A new study by BAI Research found that small businesses still do most of their banking at local branches. Consumers might be going mobile, but small businesses still prefer old-fashioned face-to-face banking.
From the story:
Small businesses continue to interact with- and transact at their branches. More than half of all business transactions are conducted at a branch. Small businesses also show a strong preference for in-person and live agent phone conversations with their financial institutions, which drives them to greater branch usage. And for financial marketers, branches continue to be the best venue to acquire new business relationships.
Unlike retail consumers, the research found that less than 25% of small businesses surveyed use mobile banking with only 8% using mobile bill pay.
As the story notes, before banks eliminate branches because of lighter traffic, they should consider the effect that eliminating branches might have on their small business clientele.
To read the full story at The Financial Brand, click here.
When banking changes, fraud changes with it. Case in point: as check-writing has declined and the use of debit cards has risen, debit card fraud has come to outpace check fraud.
What can banks and credit unions expect in the area of payments fraud in the years ahead?
In the new Resources section of our Web site, we’ve posted a short white paper that answers this question, drawing on recent banking surveys and security reports.
To access this white paper, Four Insights on the New Face of Payments Fraud, click here.
We’re very pleased with the partnerships we’ve announced in the past month or so.
First, in late November, we announced a partnership with ATTUS Technologies, provider of the industry-leading OFAC-checking service, WatchDOG Pro. This partnership enables us to offer OFAC SDN List-checking as part of Accelerated Insight.
For our press release about ATTUS Technologies and WatchDOG Pro, click here.
Second, we’ve just announced a partnership with First Data, a global leader in financial services technology. Working with First Data, we’re now able to offer the First Data Confidence Score as part of our Accelerated Insight identity verification service.
The First Data Confidence Score is an alternative tool that allows clients to use multiple forms of identification to screen applicants and provides access to hard-to-locate information on sub-prime, thin-file, and no credit score consumers. The solution leverages TeleCheck®, the nation’s most complete database of check writer information, which provides affordable, real-time information based on checking account history at TeleCheck merchants and financial institutions nationwide.
To learn more about the First Data Confidence Score and our partnership with First Data, see our First Data press release.
As these announcements show, Accelerated Insight provides comprehensive identity verification in a single secure Web service accessible in branches and through online applications, including mobile applications. In addition to Accelerated Insight’s proprietary discovery system, real-time data-cleansing algorithms, and ID verification services, Dragnet customers now have access to best-of-breed data services for OFAC-checking and account screening, providing branch personnel and online applications with critical insights at the time of account opening.
To learn more about Accelerated Insight, please contact us.
Epsilon just published a study showing that even in the age of smartphones and tablets, customers prefer receiving much of their information by direct mail. When it comes to receiving information about financial services in particular, 38 percent of the U.S. households surveyed preferred receiving information through postal mail. They preferred postal mail twice as much as Internet communications in general (17%). Email was preferred only a lowly 7% of the time. (For more about the study, click here.)
This Epsilon study is yet another reminder of how important it is to collect accurate address data from customers. There’s no better time to do this than during the account creation process when your customer is sitting face-to-face with a branch employee. Yet whether because of keyboard errors or outdated information on government-issued IDs, financial institutions end up with incorrect address data from these interviews too much of the time.
Bankers tell us that as much as 5% of their postal mail communications are returned because of address errors. That’s 5% of customers who never receive the institution’s direct mail pieces, no matter how well they’re designed or how compelling their offers.
For a lot of reasons—including getting the most out of future marketing campaigns—it pays to use a real-time identity verification service that corrects address information in real time.
We’re pleased to announce that we’ve partnered with ATTUS Technologies, Inc. and integrated ATTUS WatchDOG Pro into Accelerated Insight, our real-time identity verification service for financial institutions.
WatchDOG Pro is an industry-leading automated OFAC (U.S. Office of Foreign Assets Control) verification solution. WatchDOG Pro screens entity and individual names against OFAC lists that are updated in near real time, providing institutions with an easy and efficient method for monitoring OFAC compliance. It compares customer and vendor lists against multiple watch lists, including OFAC’s Specially Designated Nationals (SDN) List and Sanctioned Countries List. By law, financial institutions in the U.S. must check OFAC lists before opening accounts for individuals or businesses.
You’ll find our partnership announcement here.
Interested in seeing Accelerated Insight in action? Contact us.
We’re back from this year’s BAI Retail Delivery Conference in Washington, D.C. It was a great conference: good speakers, lively conversations, and lots of innovation to see on the exhibition floor.
