Banks’ Social Media Challenges

I had the chance to participate on a SMB Boston panel last week on Driving Business Value Through Social within Financial and Regulated Environments, which I think was just a fancy way of saying “social media in financial services.”

The main message of my presentation:

Financial institutions should integrate social media approaches into their marketing and customer service processes.

As I see it, banks (and credit unions) are wrestling with — or perhaps, simply failing to address — challenges regarding social media. And you don’t even need to be a journalist to know where these challenges came from:

1. What: Banks don’t know what to say in social media.
2. When: Banks don’t know when to say it.
3. How: Banks don’t know how to say it.

There are, of course, a couple of other potential challenges, but I think that “Who to say it to” is less of a challenge, and that “Why they’re saying it” is better understood. Regarding “why”, the research that Aite Group has done on social media in banking, bears this out: Most FIs are fairly clear that engaging customers, building brand awareness, and building brand affinity are why they’re involved with social media.

Engagement may be the objective, but I’m not sure, based on what I’ve seen FIs tweet and post, that they know how to achieve that objective.

I saw one FI recently tweet:

Have a new business that needs to grow quickly? Add credit card processing to increase revenues and cash flow. #smallbiz

Here’s another from a credit union:

We are listening. We are not like the BIG Banks. Check us out!

Do people really turn to Twitter or Facebook to see shameless marketing messages, re-purposed from other marketing channels? Are these tweets effectively engaging customers/members/prospects? I don’t know. But I bet the FIs that tweeted those messages don’t know either.

Another thing that struck me reading those tweets, was thinking about why the FIs chose to tweet those messages when they did. Was some marketing person sitting around with nothing to do, and suddenly realize that ts was 30 minutes since the last tweet, so s/he might as well tweet something else? Did something trigger the need for a credit card processing tweet at that particular time? I can tell you this: The credit union’s tweet came 11 days after Bank Transfer Day, so I doubt there was some pressing need to send out that tweet when it was sent.

The tone of these tweets doesn’t sit well with me, either. How many times have you heard the phrase “join the conversation?” Look again at those tweets above — do you know anybody who talks like that in the course of a normal conversation? (If you do, I bet you don’t engage in too many conversations with that person).

This gets at a big issue that marketers (not just in financial services) have to face: They don’t know how to have (or start) a conversation with consumers. Here’s the problem:

Marketing has, to date, been driven by the need and desire to persuade consumers.

But “engagement” isn’t accomplished through persuasion. (Well, persuasion can be a part of it, but it can’t be the only part of it).

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So what should FIs do to address these challenges? There’s a tactical response and a strategic response.

The tactical response: Categorize and test.

A couple of months ago, Michael Pace from Constant Contact wrote an interesting blog post, advocating that Twitter users should periodically do a self-analysis of their tweets. Honestly, I thought that was a pretty self-indulgent thing for an individual to do. But at the company level, the idea has a lot of merit.

A high-level analysis of your company’s Twitter stream can help you understand how well you’re balancing various types of tweets. And the same could be done with Facebook posts. The challenge, of course, is understanding what impact those messages are having, and if shaking up the mix would improve the impact (i.e., engagement).

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But even if you do this, I doubt that you’ll make more than just a minor impact on your firm’s bottom line. To have a more meaningful impact, you need the strategic response: Integrate social media approaches into marketing and customer service processes.

In my presentation at the breakfast, I highlighted three ways to do this:

1. Influence preferences. I like what America First Credit Union does on its site (as does @itsjustbrent,  since he either borrowed this example from me, or I stole it from him). The CU incorporates members’ product reviews on the product pages. By doing this, the CU accomplishes:

• Customer advocacy. Not just in the net promoter sense of the word — but in the more important sense of the word: Doing what’s right for the customer and not just your own bottom line. Helping consumers make better choices — that are right for them — by enabling them to access other customers’ opinions is a demonstration of customer advocacy.
• Active engagement. I guess that, if a customer follows you on Twitter and reads your tweets, or likes you on Facebook in order to enter a contest to win a prize, you could call that engagement. But I would call it passive engagement. Customers who take the time to post a review are more actively engaged, in my book.
• Continuous market research. I doubt many firms could capture the richness of information America First is capturing through satisfaction or net promoter surveys. And I know that they can’t capture it in as timely a basis as America First does.

2. Provide collaborative support. I’ve been holding up Mint.com as an example of a firm with collaborative support, but it recently discontinued its Mint Answers page. No worries, Summit Credit Union is doing the same thing, and hopefully, they can become my poster child for this. Collaborative support is giving customers the opportunity to answer other customers’ questions. Dell has been doing it for years. Why provide collaborative support?

• Reduced call volume. I’m not going to say that you’re going to see a huge volume of deflected calls, but over time, if you market the collaborative capability, it can help.
• Expanded knowledge base. This is where the bigger value comes in. Customer service reps leverage internal knowledge bases to answer customer questions. Collaborative support helps grow that knowledge base, and helps figure out which answers and responses are more valuable than others. This expanded knowledge base will also prove valuable in training new employees.
• Active engagement. Similar to the product reviews, customers who participate in collaborative support sites are demonstrating active engagement.

3. Instill financial discipline. This is about using social concepts to get people to change the way they manage their financial lives. Take a look at the research that Peter Tufano has done regarding what motivates people to save.  There are some good examples of this in practice — see Members Credit Union’s What Are You Saving For?. I recently chatted with the CEO of Bobber Interactive, and like what they’re doing about bringing social gamification to how people manage their finances.

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Bottom line: Your firm can putz around with Facebook and Twitter until you’re blue in the face. For financial institutions, this is probably not going to have much of an immediate impact on the bottom line. It will likely take years of experimentation to figure out what to say, when to say it, and how to say it on social media channels.

If you want to engage customers, you have to give them a reason to engage. Mindless, idle chatter on Twitter and Facebook isn’t sustainable.

The path to making social media an important contributor to bottom line improvement — and sooner rather than later — will come from integration social media concepts and approaches into everyday marketing and customer service processes.

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Credit Unions: New Members, Boiled Lightly

Well, Bank Transfer Day has come and gone.

Actually, I doubt that it really has “gone” as I’m sure that credit unions will do everything under the sun to keep the glow of the Bank Transfer Day movement a-burning.

Ironically — and I don’t hear anybody else talking about this — credit unions might not have been the only financial institutions to have benefited from BTD. And I’m not referring to the “shedding of unprofitable customers” that some people talk about.

Anecdotally, I’ve talked to a few folks at mid-sized banks who have told me that they’ve seen pretty good growth in new customers over the past month or so.

But that’s not what this blog post is about. This one is about the Wall Street Journal.

I’m a big fan of the WSJ. Read it every day. Agree with the editorials far more often than I disagree with them. But when some press outlet screws up — whether I support it or not — regarding something related to the world of financial services, then I’m going to call them out over it.

And that’s what this blog post is about — calling the WSJ out regarding an article titled Credit Unions Poach Clients (you may need a subscription to access this article. Surprise, surprise, I have one).

Here’s are the issues I have with the article:

1. Credit unions did not poach clients. According to my handy (online) thesaurus, “poach” means infringe upon, trespass, or boil lightly. Sorry, but credit unions didn’t do anything of these things. I’m pretty sure that the new members that credit unions have signed up in the past month came over willingly. I also don’t think that credit unions went over to banks and “trespassed” in any way. And if you know of any credit unions that lightly boiled their new members, please — PLEASE — let me know.

2. Profitability of switchers is an unknown. The WSJ article claims that “people who gravitate to credit unions tend to be unprofitable for giant banks because of the small balances they keep on deposit…” Not so fast. Take a look at the report I did for BancVue. There are many credit unions — and community banks — who offer high-yield checking accounts (Rewards Checking) where the average balances are about 4x the size of free (no-interest) checking accounts, and whose profitability exceeds that of the free checking accounts. According to CUNA, 650k new accounts were opened at CUs leading up to BTD, with $4.5 billion in new deposits generated. That’s nearly $7k/account. Not exactly “small balances.”

3. CUs charge fees, too. The article says “banks try to recoup such costs [to maintain a checking account) by imposing overdraft fees and other charges.” While credit union members may — on average — pay less in fees than the average bank customer (let’s not get into the quantipulation inherent in that statistic), guess what WSJ? Credit unions charge an overdraft fee, too.

4. Banks are everywhere, man.  Johnny Cash shoulda done a song on this. The WSJ quotes a guy from NCUA (which it says is a trade group, which isn’t accurate according to @paulsworld) who says “many of the nation’s 7,200 credit unions are in rural areas where there is no other banking option.” I don’t think this is a supportable statement.

5. The housing bubble comment was a poor choice. The article states that “several large commercial credit unions…went bust after loading up on high-risk mortgages during the housing bubble.” True statement. But in comparison to the impact the housing bubble had on banks, calling out the impact on the credit union industry was pretty manipulative. 

