fee income challenges · mobile banking, smartphone and tablet forecast: mobile banking moves...
TRANSCRIPT
Fee Income Challenges
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Best New Revenue & Cost Cutting Opportunities in 2012 & Beyond
Lee Wetherington, AAP Director of Strategic Insight, ProfitStars®
@leewetherington
Lee Wetherington Director of Strategic Insight
2
• 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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
3
Mega Trends
Too Much Data
October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
6
Data Creation Explodes
SOURCE: www.hadapt.com
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
7
90% of data has been
created in last 2 years
8
We created
1.8 zettabytes of data in 2011…
9
…and it is doubling every 2 years.
10
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
©2012 Jack Henry & Associates, Inc. All Rights Reserved.
Too Many Connections
October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
13
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Too Many Choices
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
17
120+ Drink Choices: One Machine
18
©2012 Jack Henry & Associates, Inc. All Rights Reserved.
Choice Fatigue
Too Many Choices
How much is simplicity
worth?
U.S. consumers will pay a 4% premium for simplicity.
--Siegel+Gale
“Ban
k C
usto
mer
s Sa
y M
ake
It Si
mpl
e –
We’
ll Pa
y Yo
u Fo
r It”
Amer
ican
Ban
ker;
Mar
ch 1
6, 2
011;
By
Hea
ther
Lan
dy
Simplicity Commands a Premium
How do you simplify?
25
Text Touch / Sound / Move Graphical
UI Revolution: Touch / Sound / Move 1980s 1990s 2000s
Where and how could “touch”
simplify our UI? October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
27
PNC Money Bar
October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
28
Where and how might “voice”
simplify our UI? October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
29
Siri sucks. But…
30
http
://se
arch
engi
nela
nd.c
om/s
urve
y-87
-per
cent
-of-i
phon
e-4s
-ow
ners
-use
-siri
-mon
thly
-116
611
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
http
://se
arch
engi
nela
nd.c
om/s
urve
y-87
-per
cent
-of-i
phon
e-4s
-ow
ners
-use
-siri
-mon
thly
-116
611
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
33
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Card Regs Timeline
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
37
Payments Revenue
©2011 Jack Henry & Associates, Inc. All Rights Reserved. SO
UR
CE
: FD
IC =
Com
mer
cial
Ban
king
; Fi
rm P
aym
ents
Map
= P
aym
ents
; B
EA
= A
gric
ultu
re, H
otel
s, A
irlin
es, I
T, F
ilm/M
usic
1 Payments revenues are from 2011
Payments Generate $271B in Fees/NII
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
SO
UR
CE
: McK
inse
y U
.S. P
aym
ents
Map
, Rel
ease
Q1-
2012
, Bas
e C
ase
scen
ario
Consumer DDA Profit Margins Down
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
SO
UR
CE
: McK
inse
y U
S P
aym
ents
Map
, Q3-
11 re
leas
e, B
ase
Cas
e sc
enar
io
Regs Cut $120B in Revenue thru 2016
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
1 Lost revenue assumes pre-regulatory interchange rates and NSF/OD occurrences
SO
UR
CE
: McK
inse
y U
S P
aym
ents
Map
, Rel
ease
Q1
2012
; Bas
e C
ase
scen
ario
Average Debit Interchange Down 45%
October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
42
© 2011 Javelin Strategy & Research
Interchange Before & After Durbin
October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
43
© 2011 Javelin Strategy & Research
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
44
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
But how much will small banks
lose in debit interchange?
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
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?
50
Jave
lin S
trate
gy &
Res
earc
h; “P
repa
id C
ards
and
Pro
duct
s in
201
2:
Enab
ling
Fina
ncia
l Acc
ess
for U
nder
bank
ed a
nd G
en Y
Con
sum
ers”
; Apr
il 20
12
8%
8%
9%
19%
19%
22%
26%
28%
66%
31%
12%
17%
9%
18%
21%
4%
32%
49%
12%
10%
13%
14%
19%
19%
20%
29%
59%
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
Gen Y
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.
© 2012 Javelin Strategy & Research
Primary Reasons Consumers Use Their Preferred Payment Option by Consumer Type
Half Won’t Switch for Less Than 10%
October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
51
51
0% 10% 20% 30% 40% 50%
No discount below 10% would persuade me to switch.
8%-9.9%
5.1%-7.9%
3%-5%
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.
