Privacy
Battle Not Over Yet
Strategist Abstracts
Mortgage
Trends
Rising mortgage rates are usually
bad news for mortgage lenders. Yet, the dot.com lenders seem
to be taking recent rate hikes in stride. These new-age lenders
argue that their technological prowess will enable them to outperform
traditional mortgage companies by streamlining processes and
controlling overhead. So far, they only have captured a small
piece of the market, but it's enough to make traditional mortgagers
nervous. As technology continues to change the face of the mortgage
industry, lenders will have three choices: Build the technology;
buy it; or don't play.
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Small
Business Portals Offer Challenges and Opportunities
A growing number of financial institutions
are offering small business customers everything from office
supplies to rental cars through their Web sites. However, few
are integrating these offerings into a total small business
strategy. As a result, many will fail to realize the deeper
small business financial relationships they are seeking. For
a small business portal to succeed, institutions must do three
things:
1. Research the market.
2. Leverage revenue opportunities.
3. Work with an experienced portal provider.
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Digitizing
the Bottom Line
With the recent passage of the
"Electronic Signatures in Global and National Commerce Act,"
Congress paved the way for consumers to conduct more of their
traditional financial transactions online. In addition, the
law may help both financial institutions and corporations save
money by allowing them to complete many transactions electronically
instead of shipping papers back and forth. Already, financial
institutions are looking for ways to get digital certificates
into the hands of their customers. Once they do, the technology
could prove to be the mandatory e-commerce tool.
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Keeping
Up With the Joneses
Somewhere between the boomers and
the Xers lies a generation lost. "Generation Jones" is defined
as those born between 1954 and 1965, which means one in four
U.S. adults belongs to this group. They are not the idealists
that boomers are, nor are they the cynics of the X generation.
Instead, they strike a balance between the two, striving for
a meaningful purpose in life and financial security. Jonesers
are definitely mainstream.
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As
Consumers, Aging Boomers Rock
They're not the same old "old folks."
In fact, aging baby boomers are so unlike previous "seniors"
in both attitude and lifestyle that they've been given a new
designation: the mid-youth market. Over the next few decades,
midlifers will challenge our notions of how consumers over 50
should behave. Part of the original "me generation," this cohort
is generally well-educated, highly individualistic and self-indulgent.
However, these boomers are facing some tough financial realities
when it comes to aging. Most will receive smaller pensions than
their parents; they will have to wait longer to collect Social
Security benefits; and many can expect longer life spans that
may include nursing home care.
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Opening
New Internet Portals
As banks evolve their Web sites
beyond basic services and take on broader roles, financial portals
will become more commonplace. Portals, which may include search
engines, calendars, and other customizable content, help make
a site "sticky." In other words, they help attract
and keep visitors. The challenge for financial providers is
to find the right mix of financial and nonfinancial content
that will strengthen their brand and deepen customer relationships.
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Who
Owns the Customer's Heart?
It used to be that the heart of
every consumer's financial relationship was the checking account.
Conventional wisdom held that if you had the customer's checking
account, you were just one cross-sell away from acquiring his
savings, loans, and perhaps his investments and insurance. Today,
however, bankers no longer have a lock on customers' financial
relationships. In fact, most consumers are more likely to have
a "relationship" with their insurance agent or their broker,
rather than their banker. As insurers, brokers and other financial
firms roll out new bank-like products, it could spell trouble
for traditional institutions.
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The
"Bots" Are Coming!
The recent flap over "screen scraping"
is one more example of how technology is driving bankers to
adopt new business models. Screen-scraping software allows an
information aggregator to collect financial data on its customers'
behalf from many financial services companies, which it then
consolidates into one place. This collection is done through
"bots" or software "agents." These bots can perform myriad tasks,
from comparison shopping for financial products, to seeking
out financial information on companies, to responding to inquiries
online. To prepare for the new bot-infested online landscape,
bankers must educate themselves about this technology, says
Marcus P. Zillman, CEO of BotTechnology.com.
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Focus
Shifts to the Mature Market . . . Again
Financial marketers are rediscovering
the opportunities inherent in targeting older consumers, who
collectively earn $2 trillion in income and control 50 percent
of the nation's discretionary income. Recent polls reveal pre-retirees
and retirees have little knowledge of how to manage their retirement
nest eggs. Consequently, many financial firms are launching
new products aimed at "wealth management" rather than at
"wealth accumulation." To target these consumers, financial
marketers must focus on life events that trigger the need for
financial products.
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Use
Privacy Notices to Build Customer Confidence
New privacy rules require a financial
institution to disclose its privacy policy to existing customers
on or before July 1, 2001, to new customers at account opening,
and to all customers at least once every year. Bankers should
view this mandate as an opportunity rather than as a burden.
Use your privacy policy to craft a positive message about this
issue . . . and your institution.
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Small
Business Packaging
The small business market continues
to be a fierce battleground as bankers, nonbank lenders, and
other financial services companies vie for a bigger share of
small business owners' wallets. To compete more effectively,
some institutions, including North Fork Bank and Sandy Springs
Bank, are discovering the power of packaging financial and nonfinancial
products tailored to the needs of their small business clientele.
