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.

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Quantipulation In Action: Inbound Vs. Outbound Marketing

Mashable (that highly reputable source of marketing theory and research) recently published an article called Inbound Marketing Vs. Outbound Marketing, which claimed:

“Thanks to the Internet, marketing has evolved over the years. Consumers no longer rely on billboards and TV spots — a.k.a. outbound marketing — to learn about new products, because the web has empowered them. It’s given them alternative methods for finding, buying and researching brands and products. The new marketing communication — inbound marketing — has become a two-way dialogue, much of which is facilitated by social media.

Another reason why inbound marketing is winning is because it costs less than traditional marketing. Why try to buy your way in when consumers aren’t even paying attention? Here are some stats from the infographic below.

–44% of direct mail is never opened. 
–84% of 25 to 34 year olds have clicked out of a website because of an “irrelevant or intrusive ad.”
–The cost per lead in outbound marketing is more than for inbound marketing.”

My take: Total garbage. This attempt on the part of people looking to differentiate the “new” marketing from “old” marketing completely misses the boat. 

Let’s look at this point by point:

“Consumers no longer rely on billboards and TV spots — a.k.a. outbound marketing — to learn about new products.” Who said that consumers relied on billboards and TV spots to learn about new products? Marketers relied on billboards and TV spots to make consumers aware of their products, to increase recall of their products, and create positive affinity. As long as people continue to drive along the highway (how’s the commute in your city? Yeah, sucks in mine, too) and watch TV, marketers will find that billboards and TV spots to be at least somewhat effective at those objectives. 

The new marketing communication — inbound marketing — has become a two-way dialogue, much of which is facilitated by social media. Got news for all the inbound marketing alarmists out there: Marketing has always been a two-way dialogue. It just wasn’t as easy to execute as it is today. Marketers have relied on various mechanisms — postcards, focus groups, toll-free phone numbers — to encourage feedback from consumers. Claiming that the “old” marketing was “one-way” is false.

44% of direct mail is never opened. First off, how do they know that? Think about how much direct mail you get. I challenge you to come up with even a reasonably accurate estimate of how much of it you open and how much you throw away before opening. Second, even if this were true, then I’d say: WOW! More than half of direct mail is opened. That’s pretty damn good in this marketing environment!

84% of 25 to 34 year olds have clicked out of a website because of an “irrelevant or intrusive ad.” What the hell is wrong with the other 16%?

The cost per lead in outbound is more than for inbound marketing. Stupidest claim I’ve heard all month. Just because there is no measurable media cost associated with this thing you call “inbound” marketing doesn’t mean there aren’t costs associated with the efforts. Somebody has to create and manage the social media site, right? Or, if the inbound marketing channel is the phone, do the costs of staffing the call center not count as part of inbound marketing efforts? And given the incredibly inexact science of attribution in the marketing world, how does anyone really determine that a generated “inbound’ lead wasn’t influenced by outbound marketing efforts?

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The infographic included in the Mashable goes on to claim that in the “old” way of marketing, marketers rarely sought to “entertain or educate.” Seriously? The ad industry has a RICH history of attempts at being funny and entertaining. Print ads have LONG been focused on education. 

The article also tries to differentiate “new” marketing from “old” marketing by claiming that in the new marketing, “customers come to you”, while in the old marketing, marketers sought out customers. 

Customers come to you? Really? And how do they find out about you? Simply by word-of-mouth? Good luck with that. Listen to what Groupon had t say:

“After a two-year holdout, we finally decided to run real television ads. In the past, we’ve depended mostly on word-of-mouth and limited our advertising to online search. This year, we realized that in spite of how much we’d grown, a ton of people still hadn’t heard of Groupon, so we decided to give in to our Napoleon complex and invade the rest of the world with a proper Super Bowl commercial.”

Bottom line: Trying to make inbound marketing sound like something superior and new is total BS. Marketing is a complex process. There are parts of the process that are inherently outbound and parts that are inherently inbound. There are new channels of communication that create new opportunities for both outbound and inbound communication.  Oh, and real marketers don’t take marketing advice from Mashable. 

I Regret To Inform You That My Blog Fees Will Be Going Up

Many of you have been reading this blog for the 2+ years of its existence for no charge. Well, my little freeloading friends, this is the end of that party.  Beginning December 1, I will be instituting the following fees for reading this blog:

  1. Blog reading fee. Lifetime free readership will no longer be available. Per the terms of our agreement — that the end of anybody’s lifetime allows us to revoke the offer — free readership of this blog will no longer be offered. Starting December 1, you will be charged a $.25 fee for each blog post you read, whether you link directly to the site, view it in a reader, or are simply subscribed to it at the time it was posted.
  2. Subscription reversal fee. Requests to unsubscribe from this blog will be assessed with a $25 premature disconnect service charge. At this time, subscription reversal requests cannot be taken online, as my eCommerce site is currently down for scheduled maintenance. Please mail your requests to the home office address, which can be found on my eCommerce site.
  3. Inactive reader fee. For every week that goes by in which you do NOT read a blog post, you will be assessed a $.50 fee. For any month in which you do not read a single post, a $5 charge will be levied.

In an effort to be transparent, however, I think it’s important that I explain why I’m forced to institute these fees:

1. Higher debit card fees. Starting October 1, new debit card interchange fee regulations took effect. Even though these changes only impact banks with assets greater than $10 billion in assets, I figure that if this excuse works for Redbox, then it should work for me.