C’mon WSJ: We expect a lot better from you.

p.s. If you want a copy of the report referenced above Financial High Coup: Why High-Yield Checking Accounts Trump Free Checking, contact BancVue.

The 2011 Marketing Tea Party Awards

Last year we issued the first of our eponymous awards to some very worthy winners.

The word Like took honors for Most Annoying Word in the Marketing Lexicon, while Twitter walked away with the Most Overhyped Yet Ineffective Marketing Tool award. And, to nobody’s surprise, Groupon won Bonehead Decision of the Year (for passing on a $6 billion offer from Google).

Although 2011 is only 10/12ths of the way done, we’ve pretty much seen enough (in fact, we’ve seen all we can take), and can confidently call this year’s winners in some newly ordained categories.

The New Coke Award

This year’s winner of the New Coke Award, for the company that commits the worst strategic blunder, is — hands down — Netflix. The firm’s pricing decision and  flip flop on the Qwikster thing resulted in the loss of nearly a million customers and somewhere in the order of $12 billion in market valuation. If you’re Google, that’s no big deal. But to the rest of us in the 99%, that’s a lot of money.

In the age of social media, where gathering feedback from the market and testing marketing (read: pricing) decisions can be done relatively fast and cheap, there’s simply no reason for major strategic blunders like this one.

Now, I know what you’re thinking: Based on the criteria, wouldn’t Bank of America be a close contender? No. They captured a different award:

Credit Union Marketer of the Year

Bank of America, with a single move — that they didn’t even implement — has done more for the credit union industry in one month than credit unions have done for themselves in 100 years. The Great Debit Fee Fiasco of 2011 will be a case study in business schools for years to come.

The circus surrounding an announcement — wait, did they ever really announce it? — is perhaps unprecedented. The number of parties taking credit for the reversal has only just begun. Claiming that they “listened to their customers” as the reason for the reversal only begs the question: Why didn’t they ask their customers BEFORE they made the decision?

Congrats, credit unions. This is your Rocky moment.

Most Overused Word in the Marketing Lexicon

I’m going to go out on a limb and make a prediction: 2011’s most overused word might just repeat the honor in 2012. Whether I’m right or wrong about that, there’s no doubt in my mind that Analytics takes the crown for most overused word in the marketing vocabulary for 2011.

Did you know that when you create a spreadsheet, and populate some cells with formulas that do addition and subtraction, that that’s called Analytics? If you use an Excel function, you might get away with calling it Predictive Analytics. 

Have you ever taken a list of customers and identified those that meet a certain criteria, like under a certain age, or over a certain income level? Congratulations, you’re an Analyst performing Analytics!

Do you create reports for the management team showing them traffic on your firm’s web site? That’s called web analytics.

And there’s certainly no shortage of experts telling us that analytics is the key to competitive success. If you’re not performing predictive analytics on the social media data you’re monitoring and capturing, then you might not still be in business in 5 years.

If analytics was overhyped and overused in 2011, just wait until next year. 2012 will be the year of Big Data. We here at The Marketing Tea Party will be doing our best to make it the year of Right Data. Because what’s one more bruise on the side of our heads from beating it against a brick wall?

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Don’t forget to check out Snarketing 2.0:

For the print copy:      For the eBook:

   

Bank Transfer Day Should Be A BAD Day

Many people involved in the financial services industry know that this coming Saturday, November 5, is being called Bank Transfer Day. (You can Google the term to find more information about it, how it got started, etc.). 

And many in the credit union industry seem to be licking their chops, awaiting a slew of new members, as (they hope) millions of disaffected big bank customers observe this newly-ordained “holiday.”

I challenge credit unions to make Saturday, November 5, a BAD day. 

What does BAD stand for? I thought you’d never ask. Bank ACCOUNT AVOIDANCE Day.

What I DON’T mean by “avoidance” is simply moving one’s checking account from a bank to a credit union. 

What I DO mean is getting rid of the checking account altogether.

Aite Group surveyed consumers who use “alternative” financial services products (e.g., prepaid cards, check cashing services, etc.) to manage their finances, and identified a set of consumers who don’t have a checking account (not all users of alternative financial products are un- or under-banked, FYI), and rely instead on prepaid cards. 

The most prevalent reason why prepaid card holders who don’t have a checking account don’t have one? They don’t want to pay fees. Not just fees for using a debit card. But fees for insufficient funds, fees for reordering checks, or even basic monthly fees. 

This is an interesting perspective when you consider that many of the prepaid cards that these folks are using to manage their financial lives do have a monthly fee (and other fees) associated with them. 

Are credit unions prepared to identify consumers who shouldn’t have, or could do without having, a checking account? Will they recommend to these consumers that they NOT open a checking account, and use prepaid cards instead? And do they even offer prepaid cards in the first place?

We’ll see what happens on Saturday.

Banking The DeBanked

How’s this for coincidence: Today, Aite Group published my report Marketing Prepaid Debit Cards To Overdrafters and Harvard Business School published a white paper on overdrafters titled Bouncing Out of the Banking System: An Empirical Analysis of Bank Account Closures. 

The write-up on the Harvard paper included this comment:

Between 2000 and 2005, United States banks closed 30 million checking accounts of excessively overdrafting customers. It’s a significant action because people whose accounts are shuttered have to turn to costly fee-based alternatives to receive banking services—if they can get them at all.

My take: Hogwash. A load of populist crap. 

If a consumer is paying hundreds of dollars a year in overdraft fees, then why would an alternative product  like a prepaid card be considered a “costly fee-based” alternative?

As part of their marketing strategy, many prepaid card issuers target overdrafters. The challenge, however, is that Aite Group’s research found that prepaid card issuers’ overdrafter opportunities aren’t as lucrative as they might think. The majority of overdrafters pay an overdraft fee just once or twice a year, making the economics of switching their banking activity to a prepaid card less than worthwhile.

In fact, many overdrafters won’t switch to prepaid cards based simply to avoid paying overdraft fees alone. Low awareness of prepaid cards among overdrafters is a hurdle that prepaid card issuers must overcome before they can effectively market the product.

But there is a segment of banking customers that are looking to switch — or have already done so. These are the Debanked — consumers who choose to opt out of the traditional banking product structure, and opt to manage their financial lives with products that are typically considered to be “alternative” financial products.

There are two problems with the populist view of the market, so often adopted by ivory tower college professors and newspaper-selling journalists:

1. There’s a portion of the “unbanked” population that consciously chooses to be part of this population and is NOT in any way, shape, or form “victimized” by the financial services industry, and
2. Alternative financial products, many of which have fees associated with them, are not inherently evil, predatory, or economically disadvantageous to the consumers who use them.

There is a significant business opportunity for both banks and providers of alternative financial solutions (i.e., prepaid cards, check cashing services, etc.) to identify the DeBanked and potentially DeBanked consumer population and craft solutions for this market. (Sorry, can’t get into more details here–that’s what my Aite Group report is for).

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Check out Snarketing 2.0: A Humorous Look at the World of Marketing in the Age of Social Media (print or Kindle format):

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The Future Of Movenbank

If you need a refresher course on what Movenbank is, allow me to steal this passage from TheNextWeb:

It’s an exclusively online, new model of bank that uses social, mobile and gamification technology. To create a bank focused on utility and customer engagement, Movenbank created an ecosystem called CRED, which uses a combination of mobile technology, social media and behavioral game theory to help consumers save, spend and live smarter when it comes to their finances with a built-in reward system.

Here’s how the Movenbank story is going to play out:

Act I: Start-up generates positive press and attention for promising to create new banking model. New firm takes precautions to not get overhyped (like a previous new banking startup) too far in advance of its launch. Fledgling firm signs up 100,000 potentially interested customers.

Act II: With much fanfare, Movenbank launches, but small percentage of interested prospects sign-on. Management team is undaunted as they know full well that too many customers on day one might be more detrimental than helpful. After all, on day one Federal Express flew one plane, not thousands. 

Act III: The dark and lonely times. Movenbank works diligently to acquire new customers. Slowly but steadily new customers come on board. People begin to question the firm’s business model. 

Act IV: Movenbank prospers. Customers find that they can earn their way to better rates and fees, and grow with their existing account instead of switching. More importantly, customers are profitable. While other (i.e., traditional) banks have varying degrees of success driving up account profitability, Movenbank is able to do so through a blend of interchange, merchant-funded incentives, and yes, account fees. As the new model is validated, kinks are worked out, and word of the success of a new banking model spreads, helping to drive new customer growth at a much more effective and efficient rate. 

Act V: A megabank acquires Movenbank.

Huh? What? Why would a big bank acquire Movenbank? 

It’s a classic innovator’s dilemma. Today’s banks would desperately like to reinvent their business model. But, as they say in Maine, “you can’t get there from here.”