©2011 Javelin Strategy & Research
Required discount to persuade consumers to switch payment choice
Consumer Debit Card Usage/Spend Consumer Debit Card Usage and Annual Spend, 2010 and 2011
SO
UR
CE
: Oliv
er W
yman
/PU
LSE
201
2 D
ebit
Issu
er S
tudy
Debit Growth Projections for 2012
SOURCE: Oliver Wyman/PULSE 2012 Debit Issuer Study
Biggest Opportunities for Debit Issuers
SOURCE: Oliver Wyman/PULSE 2012 Debit Issuer Study
Opportunities for Community
Banks October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
55
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
56
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“201
2 O
nlin
e B
anki
ng a
nd B
ill-P
aym
ent
Fore
cast
:: H
ow to
Boo
st P
rofit
abili
ty W
hen
Faci
ng F
lat-L
inin
g A
dopt
ion”
; Aug
ust 2
012
Big Banks Vulnerable to Switching
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Onl
ine
Ban
king
and
Bill
Pay
For
ecas
t Rev
iew
201
2”; S
epte
mbe
r 201
2
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
58
Tapping the Opportunities
1.Cut costs 2.Generate new fee revenue
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Cost-Cutting Opportunities
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Cutting Costs
1.Increase self-service 2.Streamline branches
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
So, how much cost can FIs cut
by increasing self-service?
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Growing Online Usage Can Cut $8.3B in Costs
64
“201
0 O
nlin
e B
anki
ng a
nd B
ill P
aym
ent F
orec
ast:
How
to C
ut $
8.3
B
illio
n in
Cos
ts T
hrou
gh C
hann
el C
onve
rsio
n”; J
avel
in;
Sep
tem
ber 2
010
Click to edit Master title style
Moving Offline Users Online $167 in Cost Savings Per Customer Converted to Online Banking
65 © 2011 Javelin Strategy & Research
“201
0 O
nlin
e B
anki
ng a
nd B
ill P
aym
ent F
orec
ast:
How
to C
ut $
8.3
B
illio
n in
Cos
ts T
hrou
gh C
hann
el C
onve
rsio
n”; J
avel
in;
Sep
tem
ber 2
010
Online: Cut $167 in Costs/User
Jave
lin S
trate
gy &
Res
earc
h’s
2010
Onl
ine
Ban
king
and
Bill
Pay
men
t For
ecas
t:
How
to C
ut $
8.3
Billi
on in
Cos
ts T
hrou
gh C
hann
el C
onve
rsio
n: S
epte
mbe
r 201
0
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Mobile
October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
67
2012: Year of the Smartphone
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
68
Jave
lin S
trate
gy &
Res
earc
h: “2
011
Mob
ile B
anki
ng, S
mar
tpho
ne a
nd T
able
t For
ecas
t: M
obile
Ban
king
Mov
es M
ains
tream
to M
id-s
ized
, Com
mun
ity B
anks
and
Cre
dit U
nion
s”; D
ecem
ber 2
011
U.S. Consumers’ Adoption of Smartphones and Feature Phones, 2008–2016
Mobile App Time Exceeds Web Time
69
©2012 Jack Henry & Associates, Inc. All Rights Reserved.
Mobile Savings
70
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Mobile: Cost Savings/Call Deflection
71
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
74
40% of Smartphone Owners and 50% of iPhone Owners want mRDC
13%
22%
21%
24%
29%
26%
11%
16%
16%
16%
12%
23%
27%
31%
35%
27%
37%
30%
11%
10%
11%
11%
6%
8%
38%
21%
17%
23%
16%
14%
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
Q42:
Ban
ks o
r cre
dit u
nion
s can
offe
r a se
rvice
that
ena
bles
cu
stom
ers t
o de
posit
a ch
eck b
y pho
togr
aphi
ng it
with
the
cam
era
on th
eir m
obile
pho
ne, t
hen
send
ing
the
imag
e to
the
bank
thro
ugh
a mob
ile-b
ankin
g app
licat
ion.
How
des
irabl
e is
this
serv
ice to
you
?
Mar
ch 20
11, n
= 4,
267,
1,7
16, 5
37, 4
83, 1
03, 4
57
Base
: All c
onsu
mer
s with
a m
obile
phon
e.©
2011
Jave
lin St
rate
gy &
Res
earc
h
Physical Check Deposits Expensive
October 9, 2012 75
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Cost Savings of Mobile Deposits
October 9, 2012 76
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
77
“Mobile Remote Deposit Capture: Putting a Price on Convenience” www.banktech.com; By Olivia LaBarre
But what about the risk?!
