not do enough business to justify their existence and the chances of revival are slim-to-none under current ownership.

• 1 out 3 community bank branches are zombies – Among community banks with 1-10 branches

October 9, 2012 126

“Getting Rid of ‘Zombie’ Branches”; By DAVE KAYTES AND KEVIN TRAVIS; www.bai.org/BANKINGSTRATEGIES; Dec 29, 2011

Future Role of the Branch

127 “Branch Transformation: Strategies to Position Your Branch Network for the Future” by Chris Gill with Diebold; IBAT TechMecca; January 2012

Image ATMs & “Dialog Towers”

Physical Designs: Future Branches

Concierge Teller Pods

Lounge

• Engages customers quickly, eliminates wandering

• Can form a choke point in high traffic branches

• Slowly being equipped with customer authentication

• Gives tellers flexibility to engage customers

• Often staffed with more highly trained “Relationship Bankers”

• Practically requires teller cash recycling

• Comfortable waiting area offers good merchandizing options

• Increasingly equipped with self-service refreshments

Element Rationale Example

“Bra

I – T

nge”

Physical Designs, cont’d

Branded Retail Destinations Self-Service Area Kid’s Areas

• Merchandizes key product offerings

• Intuitive retail paradigm

• Most appropriate for large format branch designs

• Low-wait, low-cost transaction delivery

• In addition to or replacing tellers

• Often vestibule based to extend hours

• Considerate and smart for larger branches

• Reflects the evolving role of branches: customers visit longer and less often

Element Rationale Example

“Bra

I – T

nge”

Technologies: Future Branches

CRM Branch Self-service Teller Capture

• Equips branch personnel to sell

• Proliferating vendor options are reducing implementation risk and improving ROI

• Low-wait, low-cost transaction

delivery

• Reduce/eliminate teller role

• Focuses staff resources on sales & service

• Automates cheque related transactions

• Reduces keystrokes, transaction time, errors and back-office work

• Keeps tellers heads up

Element Rationale Examples Next best product prompts

Online scheduling of branch appointments

Full-function ATMs

Kiosks

Typically replacing back-counter branch capture

“Bra

I – T

nge”

Technologies, cont’d

Teller Cash Recycling Workforce Management Software Video Conferencing

• Reduces administrative work

• Enables “open” branch designs

• Maximizes staff efficiency

• Automates scheduling

• Low-cost SME coverage

• Extended hours

Element Rationale Examples Traditional teller counters

Teller pods

Teller management

Lobby tracking

Desktop video conferencing

Personal teller machines (PTMs)

Video call center

Staff training

“Bra

I – T

nge”

Cost Benefits of Branch Optimization • Minimize transactional to maximize relational

• Reduce customer wait times

• Improve employee performance

– Quickly identify coaching and incent top performers

• Efficiently allocate manpower and distribute workloads

– With image ATMs, cash recyclers, etc. can reduce 1-3 FTEs per branch

SOURCE: FMSI, Financial Management Solutions, Inc. http://www.fmsi.com/pages/76/fmsi-business-intelligence-systems#

Fee Income Opportunities

Consumer Fee Opportunities

Can’t Close Rev Gap w/ Tweaks

SOURCE: McKinsey US Payments Map, Release Q1 2012; Base Case scenario

Payments Data = New Revenue

Statement/Merchant Rewards

Embedded Coupons

• Online transaction list pages

• eStatements

• Potential new revenue streams for FI

• Good customer relations

Embedded Bill Analysis

Within statement, users can enter profile info to receive personalized bill analysis

Wireless, TV, Gas, Insurance & More

Payments Opportunities

a growing share of consumers owns

prepaid cards... October 9, 2012 142

…while a decreasing

share has other financial and payment products

October 9, 2012 143

Prepaid Fills a Growing Gap

“Prepaid Cards Help Fill a Growing Void”; Digital Transactions; May 2012 144

Card Revenue Sources

Source Credit Debit Prepaid Basic Fees • Annual • N/A (most fees tied to

linked checking account) • Activation • Monthly

Other Fees • Sin (overdraft, late payment, returned payment)