But why will Movenbank succeed?

It’s not because it’s a mobile-dominant plastic-less approach (I predict that Movenbank will one day issue plastic cards).

Movenbank will succeed because the product offer is more appealing, simpler, more transparent, and more fair than the [checking account] product structures on the market today.

The OccupyWallStreet people might not like to believe this, but the real 99% of people in the U.S. are OK with paying fees for the products and services they receive. What this majority wants, however, is perceived value for the fees paid. THAT’S the problem with the banking model today — mismatch between between fees paid and value received– and the problem that Movenbank is trying to solve for.  

In addition, the timing helps. While it’s always the right time for some firm to introduce innovation into the market, now is a particularly good time. It’s the perfect storm of economic conditions (producing strong consumer dissatisfaction with banks in general), technology development and — most importantly — demographics. 

Ten years ago, even if the economic conditions and technology had been in place, the demographics wouldn’t have been there. Today’s Gen Yers were just too young ten years ago to make a Movenbank possible.

Which isn’t to say that Movenbank’s only customers will be Gen Yers (just ask PNC about the demographics of its Virtual Wallet customer base). But Gen Yers need more than mobile access to their accounts, or a pretty interface. They need a new product. A product that reflects the fact that their spending and credit needs are rapidly changing.

The organizational walls between debit and credit products in most established financial institutions prevent them from creating and developing new solutions like the one that Movenbank is promising to bring to market.

By Act IV, big banks will take notice of Movenbank and realize that Movenbank is:

1. The “starter” account they should have created for entry-level customers, and
2. A platform and business model upon which they can migrate their stale and tired business model.

This, by the way, is why I don’t think Bank Simple’s path is similar. Bank Simple may succeed at creating a new interface for banking customers, but the underlying structure and business model of banking products remains in place. Maybe I’ll be proven wrong here, but I see Bank Simple as simply (pun intended) putting lipstick on the pig.

With that said, I may be wrong about Movenbank, as well. There are a number of failure triggers:

1. Model failure. CRED might not work. From two angles, actually. One is that Movenbank may not be able to collect a sufficient amount of data to validate the CRED concept. The other potential failure angle is that Movenbank may not be able to recalibrate CRED over time. This is what happened with FICO. A 600 score was significantly more risky in 2009 than a 600 score was in 2002. 

2. Technology failure. Movenbank is putting a lot of faith in the mobile channel. Not that it’s misguided faith. But the mobile channel– most importantly mobile payments and mobile customer service — has yet to face its toughest performance, reliability, and risk/fraud management tests. 

3. Service failure. You know why ING Direct succeeded as a primarily online-only bank? Because savings accounts require little customer service on an ongoing basis. That’s not the path Movenbank is taking, however. Quite the contrary — it wants to be the provider of the primary spending account. And with a heavy-transaction product comes heavy-customer support needs. Will Movenbank have the customer service capabilities to support a sizable customer base? We’ll see.

There are three additional failure triggers that I can define, but won’t talk about here. If Movenbank wants to know what they are, it knows where to find me. 

Bottom line: I’m bullish on the Movenbank concept. Sadly (for the industry) there aren’t enough people thinking about how to (constructively) reinvent the banking model. Too much focus is on improving the “customer experience” without fixing the underlying cause of the experience problems. Or blowing it up completely.

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Check out Snarketing 2.0: A Humorous Look at the World of Marketing in the Age of Social Media (print or Kindle format):

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Maybe Bank Of America Has A Plan

Maybe — just maybe — Bank of America has a well-thought out plan behind its debit card fees.

Maybe it actually WANTS customers to leave.

Crazy talk, you say? Not sure about that. After all, ING Direct has been lauded for “firing” customers. Bank Technology News wrote this a while back:

“To promote customer homogeneity and keep costs down, ING Direct won’t hesitate to fire customers who demand too much. Better to win over customers with shrewd marketing and good rates wrought by the cost efficiencies of doing business online.”

So, rather than flat out telling unprofitable — or potentially unprofitable — to close out accounts, BofA figures, “hey, we’ll slap a fee on them, and if they don’t like it, they’ll leave. And if they stay, they become more profitable.”

And wouldn’t you know it, but Durbin opens his mouth, and HELPS BofA by telling those customers to “walk with their feet.” Talk about effective word-of-mouth marketing!

So what happens if 1 million customers leave BofA?

If they’re truly the least profitable customers, BofA’s average customer profitability increases. And with less unprofitable customers to serve, the bank can more easily shrink to a more manageable size.