There was a lot of excitement about mobile. But in our conversations with bankers, we found that many institutions, large and small, are still wrestling with classic challenges such as identity verification, compliance, and fraud detection even in that most unmobile environment—the branch.
These institutions are looking for new, foolproof, and efficient ways to address challenges related to account creation and identity verification—challenges such as:
In our booth, we demonstrated our identity verification services.
For identity verification and OFAC-checking at account opening, banks and credit unions can use our Accelerated Insight service to verify names, date of birth, and Social Security Numbers, while getting the latest address on record. In addition, institutions get a risk/confidence score that predicts account profitability, even for unbanked and underbanked customers.
We also demonstrated our document authentication service, Intercept, which detects fraudulent driver’s licenses, tracks the use of a specific document across transactions and locations, and alerts institutions to the re-use of an ID photo across multiple documents.
If you attended the show, what were the highlights for you?
Imagine two banks that have decided to grow accounts aggressively.
Bank #1: Open Now, Fix Later
The first bank opens accounts for nearly anyone who enters the branch. Applicants walk in, meet with a banker, and walk out thinking that they have an account.
Back-office processing for new accounts takes place in batch mode at night. So the day after applicants visit, bank employees start looking for fraud, past charge-offs with the institution, and invalid ID data; they also try to correct any mis-keyed customer information. They shut down any new accounts that look too suspicious, and try to contact the would-be account holders by phone or direct mail to clarify information that didn’t quite check out. Unfortunately, new account holders can be hard to reach. Perhaps the account irregularities include incorrect or old addresses or phone numbers. Or perhaps a banker made keystroke errors when entering contact information or other data. (This happens more often that we like to think.) In the meantime, debit cards and check orders have already been ordered and are on their way – perhaps to a wrong address—or to a crook. In either case, more time and money will be wasted straightening this out.
After that initial visit to the branch, the customer might be disappointed or even angry that the account opening process—standing in line, filling out forms, etc.—resulted in the need for further follow up with the bank – or a closed account the next day.
Bank #2: Getting It Right the First Time
The second bank will open accounts for lots of people, but it verifies IDs, address information, and relevant customer history in real time. If there’s a problem, the banker and the applicant can discuss it right there in the branch, face to face. Perhaps it was a misunderstanding or a clerical error. Perhaps the applicant really does not qualify for a conventional DDA account, but might be interested in a special type of account or a prepaid card. Perhaps the applicant is a fraud operator and shouldn’t be given any type of account at all.
Whatever the outcome, a degree of trust has been established between banker and applicant (except the fraud operators). The banker has had an opportunity to sell or cross-sell appropriately. And the bank won’t be spending money in the form of staff time, IT operations, and special direct mail pieces or after-the-fact re-work to close accounts and repair the damage done by a fraud operator, simply because it had to wait a day or two to vet an account.
The Value of Real-time Analytics
For banks interested in growing accounts aggressively, it makes sense to follow the example of Bank #2. Using real-time ID verification and risk/confidence scoring, banks can make the most of in-branch visits and eliminate the costs of back-office Day 2 processing. That’s a good strategy for growing both revenues and profits.
To learn more about Accelerated Insight, our real-time identity verification service for financial institutions, please contact us.
Earlier this year the Financial Brand published the results of its survey of 228 banks, credit unions, and community banks about the state of bank and credit union marketing. The survey asked these institutions what their top three marketing priorities were for 2012.
Obviously, answers 1 and 3 are closely related. In addition, 51% of institutions said that their customer onboarding program would be more important in 2012.
None of these results surprise us. Engaging with customers more successfully—understanding their needs, and selling products and services to meet those needs—is the best solution for acquiring profitable clientele and growing sales in a tough economic environment.
So the goals are clear. What about the obstacles?
The majority of respondents said their biggest challenges came from internal factors such as:
If limited marketing and IT resources are the problem, then new sales and marketing initiatives will have to be highly cost-effective. Multi-year engagements with big consultant firms are probably out. Sales and marketing need to be fast and efficient in order to contain costs while addressing the needs of rapidly changing markets. And any new, widely deployed IT solution is going to have to be easy to use (minimizing training costs) and easy to deploy (minimizing IT costs).
We believe that financial institutions can achieve their sales and marketing goals by optimizing account creation with fast, efficient customer analysis and ID verification services. These services give branch personnel the best possible information for making real-time decisions that affect account growth, account profitability, and fraud risk.