• Int’l transx • Cash W/D

• Foreign ATM • ATM W/D • Load • Inquiry • Bill Payment • Card replacement

Interest • 0-35%+ (rate increases w/ delinquency)

• N/A • N/A

Interchange • Varies by type and volume

• ≈2% + $0.10/trx

• $0.21 + .05% (unless exempt, then ≈ 1.65% + $0.15/trx

• Varies by type (unless bill pay offered then same as debit)

• ≈1.5% + $0.20/trx

Other • N/A • Float (for linked checking account)

• Float • Break (≈8%)

Annual Revenue

• $175-$250 • $4.50-$5.00 • $100-$125

Prepaid Cards Fill Growing Gap

h; “P

ers”

Consumers’ Ownership of Financial or Payment Products by Type, 2010–2011

Prepaid Popular with Underbanked, Low-Income & Young Consumers

October 9, 2012 147

h; “P

ers”

Consumers’ Ownership of a Prepaid Card or Payroll Card by Segment

Most Prepaid Users Have Reloadables

h; “P

ers”

Percent of Consumers Who Reload Their Prepaid Cards with Additional Value

Half of Consumers Reload Online

h; “P

ers”

0% 10% 20% 30% 40% 50%

Automatically reloaded

ATM or kiosk

Bank branch

Money services provider (e.g., Western Union, MoneyGram)

Merchant or retailer location

Online

Percent of Prepaid Owners

Q28A: Where are you able to reload your card?

October 2011, n= 227Base: All consumers who have a reloadable prepaid card.

Prepaid Card Reload Locations

Average Reload Fees Paid

h; “P

ers”

0% 10% 20% 30% 40% 50% 60%

More than $6.00

$5.00 - $5.99

$4.00 - $4.99

$3.00 - $3.99

$2.00 - $2.99

$1.00 - $1.99

Less than $1.00

I do not pay a fee to reload my card

My employer

A bank

A merchant or retailer

Q28D: What is the average fee you pay when you reload your prepaid card with additional value?; Q26: Earlier you mentioned you have used a prepaid card or payroll card in the last 12 months. Where did you get the prepaid card you use most often?

October 2011, n= 24, 58, 98Base: All consumers who reload their prepaid cards.

Average Fee Paid to Reload a Prepaid Card by Provider Type

Prepaid Owners Reload Twice/Month

h; “P

ers”

Number of Times a Prepaid Card Is Reloaded in a Typical Month

Underbanked Reload More $ Than Gen Y

h; “P

ers”

0% 10% 20% 30% 40% 50%

Less than $10

$10-under $25

$25 - under $50

$50-under $100

$100 - under $250

$250 or more

Underbanked

All prepaid owners

October 2011, n= 81,42, 226Base: All consumers who have a reloadable prepaid card.

Average Amount Reloaded Onto a Prepaid Card, by Underbanked, Gen Y, and All Prepaid Owners

Underbanked Use/Spend Prepaid More

h; “P

ers”

$59.49

$55.44

$79.72

$- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00

Average purchase amount (mean)

Monthly use (mean)

Underbanked

All prepaid owners

Q17: In a typical month, how many times do you use each of the following payment methods, for in-store purchases or purchases made at a merchant's location? Q18: What is the average amount you typically spend on a single in-store purchase using the payment methods outlined below? Please give your best estimate.

October 2011, n= 50, 154, 267Base: All consumers who own a prepaid card.