78
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
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
Mob
ile P
aym
ents
Hit
$20
Bill
ion
in 2
012:
Ta
blet
s A
re K
ey to
a S
ucce
ssfu
l Ret
ail S
trate
gy”;
Sep
tem
ber 2
012
Mobile Banking to Mobile Payments
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
Mob
ile P
aym
ents
Hit
$20
Bill
ion
in 2
012:
Ta
blet
s A
re K
ey to
a S
ucce
ssfu
l Ret
ail S
trate
gy”;
Sep
tem
ber 2
012
Evolution and The End Game
October 9, 2012 83
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Mobile Banking
Mobile Payments
Mobile Marketing
Things We Know
Mobile Buys of Physical Goods Triples
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2 Purchasing Pattern on Mobile Devices
Mobile POS to Grow 25% Annually
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2
Mobile POS Purchase Dollar Volume Forecast, 2011–2017
66% of Mobile Bankers Buy w/ Mobile
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
Mob
ile P
aym
ents
Hit
$20
Bill
ion
in 2
012:
Ta
blet
s A
re K
ey to
a S
ucce
ssfu
l Ret
ail S
trate
gy”;
Sep
tem
ber 2
012
Mobile Online Commerce by Channel Use, Past 12 Months Among Mobile Bankers
Preference for Wallet Providers
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2
1%1%1%
2%2%
3%3%3%3%
4%4%4%
5%5%
6%6%
8%9%
13%15%
0% 10% 20%
FacebookCitibank
MicrosoftWal-MartU.S. Bank
AmazonDiscover
GoogleSprint
T-MobileApple
American ExpressWells FargoMasterCard
Bank of AmericaChaseAT&T
VerizonPayPal
Visa
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.
©2012 Javelin Strategy & Research
Things We Don’t Know
Which mobile payments techs, channels, and functions will prevail?
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Digital Wallet Features
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2
3© 2012 Javelin Strategy & Research
Loyalty, Coupons, etc.
Membership, Access, etc.
Transacting
VirtualPhysical
Functions
Channels
Bar Code NFC Cloud
Technologies
FIs’ Role in Mobile POS
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
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
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2
© 2012 Javelin Strategy & Research 4
Secure Element(Credentialing)
NFC Chip(SIM or
Embedded)
Wallet(Rewards, Loyalty, Payments, Keys,
Tickets)
Merchant POS
Payment Networks
Issuer TSM
Secure Element
TSM
© 2012 Javelin Strategy & Research
NFC (SIM or Embedded) Model
Transact
Load
Acquiring Bank
Issuing Bank
PROBLEM 3: So what to do
before/while/if NFC arrives?
Mobile Wallet Tech Trajectory
Cloud NFC
The
BIG Question
©2012 Jack Henry & Associates, Inc. All Rights Reserved.
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!
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
$1 Trillion
SOU
RC
E: “
The
Gre
at M
obile
Alli
ance
” by
Ste
ve M
ott;
Dig
ital T
rans
actio
ns; J
uly
& S
epte
mbe
r, 20
12
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
SOU
RC
E: “
The
Gre
at M
obile
Alli
ance
” by
Ste
ve M
ott;
Dig
ital T
rans
actio
ns; J
uly
& S
epte
mbe
r, 20
12
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
UR
CE:
“Th
e G
reat
Mob
ile A
llian
ce”
by S
teve
Mot
t; D
igita
l Tra
nsac
tions
; Jul
y &
Sep
tem
ber,
2012
The Holy Grail
FI Payment
Data
Merchant Product
Data
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
121
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
have received a financial alert.© 2011 Javelin Strategy & Research
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
122
24%
22%
22%
35%
37%
23%
25%
28%
28%
40%
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
have received a financial alert.© 2011 Javelin Strategy & Research
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.