But you know what else happens?

Unprofitable — or potentially unprofitable — go join credit unions or open accounts at community banks. The credit union folks think this is great because it probably means the average age of members goes down. Hooray!

But oddly, the credit union’s profitability is adversely affected. Because if it’s low balance accounts  walking in the door, the income accelerator — the revenue generated on deposits beyond the spread and fees — is diminished. (This by the way, is one of the key reasons why high-yield checking accounts are more profitable than no-interest accounts. See my report on Why High-Yield Checking Accounts Trump Free Checking).

Let’s look at a  scenario: Assume you have 100 customers, equally split across 4 segments. Assume that the average profitability per customer of segment 1 is $1, segment 2 is $2, segment 3 is $3, and segment 4 is $4.

You’re making $250 in profits with average customer profitability at $2.50/customer.

If, thanks to BofA, 25 new Segment 1 customers walk in the door, profits go up to $275, but average profitability declines by 12% to $2.20/customer.

If the four segments represent the generations, it’s possible that you will lose Segment 4 customers (Seniors) over time. So let’s say 25 new Segment 1 customers come in thanks to BofA, but 10 Segment 4 customers are no longer with you. Profitability still goes up, to $255. But average profitability declines to $2.13, a 15% drop.

And if the ratio of customers in the four segments doesn’t change — that is, if segment 1 customers don’t become as profitable as segment 2, 2 as profitable as 3, and 3 as profitable as 4 — over time, then your FI is in trouble.

Oh sure, you can hold hands and sing cumbaya and hope those customers become more profitable over time. But smart firms don’t do that.

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So maybe BofA’s plan is to drive out customers it doesn’t think are — or can be — profitable, and let some other FI deal with them.

I’m sure many credit union marketers are thinking that this is great, that they would love to have those relationships, and grow with them over time.

Maybe they can. But if the BofA rejects….oops, I mean defectors….are the younger, less affluent, Gen Yers, then it may take some time for them to have a material affect on the CU’s profitability.

I’ve heard CU cheerleaders talk about being more open to extending credit to younger and less affluent consumers, and finding ways to help those consumers manage their financial lives without the high rates and fees that the big banks charge.

But there’s a reason why those consumers either don’t get credit or have to pay higher rates and fees to get credit, loans, and accounts. They’re higher credit risks, and they bring less funds to the table, resulting in less profits.

Seems to me there are a number of people in credit union land ignoring those realities.

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But, back to BofA, maybe the imposition of fees on debit cards is a smart move for the bank. I wouldn’t have advised the bank to do what it did, instead, I would have told them to levy fees on writing checks.

The CU Water Cooler Symposium 2011

If you’re a financial services professional trying to choose a conference to go to, you can flip a coin to make your choice.

Heads, you go to some large industry-wide boondoggle in Las Vegas with a thousand other attendees and see Sully (oops, I mean CAPTAIN Sullenberger) in the 43rd minute of his 15 minutes of fame. Tails, you go to a smaller functionally-focused conference with 150 other attendees and see your colleagues talk about what their firms are doing (if you can stay awake through their entire presentation, that is).

If you’re lucky, however, the coin will land on its edge. And then you can decide between Finovate and the CU Water Cooler Symposium.

I wasn’t able to attend Finovate last week, but I did get to go to the CU Water Cooler conference. Even better, I got to present there.

When Tim McAlpine told me a few months ago that he was selecting me to speak, I asked him what he wanted me talk about. He said “I don’t know. I like the way you bring humor to your blog, and want you to bring that to the Symposium.” I told Tim that I don’t do stand-up comedy, so he said “Do what you want.”

I chose to speak on Quantipulation, and tried to debunk a few marketing myths. CU Times wrote that I have a “simple message for credit unions, ‘Don’t believe any numbers without question.’”

Not to make a mountain out of a molehill here, but that’s not quite accurate. Instead, I told the conference attendees not to believe any number they heard over the course of the conference without questioning the number’s assumptions.  But I’m quibbling here.

With no intended disrepect to the speakers I’m not mentioning below (I didn’t actually get to hear all of the presentations), here are the three highlights for me, in no particular order:

1. Demystifying Creativity. Someday Charlie Trotter (the one living in Foat Wuth Texas, not the restaurant owner) is going to be well known, and I’m going to get to say “yeah, I know Charlie.” It’s OK if he doesn’t admit to knowing me. Charlie talked about what creativity really is. Charlie helped me (and I hope everyone else) to better see how creativity is not synonymous with imagination. Imagination is the ability to imagine. Creativity is about DOING something. According to Charlie, you aren’t creative until you’ve actually created something. The third concept Charlie hit upon was talent. Talent + Imagination + Creativity = Success. Charlie didn’t actually say that, I’m just quantipulating.