2. The Barbara Lee effect. Ms. Lee, a member of the House of Representatives, recently commented that she doesn’t use the self-checkout lanes at supermarkets because  “that’s a job or two or three that’s gone.” If there are more people like her out there — who stop using self-checkout lanes, ATMs (because they take away bank teller jobs), self-service gas stations (because they take away gas pumper jobs), or E-Z pass on the highway (because you know we can’t afford to lose any more toll taker jobs) — then the result will be higher prices for lots of things. In anticipation of this mass lunacy, I’m afraid I have to raise my prices.

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In a little more seriousness, there is a message here for marketers.

While I fully support the right of any business in this country to raise its prices, and shoot itself in its foot (or head) by doing so, firms that feel the need to raise prices WITHOUT committing PR suicide must do so with caution, transparency, honesty, and proactive communication.

Redbox’s announcement is shameful. They might have well as blamed foreign currency fluctuations in Uganda. There’s a large financial institution (who shall remain nameless lest they find out I’m blogging about them) that should’ve been a bit more sensitive about how it announced its recent price hikes. I would mention Netflix, but I have a professor/ad agency friend in the LA area who would jump all over any comment I might make about them.

Price changes are lightening rods. You might be able to mute the thunder, but people still see the sky light up. And then like to point at it and talk about it.

Someone Should Get Fired

Check out this opening paragraph to an article titled How strategic is our technology agenda? in McKinsey Quarterly:

“The CEO of a leading consumer goods company was unhappy with his CIO. An important competitor was gaining market share at a disquieting pace by using social media and data analysis to target customers more effectively. When asked about these developments, the CIO outlined some potential responses, but he didn’t follow through on them. Instead, according to the CEO, the CIO remained preoccupied with “keep the lights on” IT projects and was therefore unable to gain traction with the business leaders and others within the company who would be critical in helping to address the new competitive challenge.”

My take: Someone should get fired. I’m just not sure if it’s the CEO, the firm’s CMO, or the authors of the article. But I’m pretty sure it’s not the CIO who should get canned. 

Why should it be the…

CEO? If IT isn’t “strategic” within an organization, it’s not necessarily the CIO’s fault. I’ve worked with plenty of CIOs who have tried to make IT more strategic, but find that the processes, the org structure, and the management mentality required to make IT strategic aren’t in place to make it happen. 

In a report I published a while back called Bank Performance: Why IT Management Matters, I found that it doesn’t matter which technologies a firm uses. What matters is how a firm manages IT. The “how” of IT management is comprised of three dimensions: 1) Tolerance of IT risk; 2) Senior management support of IT; and 3) Coordination between IT and business functions.

What my researched showed was that firms (in this case, banks) that have a high tolerance for IT risk, have strong senior management for the use of technology as a business enabler and differentiator, and demonstrate tight coordination between the IT department(s) and lines of business are more profitable than other banks. 

In other words, for IT to be strategic, it takes more than just a bottom-up drive from the CIO’s organization. 

Another [big] reason why the CEO is a candidate to be shown the door: Why is going to the CIO with a problem related to social media and data analysis? 

This takes us to the second candidate to get the axe…

CMO? If a CPG firm is losing market share because it isn’t leveraging social media or successfully executing data analysis, the fault for this doesn’t lie with the IT organization, it lies with the marketing organization.  

The McKinsey article also contains the following passage:

“Vocal business unit leaders at a North American insurance company, for example, insisted that sluggish times to market for new products were an important factor behind its eroding market share. They also believed that poor IT systems—specifically, the software that supported pricing and helped adapt insurance products to local regulatory requirements—were responsible for the lagging product-development performance.”

Hogwash. I believe full well that IT systems might be a negatively influencing factor in the firm’s time-to-market for new products, but the fault in this situation lies with the inability of the lines of business to effectively make the case for investing in an makeover or overhaul of those applications. IT can help the business understand the technology implications of investments, but it is the business’ responsibility for making the business case for investments that improve its performance. 

In the case of the CPG firm referenced at the beginning of the article, the CMO would appear to be seriously derelict in his or her duties to not be included in the CEO/CIO discussion. 

Which takes us to the third candidate(s) to be fired…

Authors? I don’t want to call anybody a liar here, but I don’t believe the CEO/CIO conversation actually happened. “Leading” CPG firms (McKinsey’s adjective) are generally marketing-driven firms. I don’t believe the CEO of a “leading” CPG firm would turn first to the CIO — and not the CMO — to discuss an issue with social media or market share. 

Maybe the authors took some poetic license for the purpose of the article. If so, I’m OK cutting them slack and not firing them for this relatively minor offense. 

See? I can be a nice guy.

Bank Transfer Day Needs A New Name

Bank Transfer Day is a gawdawful name. I saw one CU person’s tweet alluding to it as BTD. Ugh.

What the hell does it mean? Transfer your money from one bank account to another?

Yes, I know full well it’s about moving your money OUT OF a bank (and into a credit union).  But how is that obvious to the 99%? 

One friend (who shall remain nameless unless he tells me it’s OK to attribute this to him) suggested calling it Tell Your Bank To Shove It Day.

Now we’re talking. 

How about CU Later Banks! Day? (Or is that too obvious?)

Or maybe Break The Bank Day is better. On second thought, Durbin’s already pretty much proclaimed 2011 to be Break The Bank Year.

Spank Your Bank Day is another option. Too violent?

I don’t know what the right answer is, and it doesn’t really matter what I think since nobody is going to change the name based on what I have to say. But maybe I can get the powers to be to rethink the name.

Having said that, who are the “powers that be”?

If you know, please let me know. Because after I ask them to change the name, I’m going to suggest that they change the date. Doing this on a Saturday isn’t the best idea.

And who came up with that picture? It looks like The Joker from the Batman series and movies.

What do you think the day should be called?

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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