Jave
lin S
trate
gy &
Res
earc
h’s
“Inte
ract
ive
Fina
ncia
l Ale
rts 2
011:
U
sing
SM
S an
d E‐
mai
l Ale
rts B
undl
es to
Driv
e Pr
ofita
ble
Bank
ing
Beha
vior
s”
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
123
Javelin Strategy & Research’s “Interactive Financial Alerts 2011: Using SMS and E‐mail Alerts Bundles to Drive Profitable Banking Behaviors”
Streamline Branch Delivery
124
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
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”
128
http
://fm
siva
ntag
epoi
nt.w
ordp
ress
.com
/201
0/08
/03/
a-vi
sit-t
o-th
e-br
anch
-of-t
he-fu
ture
-toda
y/
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
SO
UR
CE
: Cel
ent;
“Bra
nch
Ban
king
in a
Mul
ticha
nnel
Wor
ld P
art I
I – T
he M
any
Face
s of
Cha
nge”
; by
Bob
Mea
ra
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
SO
UR
CE
: Cel
ent;
“Bra
nch
Ban
king
in a
Mul
ticha
nnel
Wor
ld P
art I
I – T
he M
any
Face
s of
Cha
nge”
; by
Bob
Mea
ra
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
SO
UR
CE
: Cel
ent;
“Bra
nch
Ban
king
in a
Mul
ticha
nnel
Wor
ld P
art I
I – T
he M
any
Face
s of
Cha
nge”
; by
Bob
Mea
ra
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
SO
UR
CE
: Cel
ent;
“Bra
nch
Ban
king
in a
Mul
ticha
nnel
Wor
ld P
art I
I – T
he M
any
Face
s of
Cha
nge”
; by
Bob
Mea
ra
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
133
SOURCE: FMSI, Financial Management Solutions, Inc. http://www.fmsi.com/pages/76/fmsi-business-intelligence-systems#
Fee Income Opportunities
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Consumer Fee Opportunities
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Can’t Close Rev Gap w/ Tweaks
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
SOURCE: McKinsey US Payments Map, Release Q1 2012; Base Case scenario
Payments Data = New Revenue
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
SO
UR
CE
: McK
inse
y P
aym
ents
Pra
ctic
e
Statement/Merchant Rewards
138
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Embedded Coupons
• Online transaction list pages
• eStatements
• Potential new revenue streams for FI
• Good customer relations
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Embedded Bill Analysis
Within statement, users can enter profile info to receive personalized bill analysis
Wireless, TV, Gas, Insurance & More
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Payments Opportunities
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
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
145
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
146
Jave
lin S
trate
gy &
Res
earc
h; “P
repa
id C
ards
and
Pro
duct
s in
201
2:
Enab
ling
Fina
ncia
l Acc
ess
for U
nder
bank
ed a
nd G
en Y
Con
sum
ers”
; Apr
il 20
12
Consumers’ Ownership of Financial or Payment Products by Type, 2010–2011
Prepaid Popular with Underbanked, Low-Income & Young Consumers
October 9, 2012 147
Jave
lin S
trate
gy &
Res
earc
h; “P
repa
id C
ards
and
Pro
duct
s in
201
2:
Enab
ling
Fina
ncia
l Acc
ess
for U
nder
bank
ed a
nd G
en Y
Con
sum
ers”
; Apr
il 20
12
Consumers’ Ownership of a Prepaid Card or Payroll Card by Segment
Most Prepaid Users Have Reloadables
148
Jave
lin S
trate
gy &
Res
earc
h; “P
repa
id C
ards
and
Pro
duct
s in
201
2:
Enab
ling
Fina
ncia
l Acc
ess
for U
nder
bank
ed a
nd G
en Y
Con
sum
ers”
; Apr
il 20
12
Percent of Consumers Who Reload Their Prepaid Cards with Additional Value
Half of Consumers Reload Online
149
Jave
lin S
trate
gy &
Res
earc
h; “P
repa
id C
ards
and
Pro
duct
s in
201
2:
Enab
ling
Fina
ncia
l Acc
ess
for U
nder
bank
ed a
nd G
en Y
Con
sum
ers”
; Apr
il 20
12
1%
3%
17%
23%
27%
44%
48%
0% 10% 20% 30% 40% 50%
Other
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.
© 2012 Javelin Strategy & Research
Prepaid Card Reload Locations
Average Reload Fees Paid
150
Jave
lin S
trate
gy &
Res
earc
h; “P
repa
id C
ards
and
Pro
duct
s in
201
2:
Enab
ling
Fina
ncia
l Acc
ess
for U
nder
bank
ed a
nd G
en Y
Con
sum
ers”
; Apr
il 20
12
2%
5%
8%
30%
9%
9%
7%
30%
6%
2%
3%
12%
21%
11%
11%
35%
0%
0%
4%
4%
9%
24%
7%
52%
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
Percent of Prepaid Owners
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.
© 2012 Javelin Strategy & Research
Average Fee Paid to Reload a Prepaid Card by Provider Type
Prepaid Owners Reload Twice/Month
151
Jave
lin S
trate
gy &
Res
earc
h; “P
repa
id C
ards
and
Pro
duct
s in
201
2:
Enab
ling
Fina
ncia
l Acc
ess
for U
nder
bank
ed a
nd G
en Y
Con
sum
ers”
; Apr
il 20
12
Number of Times a Prepaid Card Is Reloaded in a Typical Month
Underbanked Reload More $ Than Gen Y
152
Jave
lin S
trate
gy &
Res
earc
h; “P
repa
id C
ards
and
Pro
duct
s in
201
2:
Enab
ling
Fina
ncia
l Acc
ess
for U
nder
bank
ed a
nd G
en Y
Con
sum
ers”
; Apr
il 20
12
6%
14%
7%
13%
43%
16%
7%
21%
3%
17%
37%
15%
5%
8%
3%
9%
47%
29%
0% 10% 20% 30% 40% 50%
Less than $10
$10-under $25
$25 - under $50
$50-under $100
$100 - under $250
$250 or more
Percent of Prepaid Owners
Underbanked
Gen Y
All prepaid owners
October 2011, n= 81,42, 226Base: All consumers who have a reloadable prepaid card.
© 2012 Javelin Strategy & ResearchQ28C: What is the average dollar amount that you typically add to your prepaid card when you reload it?
Average Amount Reloaded Onto a Prepaid Card, by Underbanked, Gen Y, and All Prepaid Owners
Underbanked Use/Spend Prepaid More
153
Jave
lin S
trate
gy &
Res
earc
h; “P
repa
id C
ards
and
Pro
duct
s in
201
2:
Enab
ling
Fina
ncia
l Acc
ess
for U
nder
bank
ed a
nd G
en Y
Con
sum
ers”
; Apr
il 20
12
$59.49
3.9
$55.44
3.8
$79.72
10.8
$- $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)
Percent of Prepaid Owners
Underbanked
Gen Y
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.
© 2012 Javelin Strategy & Research
Average Monthly Use and Purchase Amount for Prepaid Cards, by Underbanked, Gen Y, and All Prepaid Owners
Business Fee Opportunities
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Small Businesses by Revenue
October 9, 2012 155
“Why
Sm
all B
usin
ess
RD
C M
atte
rs” b
y C
elen
t’s B
ob M
eara
ht
tp://
bank
ingb
log.
cele
nt.c
om/?
p=29
61; 0
7-09
-12
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
157
Sour
ce: A
ite G
roup
sur
veys
of 1
00 U
.S. c
omm
unity
ban
ks, M
ay to
Jul
y 20
11
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
©2011 ProfitStars. All Rights Reserved.
158
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
©2011 ProfitStars. All Rights Reserved.
160
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?
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
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
162
Small Business Deposit Frequency
October 9, 2012 163
“Why
Sm
all B
usin
ess
RD
C M
atte
rs” b
y C
elen
t’s B
ob M
eara
ht
tp://
bank
ingb
log.
cele
nt.c
om/?
p=29
61; 0
7-09
-12
SMB Average Checks per Deposit
October 9, 2012 164
“Why
Sm
all B
usin
ess
RD
C M
atte
rs” b
y C
elen
t’s B
ob M
eara
ht
tp://
bank
ingb
log.
cele
nt.c
om/?
p=29
61; 0
7-09
-12
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
Sm
all B
usin
ess
RD
C M
atte
rs” b
y C
elen
t’s B
ob M
eara
ht
tp://
bank
ingb
log.
cele
nt.c
om/?
p=29
61; 0
7-09
-12
October 9, 2012 166
49% of businesses
willing to pay for mobile access
167
--Aite ©2011 Jack Henry & Associates, Inc. All Rights Reserved.
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.
168
“Nat
iona
l Pol
l Rev
eals
Sm
all B
usin
ess
Mob
ile T
echn
olog
y an
d So
cial
Med
ia T
rend
s E
-mai
l” G
IS N
ews;
http
://w
ww
.gis
user
.com
/con
tent
/vie
w/2
5686
/2/;
Janu
ary
27, 2
012
Basic vs. Advanced SMB Mobile
169
Sour
ce: A
ite G
roup
sur
veys
of 1
00 U
.S. c
omm
unity
ban
ks, M
ay to
Jul
y 20
11
Strategies & Tactics
October 9, 2012
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
170
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
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
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Lee Wetherington, AAP [email protected] http://discover.profitstars.com/leewetherington
http://twitter.com/leewetherington
http://www.linkedin.com/in/leewetherington