Here's a look at what it takes to establish your institution
as the single source provider of financial services to small
businesses.
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Effective
Training Taps Curiosity
Effective training can spur large
groups of people to achieve amazing feats. But to transmit a
consistent, compelling idea throughout an entire organization
is a feat in itself. Spoon-feeding facts and slogans won't convince
people to leap onto the bandwagon. That's why companies like
Celemi Inc. are designing new training techniques that eschew
conventional lectures and slides in favor of instructional methods
that guide employees to find their own answers and draw their
own conclusions. Break-out groups collaborate on mental puzzles,
thought-twisters and hypothetical problems, and there's always
a little fun built in along the way.
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Preparing
for the E-Future
In the financial services industry,
Internet initiatives are being launched at a frantic pace. More
than 40 percent of financial services firms said they were investing
in 10 or more Internet projects, according to a recent poll.
Although many institutions have established a Web presence by
developing in-house resources, online customers have grown more
sophisticated and are beginning to demand more from their institutions'
systems. Consequently, many financial providers are facing substantial
upgrades, which raises an important question: Is it better for
us to build a new Internet infrastructure ourselves, or should
we outsource it?
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Internet
Banking, Scandinavian-Style
When it comes to Internet banking,
Scandinavia's banks are setting a blistering pace for the rest
of the world. While U.S. banks penetrate less than 10 percent
of their retail customer bases with Internet service, Scandinavian
banks are recording 20 percent penetration rates, as well as
a much higher number of online transactions. Scandinavian banks
enjoy a head start due to a willingness to invest heavily in
technology and security. Moreover, these banks view Internet
banking not as the wave of the future, but as reality for the
here-and-now that is no less a part of the normal routine than
opening accounts or cashing checks.
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Small
Business Takes to the Web
The Internet is playing a crucial
role in opening doors of opportunity for small businesses. Small
businesses currently experiencing online success do it by filling
niches larger competitors have missed. By knowing their customers
and working harder to serve them, small business' online sales
are projected to grow from today's 8 percent of total revenue
to 17 percent by 2002. For financial institutions, there is
significant competitive advantage to converting small business
customers to Internet banking. Internet banking can complement
online small business initiatives, and even small banks can
duplicate the small business service offerings of larger institutions.
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Preparing
for Gramm-Leach-Bliley
As new privacy laws take effect,
bankers must stay in touch with legislators on a state and national
level. Several states have tried to enact stringent privacy
regulations which would supercede federal guidelines if they
are more comprehensive. Overzealous state legislators who may
be uninformed about the effect of broad new laws could force
institutions to adhere to requirements that differ from state
to state. Since financial institutions and third-party marketers
alike must comply with privacy rules, institutions should join
forces with their marketing partners to develop privacy guidelines
that benefit consumers and the companies that serve them.
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Selling
Insurance by Phone
Last year, banks' sales of traditional
insurance products rose 35 percent to $8.6 billion. Yet, their
collective share of total premium was well below 5 percent of
the nation's total premium volume. The trouble is banks do not
have a business model that capitalizes upon their unique distribution
abilities. Rather, most banks are buying or partnering with
traditional agencies and trying to shoehorn these entities into
their existing infrastructures. It won't work. Instead, banks
would be better off to emulate financial services companies
like USAA, who conducts virtually all of its business via direct
marketing, with inbound telemarketing at the center of the company's
distribution strategy.
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On
Web, Content Rules
To truly leverage their presence
on the Internet, bankers must not only appreciate what people
are doing online, they must embrace those activities. According
to polls, the number one reason people log on to the Internet
is to send and receive e-mail. Communicating is followed closely
by gathering information. So what do financial institution Web
sites do to participate in either one of these top online activities?
For the most part, not much. Financial institutions must do
more to draw customers to their sites, including offering more
consumer information and value-added services.
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Big
Names Target Small Business
Last year the top two lenders for
small businesses were not banks at all, but the credit issuers
Mountain West Financial and American Express. A third, Advanta
Corp., which also provides credit cards and other forms of small
business financing, was ranked in the top five. Organizations
such as Merrill Lynch and American Express are capitalizing
on name-recognition and moving into the small business arena
at cyber-speed, introducing products that provide business discounts,
cash management services, online merchant services, and more.
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The
Color of Money
The financial services industry
should pay special attention to the emerging black middle class.
According to a recent survey, the buying power among African-Americans
has risen 66 percent since 1990 to nearly $500 billion last
year. While whites still hold the lead in terms of investments
and savings, this minority is poised to reduce that gap in the
years ahead.
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Privacy
Battle Not Over Yet
A PSI Global study says 94 percent
of consumers do not want their financial services provider sharing
private information with third parties without their permission.
This comes as no surprise to those of us in the financial services
industry. Protection of customer privacy has always been the
foundation of our business. However, some consumers have been
duped into believing that banks are looking for any opportunity
to bilk trusting consumers. As a member of one of the most trusted
segments of the financial services industry, you should be outraged
by such slanderous insinuations. Moreover, you must stay abreast
of privacy regulations as they're drafted, and alert lawmakers
if you find any pieces that are anti-competitive or unworkable.