2. Boomification of Credit Unions. Damn, that Denise Wymore is a good speaker. I truly wish that I had her ability to connect with an audience. On the other hand, I’m glad that I’m not wrong about stuff like she is. Denise’s presentation truly was excellent — engaging and compelling. Problem is, her ideas are just simply wrong. Ideas like getting rid of FICO, and judging loan applicants based on their “character.” They have a name for that, Denise: Discrimination. And it’s illegal. Or the idea that profit-driven is somehow the antithesis of people-driven. A false dichotomy, Denise. Denise’s cumbaya makes for a great presentation, but cumbaya won’t sustain a credit union, nor the credit union industry.

3. Future of Payments. As I listened to Jeff Russell, CEO of The Members Group, a little voice inside my head was screaming “ARE YOU LISTENING TO THIS, PEOPLE?!” My perhaps skewed perspective on the things I hear from credit union professionals lead me to believe that too much of the conversation is about lending. Jeff’s message, if I’m interpreting it correctly, is that payments is where the focus should be. If I’m getting him right, I couldn’t agree more. There’s no better way to help a credit union member best manage his/her financial life than to help them make smart everyday spending decisions. You simply can’t do that if their primary spending account is a checking account or credit card held at some other financial institution. On top of that, the future of cross-sell marketing for banks and credit unions will come from payments-related and payments-triggered transactions. If your credit union is a payments laggard, good luck. You’re not going to make it up on car loans.

I do wish, though, that Jeff hadn’t said two things that he did. The first being that mobile payments will be the dominant form of payments in five years. I’m willing to bet a LOT OF MONEY that that won’t be the case. In the past 15 years, I’ve NEVER been wrong underestimating the rate of technology adoption.

Second, I’d argue with Jeff regarding his view that free checking is dead. Free checking isn’t — or shouldn’t be — dead, and for two reasons. First of all, unlike Jeff said, debit interchange doesn’t fund free checking accounts. Free checking accounts have been around for a lot longer than the increase in debit card activity.

The advent of free checking was born out of the the belief that getting someone’s checking account was the steppingstone to getting more of their financial accounts. If that belief is true — and it’s certainly a discussion for argument, since so few financial institutions have done a good job of successfully cross-selling — then a cut in debit interchange shouldn’t portend the complete death of free checking.

The other reason why is free checking isn’t dead is because it never really was alive. When we say “free checking” what we’re really saying is “no monthly fee” checking. Tell the people who don’t pay a monthly fee, but pay out hundreds of dollars in overdraft, foreign ATM, and safety deposit box fees that their checking account is “free.” I hope you don’t get punched in the face.

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Beyond the presentations themselves, the other thing that makes this conference top-notch is the attendees.

I wonder how it felt for first-time attendees who aren’t tied in to the credit union twittersphere. I wonder if they felt like this was some party they were crashing. I certainly hope not. But the conference really is a gathering for a lot of credit union professionals who actively engage with each other on a daily basis. And of course, some of the attendees have known each other for a long time. Denise Wymore and Janine McBee told me they’ve known each other for….

Oh, hey, did I tell you that I finally met Jimmy Marks in person? I’ve never hugged a man the first time I met him. But I gave Jimmy Marks a hug when I “met” him. (It’s OK, it was one of those male “shoulder bump” hugs). Although I had never met him in person before this week, I’ve been tweeting with him for at least two years. And I “know” him better than I know a lot of my colleagues at work.

It was also a treat to see Rob Rutkowski and Jeff Hardin at the conference. For two reasons: The first, because I had met the both of them at the Forum Symposium in 2007, and hadn’t seen either of them since; and second, because the two of them make me feel like I’m not the only “old” guy at the conference (even though both of them are younger than I am).

Bottom line: Love this conference. Thanks to the CU Water Cooler editors — Carla, Matt, Kelley, William, Gene, Doug, Brent, Christopher — for their time, effort, and brainpower on doing what they do. And huge thanks from me to Tim McAlpine for giving me the opportunity to present and attend the conference.

Why Google Won't Become A Bank

Search Engine Watch published an article titled Why Would Google Become A Bank? and basically answered the question in the first paragraph by saying “Because that’s where the money is.” The article goes on to list a more specific set of reasons including:

1. Increased value for AdWords ads.
2. The power of the coupon just got better.
3. Further diversification of revenue streams.
4. Data.
5. Android and Chrome usage increases.

My take: Don’t hold your breath waiting for Google to become (or launch) a bank. It isn’t going to happen. Here’s why:

1. It’s not where the money is. The prospects for mobile payments is certainly bright. But the question that remains to be answered is: Who’s going to make money from these payments? If you, your bank, or anyone else thinks that consumers will pay a fee or a premium for the “privilege” to make a mobile payment, you (and they) are sorely mistaken. Banks’ ability to make money from transactions — mobile or not — has seen its ups and down in the past few years (up on credit cards, then down on credit cards, up on debit cards, then down on debit cards). Retail banking is simply NOT “where the money is.”

2. Nobody in their right mind wants to be regulated to the extent that banks are. For the past few years, regulatory changes have hacked away at banks’ ability to make money. The Card Act, Regulation E, Durbin’s Folly, the list goes on. From a new entrant standpoint, it’s simply too risky and unpredictable to enter the industry. Firms like BankSimple and Movenbank are getting into the industry by either leveraging other firms’ bank charters or by avoiding the need for one altogether.

3. They don’t have the support infrastructure. Google isn’t a B2C company, it’s a B2B company. It has no competency — let alone capability — to provide transactional customer support. So I hear you say,”but they’ll outsource that.” No, they won’t. Outsourcing a critical business function doesn’t absolve you of the need to know how to manage and integrate that function into your business

4. It doesn’t fit with the firm’s business model. Even if you argue my three previous points away, the most important reason why Google won’t become a bank is that it just doesn’t fit with its strategy and business model. Google’s strategy and business model is unique and ambitious: It aims to be the center of the universe in INFLUENCE.

Why did Google acquired Zagat? To influence your choice of restaurants. Why did Google launched Google Advisor? To influence your choice of banks.

Google doesn’t want to process mobile transactions, open bank accounts, and deal with your stupid little banking questions.Google wants to influence who you do business with. And not just in banking and financial services, but everywhere.

When Google is influencing all of your day to day decisions, then every provider in the world will be kissing Google’s shiny black boots looking to participate. And THAT’S how Google will make money. Not by becoming a bank.

Improving Bank Customer Retention

Market research firm Yoosless Phuqing Research released the results of a study today, revealing important insights into improving bank customer retention.

According to the study, bank customers who turn right into parking spots in a bank’s parking lot have a 7% higher retention rate than left-turning customers. According to the firm’s founder and CEO, Aimso Yoosless:

“Just 18% of right-turning customers switched banks last year. In contrast, 23% of left-turning customers switched. Clearly, a quality parking experience creates greater customer retention than quality online banking or direct deposit services.”

First National Bank of Boar Tush (Alabama) has already acted on these findings by closing off left-side parking spots:

According to the banks’s SVP of Revenue, William Dumass: “By closing off half the parking lot, we expect to increase our overall retention rate by 2.5%, which translates to roughly $500,000 in annual profits. The ROI on this effort is huge.”

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If you’re wondering what motivated this blog post, it was an article titled Banks Ignore Customers, Waver on Mobile Engagement that reported the following:

“While only 13% of banking customers currently use mobile engagement, a recent survey of revealed that a quality mobile banking experience creates greater customer retention than quality online banking or direct deposit services. A financial services strategy consulting and research firm conducted a recent study showing that only 5% of [consumers] using mobile banking and payment services switched bands in the previous year. With no true standout bank in the mobile banking arena, the bank that drives innovation in the mobile field stands to gain a large advantage.”

[Note: The above is a cut and paste with some rearranging going on. I’ll assume the author meant “bank” and not “band.”]

It would be easy to chalk this up to a misunderstanding of causation versus correlation. But that doesn’t capture it in every case.

On the contrary, in a number of–if not many–cases, it’s a factor of the author’s desire to make a statement about innovation, technology, or maybe to be seen as a thought leader. The research simply gives the author the opportunity to reiterate something that they already believed.

Ironically, I’m  a big believer that the mobile channel will be a strong differentiator. But the business case won’t be justified by some simplistic impact on customer retention.

The retention argument has been used with every online technology that’s been introduced over the past 15 years: online banking, online bill pay, eStatements, PFM, etc.

At this point in the development of online banking technology, banks’ retention rate should be approaching 800%.