Average Monthly Use and Purchase Amount for Prepaid Cards, by Underbanked, Gen Y, and All Prepaid Owners

Business Fee Opportunities

Small Businesses by Revenue

October 9, 2012 155

“Why

rs” b

t’s B

The Opportunity & The Challenge

• The Opportunity – U.S. small businesses spend $500B on financial

products each year • The Challenge

– Understanding and meeting their needs • The Solution

– Knowing what they want and will pay for – Training staff to better understand business needs – Broaden products/service to meet those needs – Leveraging right tech to improve SMB access

October 9, 2012 156

Advanced Small Biz Online Banking

Value of Small Business to FIs

“…small-business owners represent between 10% and 12% of a retail bank’s customers, they account for up to 35% of retail FIs’ revenue…

When you add in the value of the small-business owner, who tends to be more affluent than the average customer, that number goes to 50% of retail bank revenue.”

October 9, 2012

Les Dinkin Managing Director,

Novantas LLC

Source: “Nonbanks Leapfrog Banks in Small-Business Cash Management and Treasury,” American Banker, April 2011

SMBs Still Served as Consumers

October 9, 2012 159

Source: Aite Group survey of 100 U.S. community banks, May to July 2011

Small Business Market Opportunity

% of Commercial Checking Accounts

2007 Median 2010 Median

Internet Cash Management 6.53% 6.94%

Commercial Bill Pay 1.35% 0.94%

ACH 0.02% 2.15%

Sweeps 1.39% 1.25%

Positive Pay N/A 0.20%

October 9, 2012

Anemic Penetration of Business Accounts by Mid-Size FIs A lack of focus on treasury management products and sales is preventing mid-size FIs from realizing the potential of their commercial deposit franchises.

SOURCE: The Cornerstone Report: Benchmarks & Best Practices for Mid-Size Banks 2011

So, what is true small-business online banking?

Micro “Cash Management” • Online payroll

– Calculation of tax withholdings – Integrated tax payments

• Electronic invoices & receivables mgt • RDC, ACH, Wires, P2P, B2B (SMB BillPay) • Mobile account alerts/authorizations • QuickBooks/accounting integration • Real-time transaction information • Tiered access authority/permissions

Small Business Deposit Frequency

October 9, 2012 163

“Why

rs” b

t’s B

SMB Average Checks per Deposit

October 9, 2012 164

“Why

rs” b

t’s B

Small-to-Medium Size Businesses (SMBs)

• 25 million Small-to-Medium Businesses (SMBs) – Most SMB owners banking as consumers only

• 90% of SMBs accept checks – 70% cash, 33% credit cards, 31% debit, 28% PayPal

• Two-thirds of SMBs have less than five checks per deposit, making them suitable candidates for low-cost remote deposit capture (RDC) solutions – Mobile RDC; Flatbed Scanner RDC

• RDC can potentially remove 117 branch deposits per day from SMBs (need for one less teller)

October 9, 2012 165

“Why

rs” b

t’s B

October 9, 2012 166

49% of businesses

willing to pay for mobile access

Small Business Mobile Usage

• 38% of small business decision-makers use smartphones or tablets to help manage their businesses each day.

• The larger the small business, the more likely the small business decision-maker uses smart devices to run operations: – 28% among those with one to four employees

– 36 percent for those with five to 19 employees

– 63% for those with 20-plus employees

• When it comes to mobile business applications, 41% say they are interested in using apps such as mobile banking, customer relationship management (CRM), risk management, payroll management, etc.

“Nat

l” G

Basic vs. Advanced SMB Mobile

Strategies & Tactics

October 9, 2012

Strategies

• Exploit cost-efficiencies of e-channels – Online, Mobile, Alerts

• Evolve branches to improve relational over transactional

• Serve business customers – Majority of SMBs not being served – Businesses represent easiest fee opportunities

– Capture new segments/fees with prepaid

Solutions and Approaches

• Offer merchant-funded rewards

• Tap data to know your customers • OFM analytics; target messaging

• Personalize online/remote channels • Widgets; Live Chat; Video over IP?

• Make a choice • Follow vs. Differentiate; Free vs. Fee;

“On Behalf Of” vs. Empower

Lee Wetherington, AAP lwetherington@profitstars.com http://discover.profitstars.com/leewetherington

http://twitter.com/leewetherington

http://www.linkedin.com/in/leewetherington

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