Earlier this month The Economist magazine hosted a lively debate on its site about the future of branch banking.
Brett King, author of Bank 2.0, argued that bank branches are obsolete. He wrote:
“Just like the publishing and media industries, a place is simply no longer a vital, necessary component of day-to-day banking. Bankers would have no more luck getting customers back into the branch than Borders might have getting customers back into a bookstore.”
Opposing this motion, Mark Weil, head of EMEA financial services at Oliver Wyman, argued:
“Far from killing the branch, new technology is revolutionising it. It means banks can do simple transactions via the ATM, phone and internet and turn their branches into places where customers have space to talk about their big financial decisions.”
Jonathan Rosenthal, banking editor at The Economist, moderated the debate. The discussion raised important points about banking trends, customer demographics, and technology. Readers were not shy about chiming in: twice the debaters’ statements garnered about 70 comments.
But readers rendered their verdict early. About two-thirds of voters opposed the motion on the first day, and that majority barely budged in the two weeks the debate was live on the site.
That said, the back and forth was instructive, and between Mr. King and Mr. Weil’s statements and the comments of readers, one can find a wealth of information and opinions about retail banking in 2012.
What’s our take on this question? Are bank branches really obsolete?
Branches are changing, but they’re hardly obsolete. The rise of online/mobile banking concurrent with the closing of over-abundant branches should not be construed as indicative of the demise of the branch; they are each largely driven by different business objectives. Based on our conversations with banks large and small, and based, too, on our review of market, including financial results from major financial institutions, we believe that most banks will continue to operate branches indefinitely. The technology inside branches will undoubtedly change. ATMs will evolve, and video tellers might outnumber people at certain locations. New products and services that are appropriate to provide through physical locations will emerge. But branches, in one form or another, are here to stay.
Why? Two reasons: sales and security.
Let’s start with sales. Studies show that consumers like having branches near where they live and work, and that they choose banks based in part of the proximity to branches. Mobile banking might be convenient, but lots of people still want the choice of being able to walk into a branch for a face-to-face discussion with a banker. Online-only banks won’t win these accounts. And they’ll lose an opportunity for long-term profits.
Look at the impressive results a major U.S. bank is achieving through its growing network of branches. According to its recent investor reports, this bank has 5,500 branches in the U.S. and is opening about another 150 this year. New branches break even at around 30 months. Once “seasoned,” the branch delivers $1 million on average in annual pre-tax profits. The 1,250 or so branches the bank has added since 2001 are projected to contribute roughly $1 billion in pre-tax profits over the next 8 years. Affluent customers visit them 4 times a quarter. Far from considering this channel obsolete, this bank is planning on adding more branches in the coming years.
As for security, most bankers are expecting fraud to get worse, not better, in the foreseeable future. Most banks will not want to dispense with at least an initial face-to-face initial meeting with a customer to ensure compliance and to stop fraud. If trouble strikes in the form of ID theft or other types of security breach, both bankers and customers are likely to appreciate the opportunity to talk in person to assess the situation and to rebuild trust.
Bottom line: If you build branches in the right locations and deliver the right kind of services, customers will visit branches. They’ll trust branches and use them, and branches will deliver profits to the shareholders.
First, there’s the very real risk that your latest customer is a fraudster. Financial institutions expect to be hit with more fraud this year, including credit card fraud, check fraud, and account take-overs. Every time your institution opens an account, there’s a chance—too big a chance—that the account holder isn’t who he or she says she is and will attempt to defraud your institution.
Second, there’s a chance that in your organization’s drive to grow accounts and hits sales numbers, branch staff will take shortcuts, violating company policies and jeopardizing your institution’s compliance with OFAC, CIP, and other Know Your Customer laws. For example, a banker might accept a government ID that’s expired or take some other shortcut, reasoning that the customer doesn’t seem like a fraudster and that new sales targets must be met. Unfortunately, shortcuts like this are taken all too often.
Third, there’s a risk that the institution will fumble the account opening and customer onboarding process. Names might be misspelled or other CRM data entry errors might occur. Wrong offers might be suggested, and real opportunities overlooked. That’s a pretty substantial risk. Since the majority of a customer’s lifetime sales occur in the first three months, mishandling the onboarding process can be costly.
One of the best ways to reduce these risks is to streamline and automate data collection and identity verification during customer onboarding. By deploying real-time identity verification services in branches and integrating those services with CRM systems and other account services, risk management teams enable branch staff to: