A February 2012 survey of 2,273 retail financial institutions by Moebs $ervices found that banks and credit unions received a combined $31.6 billion in overdraft fee revenue in 2011, down 4.5% from 2010.

Around this time a year ago, Moebs had forecast overdraft fees would total $38 billion in 2011, which would have been an all-time high in the financial industry. They had also estimated $35.4 billion for 2010, but the actual number turned out to be $2.1 lower than they anticipated.

In their most recent study, Moebs also analyzed more than 12,000 datapoints surrounding service fee income in the banking industry. They found that banks and credit unions enjoyed an overall rise in revenues in 2011, despite the reversals in overdrafts.

The Moebs study found that the national median price for an overdraft fee increased to $29, up from $27.50 in 2010. Moebs says financial institutions’ price increases on overdrafts are a direct response to costs stemming from a heightened regulatory environment, namely the implementation of the Dodd Frank Act and Regulation E.

Source: Moebs $ervices surveys and an analysis of FDIC, NCUA, OCC and Federal Reserve data.

The Overdraft Landscape In 2011

“The average number of overdrafts per account has fallen by 29.5%, from a peak of 10.5 in the 3rd quarter of 2008 to a low of 7.4 barely three years later.”

After peaking at $37.1 Billion in 2009, financial institutions have lost $5.5 billion, or 14.8%, in overdraft fee revenue over the past two years.

The median price has increased by 16% nationally, up $4 in 3 years.

The frequency with which consumers overdrew their checking accounts in 2011 also saw a decline.

The numbers indicate a fall off in volume, a rise in prices, and a loss of revenue, yet Moebs feels the overall market might have bottomed out. Mike Moebs, CEO of Moebs Services, has a rosy outlook.

“Amazingly, given all of the polar forces at play in the overdraft market — volume, price, revenue, a slumping economy, high unemployment, regulator restraint by FDIC, and legislation by Congress — the overdraft market is rising like the mythical phoenix and coming back,” Moebs says optimistically. “It appears that the American consumer is saying they want overdrafts, but they want them as a reasonably priced safety net overdraft, and not an old fashion high penalty-priced overdraft.”

This automated overdraft notice is cold, corporate and impersonal. It doesn't do anything to help customers feel positive about the overdraft service they signed up for. Customers who get too many of notices like these just might think about shutting their overdraft service off.

A much friendlier way to alert people about overdrafts. When marketing overdrafts, it's important to remember you want people to be comfortable every time they incur a fee. Overdraft notices should remind consumers that the (voluntary) fee paid allowed a transaction to go through that would have otherwise been rejected -- a huge embarrassment and inconvenience.

According to an earlier study by Moebs, 44.3% of banks and credit unions made some type of change to their overdraft program in response to opt-in requirements vs. 55.7% who did nothing. One in five increased prices to offset revenues lost from those opting out. 6.5% actually decreased prices for overdraft protection.

Almost one third, or 29.3% of all financial institutions, changed the amount they charge customers who overdraw their accounts. Of those who changed, 14.6% lowered their price, by an average $4 to $25. Main Street banks and credit unions with assets less than $100 Million, charge customers an average price of $25 per overdraft.

Mega banks, with assets greater than $50 Billion, charged customers a median price of $33.50 per overdraft. As a whole, all banks were at $30, and all credit unions were at $25.

“More and more banks and credit unions are lowering the price of overdrafts,” points out Moebs. “This decision bodes well for these institutions as they try to reclaim lost market share to payday lenders, who only charge consumers a median price of $17.50.”

Key Question: How many financial institutions have aggressively marketed overdraft opt-ins since their one big push in the wake of Reg E? How many banks and credit unions continue to actively promote adoption of this service on a regular, on-going basis?

Just be careful. Consumers are prickly about bank fees these days, so financial marketers trying to boost overdraft income will be walking a fine line. Indeed Jim Sloan, a financial columnist, has wondered why there hasn’t been a consumer revolt against overdraft fees. “With so many consumers in a hyper-vigilant state over some checking account fees,” he writes, “why are consumers still willfully paying billions in overdraft charges every year?”

Who should you target? Heavy users. Moebs found that almost all of those consumers who averaged ten or more overdrafts in a year elected to opt in. JP Morgan Chase said that of those who frequently overdraw their accounts 53% signed up for overdraft coverage. Smart financial marketers will identify who these people are through data and demographic profiling.

Key Takeaways: Keep marketing overdraft protection. Consumers need to feel like it is a value-added convenience — a service most people use and appreciate — and not another smarmy way financial institutions gouge common folks.

This article © 2012 by The Financial Brand and may not be reproduced.

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Here’s a breakdown of who’s paying for what, how much it costs, how many keywords they use and how many clicks they get. The data is divided into four main groups: Banks, Credit Unions, Consumer Search Terms and Geographical Search Terms. There are two bonus sections at the end showing how financial institutions are targeted through Google AdWords by industry vendors and trade groups.

Banks Using Google AdWords

Credit Unions Using Google AdWords

Out of the top 20 biggest credit unions in the U.S., 11 are running Google Adwords campaigns (55%). Navy FCU, the biggest credit union in the world, also has the biggest AdWords budget — probably around $1 million annually.

Common Consumer Search Terms

Geographically Specific Search Terms

Financial Consultants Targeting Banks & Credit Unions

Common Terms Used to Target Banks & Credit Unions

This article © 2012 by The Financial Brand and may not be reproduced.

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Let’s face it: the broad span of ages in Gen-Y makes it challenging to build relationships. Some financial institutions have fantastic web pages directed toward teenaged youth, while others may focus on savings programs with prizes and activities at a younger group. But like many bank and credit union marketers, maybe you may be struggling to create a cohesive program that addresses the spectrum of ages and needs of this large and diverse group, not just one segment or two. How do you do it without driving yourself nuts, overwhelming your marketing department and breaking the budget?

The answer is a “trigger campaign.” With strategic precision, you begin communicating periodically with these members from day one. By the time they’re able to make their own financial decisions (without mom and dad), you’ll have earned their loyalty for life. Even in a kid’s younger years, there are few life events you can use to use as communication markers in a trigger campaign. With a little creativity, you can pinpoint these life events, start conversations, and build relationships with Gen-Y consumers.

Okay, that makes sense, but it sounds like a mountain of work. Where do you start? Use MCIF or similar data segmentation systems to break this large group by into smaller, age-based clusters. This allows you to deliver highly-personalized educational materials and relevant offers with specific appeal to busy parents and their child(ren).

Here’s your step-by-step guide through the ages.

Ages 9 – 14

You’re marketing to the minor child’s parents in this age group. Give mom and dad simple information to help teach young family members the importance and rewards of saving. Youngsters like to watch their money grow — the savings jar that becomes full of loose change and becomes a savings account for their first car.

Sending an annual birthday greeting is a simple, friendly way to start your campaign. Consider setting some age-appropriate savings goals as another component of your trigger program. Incentives and rewards are good motivators for children. Send congratulatory notes when the level is reached. The older end of this group might also get a friendly note if they haven’t made a deposit in the past six months.

By age 14, these children have their sights set on learning to drive. It’s not too early to explain simple ways these youngsters can budget for buying a car and understand the costs of car ownership.

Use age-appropriate graphics and language, so parents and children can talk about the subject together. Consider a companion print or email piece to the parents alerting them the communication is coming. Follow up with parents via email to take action and learn more.

Ages 15 -18

Birthdays are still important identifiers for life-changing events that impact their finances. Expanded information about how to buy their first car and how strong academic performance helps save on auto insurance are great topics to have in your campaign.

An invitation to open their first checking account gets them thinking about banking with you. High school graduation and planning for college expenses are exciting and scary. Another letter could explain how your financial intuition can help. Reaching savings goals or account dormancy can trigger another communication.

Keep parents in the loop with direct mail and email for quick follow-ups. Make copy easy-to-understand to hold the young adult’s interest during their conversation with their parents.

Ages 19-24

Parents are still co-signators on most accounts and loans, but they’re slowly letting their children put their financial education into practice. Your goal is to convince the parent that your financial institution is the best place for their child as they enter their earning years. Use email to keep talking to parents about products and services that help their child become more independent, and still have appropriate safeguards to stave off financial disasters.

This transitional group is interested mobile banking, first credit cards, and low-interest student loan financing and repayment. Use casual language and simple terms they can understand. Keep it short. Birthday greetings are still a friendly thing to do, but if the customer has checking and savings accounts, co-signed credit cards or other loans, your opportunities to communicate and educate are excellent.

Explain how young adults can build a good credit score. Many college-aged students fall into steep credit card and student loan debt.

Provide tips for managing their money and credit as they step out on their own. Also, talk about banking apps and alerts your financial institution has.

Email is a powerful tool for these nomadic young adults, who may change their physical address 3-4 times during this period.

Ages 25 – 30

The days when the Bank of Mom and Dad was always open are coming to an end as these young adults start to achieve true independence. They have tons of questions, and need reliable advice in straightforward language.

Remember, Gen Y loves electronic communication and this age group is definitely on the move for many reasons. Use email as the primary delivery method in this trigger campaign. Continue using data to center on the life events these members are likely to experience. Encourage savings, offer direct deposit to those who don’t have it. Suggest signing up for bill pay to protect their fledgling good credit if they aren’t enrolled. Pair the products and services with other helpful information that builds confidence that you’re their financial solutions provider.

On the subject of education loans, credit unions are offering to consolidate private student loan debt. This is a great opportunity to help cash-strapped former students manage their education debt and still have a positive outlook about achieving some of their other financial dreams. Considering how much this generation enjoys sharing information, this is certainly a subject worthy of sharing if you do it right.

Other Savvy Steps You Should Take

Multi-channel delivery: When marketing to the parents of minors, it’s a very good idea to send these campaigns via print and follow up with email. For young adults who are likely on the move, email might be the best primary delivery tool. They’re looking for easy access to information they can really use. They also appreciate green initiatives. Consider creating a special electronic newsletter just for them. This group will appreciate the easy way to share and store the information this way.

Make it personal: Electronics make it fast, but you’re still an organization of human beings. Don’t overlook the chance to meet these people personally and advise them the way their parents might have. Empower them further with fun events and free seminars. Provide the name and number to call at the credit union when they have more questions.

Easy response tools: Always include a PURL/GURL or hyperlink to online services to make contacting you or accepting the offer trouble-free.

Boost your website content: Gen-Y combs the Internet with ease. Give these subjects a permanent home on your website for a handy future reference. Create a virtual library of newsletter topics if that’s the route you choose. Create youth-friendly web pages. Configure website pages for mobile viewing.

Use social media: Create a prospecting opportunity by introducing these topics via your credit union social media pages.

Margie Church works for Pinpoint Direct Marketing. Pinpoint Direct Marketing creates data-driven, electronic and print marketing campaigns for the financial industry. Its customized campaigns achieve excellent results without premium costs. Learn more about Pinpoint Direct Marketing at www.PDMKT.com.

This article © 2012 by The Financial Brand and may not be reproduced.

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C1 Bank is offering a free Mercedes-Benz to customers depositing $1 million into a unique five year CD the bank is promoting. Qualifying customers will receive their brand new Mercedes-Benz as pre-paid interest.

Customers can choose from the SLK350 Roadster (shown above), E350 Sedan, ML350 SUV and E350 Convertible. Each model has a base sticker price around $55,000.

The unique CD offers a 1.20% APY, yielding pre-calculated interest that would amount to a $61,294 advance payment. C1 Bank is only allowing the prepaid interest to be used towards a purchase of a new Mercedes with an MSRP of $59,585. They are throwing in all the taxes and license fees (worth nearly $5K), and knocking $3K off the package, so it basically works out.

The Fine Print:

• Offer valid through July 31, 2012.
• Only applicable for new funds.
• Consumer deposits only.
• Florida residents only.
• Offer is limited to two Mercedes vehicles per household.
• In the event of early withdrawal, C1 Bank will deduct $61,294.04 and a $3,000 penalty from the $1 million principal.

It’s a pretty deft deal, all the way around. The dealer can move expensive cars with wholesale volume, so they can afford to give the bank discounts. Because of the dealer discount, the bank can afford to offer customers an effective APY greater than what they normally could (perhaps the difference between 0.75% and 1.20%). Right now, C1 has nearly everyone beat by at least 0.15% APY on a 5-year CD. And the CD customer benefits by receiving all their higher interest rate paid up front — a free car — instead of having to earn it slowly over time.

Key Questions: Why does C1 Bank want deposits? What will they do if they get 20 takers… and $20 million in deposits? Are they investing in T-bills? Do they need money to lend?

It’s a radical concept; probably not the first in the financial industry, but it turns the CD value proposition on its head. It’s like loaning someone $1 million dollars, except instead of the guy paying you back with interest five years from now, he’s giving you his brand new Benz up front today. It raises interesting questions about the time-value of money, interest rates vs. inflation rates, and the depreciating value of physical assets such as cars.

Of the CD promotion, C1 Bank CEO Trevor Burgess says it is “thrilling to change the game with the instant gratification.”

He sure hit a nerve there. That’s what makes this CD product so revolutionary: the concept of instant gratification. No one likes waiting for their money to accrue interest. It’s boring and “responsible,” so no one likes doing it.

The instant gratification CD is a good idea for financial marketers to tuck away. Save it for when your bank or credit union needs deposits, because that day will come again (as unlikely as that may seem sitting here in 2012). This could be a particularly deadly approach to take with the next generation of CD investors — Gen-Y, also known as Gen Now.

Just remember: The pricing on this kind of CD doesn’t wash out if you offer people prepaid interest in the form of cash. It only works out when you are able to offer a commodity or service you obtain at a wholesale discount. To make the offer as appealing as possible, using highly desirable items (e.g., luxury goods and destinations) is a smart strategy. Entice consumers with something they desperately crave and would value/covet, but would not usually buy for themselves.

The Icing on the Cake

What makes C1′s Mercedes giveaway extra savvy is that is was timed to perfectly coincide with a name change. They previously bore the rather bland and undifferentiated “Community Bank” as their moniker, switching to the much more unique alphanumeric C1 effective May 1, 2012.

While news outlets would barely give notice to a bank changing names (it happens all the time, right?), the media will descend on a story about a free Mercedes with mad furor. The bank could have pumped out one press release after another… one customer letter after another… and still they wouldn’t have yielded a fraction of the communications value that their cleverly crafted CD promo will yield.

It’s brilliant. In fact, any bank or credit union that needs to draw attention to itself should consider using a similar promotional gimmick. Many announcements from financial institutions can be excruciatingly dull, but you can really spice up a PR story with a giveaway (preferably tied to a product promotion) dangling some blingy pizzazz.

As part of the new direction for the brand, C1 will be using the slogan “Customers 1st. Community 1st.” The tagline pays homage to the bank’s old “Community” name and focus, while also providing context for the “C” and “1″ in the new name. It’s another smooth move on the bank’s part — honoring the old while explaining the new — but it begs a question: Where do shareholders fit in? Aren’t they also 1st? (Maybe C1 is privately held, so it doesn’t matter?)

C1 Bank is a local, independent bank serving 18 locations in Pinellas, Hillsborough, Manatee, Charlotte and Pasco counties in Florida.

Earlier this year, the bank announced net income of $1.0 million in the first quarter of 2012, its eighth consecutive quarterly profit.   Deposits grew organically by $94 million in the quarter from $558 million at year-end 2011 to $652 million at March 30, 2012.

This article © 2012 by The Financial Brand and may not be reproduced.

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TD Bank joins Inland Bank, University of Illinois Employees Credit Union and Eastman Credit Union who have also recently introduced Pew’s simple disclosure to their customers.

Chase, North Carolina State Employees’ Credit Union and Pentagon FCU voluntarily adopted Pew’s model disclosure form last year.

“We commend these financial institutions for providing their checking account holders key information in a consumer-friendly way,” said Susan Weinstock, director of Pew’s Safe Checking in the Electronic Age Project. “We encourage other banks and credit unions to adopt our simple disclosure form to shield consumers from unexpected fees that are often hidden in over 100 pages of disclosure documents.”

Pew’s research shows that the median length of disclosure documents at the nation’s 10 largest banks is 111 pages, making it difficult for account holders to find important policies and fee information. A standardized and simplified form such as Pew’s allows consumers to have the information needed to comparison shop and determine the checking account that best meets their financial needs. Such a tool allows financial institutions to compete based on clear information about the key fees and terms of the checking accounts they offer.

“At TD Bank we are constantly looking for new ways to make banking convenient for our customers,” said Ryan Bailey, Head of Deposit Products and Pricing, TD Bank. “We want our account holders to be able to see the common fees and features associated with their account. Our new simple account guide is another step on the path that leads to America’s Most Convenient Bank.”

The move to make checking account fees more transparent comes at a time when the Consumer Financial Protection Bureau (CFPB) is beginning to launch a series of initiatives to bring greater clarity to how many retail banking products work. Pew is calling on the CFPB to make checking accounts safer and more transparent by requiring financial institutions to:

• provide customers information about checking account terms and fees in a concise, easy-to-read, uniform format
• provide account holders with clear, comprehensive pricing information for all available overdraft options
• make overdraft penalty fees reasonable and proportional to the bank’s costs in providing the overdraft loan
• post deposits and withdrawals in a fully disclosed, objective, and neutral manner that does not maximize overdraft fees

Examples of Simple Disclosure Documents

• TD Bank
• Chase Bank
• University of Illinois Employees Credit Union
• Eastman Credit Union

This article © 2012 by The Financial Brand and may not be reproduced.

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Constructing an effective credit card marketing strategy isn’t as simple as throwing a precious metal into a card’s name or casting Alec Baldwin for television spots. That’s not to say such tactics cannot be effective, but rather that real success stems from the creation of an environment in which marketing is not a separate function, but an integrated part of all credit card operations, ranging from underwriting to product development and customer retention. In short, the best marketers engage in activities and institute polices that foster the most efficient use of marketing dollars possible.

There are, of course, many ways to do this – some innovative, some tried and true – and a lot depends on your company’s corporate philosophy, structure, financials, etc. However, there are 5 tactics in particular that you would be remiss in not implementing immediately, if you haven’t already done so.

1. Focus each product on a single consumer need

By focusing each credit card offer on a distinct consumer need, you garner both the ability to present more effective value propositions to consumers and a customer base that behaves as predictably as possible, thereby making it easier to forecast card profitability as well as adjust marketing strategies based on early returns.
This is obviously difficult to achieve if the same card is trying to address disparate needs. For example, if a card provides lucrative rewards as well as low introductory interest rates, you’ll wind up with some customers who spend a lot and always pay their bills in full, some who spend and only pay the minimum, and some who transfer balances with no guarantee that they will keep their cards following the expiration of intro rates.

On the other hand, if you offered three different cards – one high-interest rewards credit card, one 0% credit card for new purchases, and one balance transfer credit card – you’d garner three highly-predictable customer groups. That, of course, would allow you to target underwriting and marketing more effectively, better manage risk, and ultimately make more money.

2. Bring together marketing and underwriting

Too often the marketing and underwriting teams at credit card companies are disparate entities that have effectively little, if anything, to do with one another. You know what this leads to? Applicants that do not fit the underwriting criteria used to develop offers and underwriting conservatism that could easily be avoided.
A credit card’s marketing message significantly affects the type of consumer that will apply for it. And if the only direction given a marketing team is that each account cannot cost the company more than $100, for example, they’ll likely meet that constraint, but in doing so may attract riskier, less profitable customers. This would, in turn, necessitate an underwriting adjustment to the point that each account could no longer cost more than $70, which would push the marketing team to rely more heavily on the lowest-hanging fruit – even riskier, less profitable customers than before. The only way to break this vicious cycle is to integrate those two separate teams.

3. Offer secured cards

All credit card companies should offer secured credit cards for two very simple reasons: 1) they provide profitable access to a significant consumer segment without adding any risk and 2) soliciting secured card customers who prove their creditworthiness will become one of your most efficient marketing channels. It’s a can’t-lose strategy made even more essential now that the CARD Act has mitigated both the profitability and popularity of unsecured credit cards for people with bad credit.

4. Appeal to former debit card users

In the past, consumers have gravitated to debit cards instead of credit cards for three main reasons: 1) a desire not to have to pay bills; 2) the urban legend that debit cards provide fraud protection superior to that available via credit cards; and 3) the decreased risk of overspending.

However, recent overdraft and swipe fee regulations have resulted in a mini-exodus from debit cards, driven primarily by the near-extinction of debit card rewards. This means a significant opportunity exists for credit card companies to add valuable new accounts to their rewards portfolios. The key to addressing the aforementioned consumer concerns is a combination of auto-pay plans, customizable limits, and education about the relative merits and risks of both credit cards and debit cards. Marketers can thereby ensure that rewards are the deciding factor in people’s minds.

5. Leave no customer empty handed

When a customer comes to a bank in search of a credit card, you’re seeing the fruits of a lot of time and money spent on marketing. The most irresponsible thing you can do at this juncture is turn the consumer down for whichever card they apply and offer no profitable, attainable alternative. At the very least, a secured card will be fitting, and by exhausting every opportunity to turn potential customers into customers, you’ll drastically increase the efficiency of marketing dollars.

Ultimately, it’s no secret that the credit card company making the most out of every marketing dollar spent generally wins, as that company can simply outspend the competition. It’s therefore key that marketing executives think not only about their advertisements and value propositions, but also about product terms, card profitability, and customer experience. In short, mechanisms like those discussed in this article could significantly increase marketing budget efficiency.

Odysseas Papadimitriou is the former head of online marketing
for Capital One and the current chief executive officer of Card Hub,
a leading credit card comparison marketplace and home to the
largest gift card exchange on the Web.

This article © 2012 by The Financial Brand and may not be reproduced.

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With consumers’ increasing use of credit cards, financial marketers will be aggressively pursuing new cardholders. But these days, we won’t see many of the tricks and tactics used in years past, whether that be generous 2% cash back offers (carrots) or punitive 79.9% APRs (sticks). When 80% of the complaints filed with the Consumer Financial Protection Bureau (CFPB) are tied to credit cards, it’s no surprise that we’ll be seeing some significant shifts in the market.

As the CFPB moves to muzzle predatory practices, banks can also learn a lesson from the fallout over BofA’s $5 debit fee: it’s clear that consumers will no longer swallow new fees for services that were previously free. As a result, profit margins are getting tighter, which means issuers can no longer afford standout deals, as PenFed cardholders painfully realized.

One trend that will endure throughout the recession is risk reduction: marketers will continue to concentrate on those consumers with the best credit ratings. The credit card industry is healthier this year than last, so we’ll see more marketing and a few shiny new offers in 2012, but for the most part credit cards will be targeted at consumers with excellent credit — a 720 credit score or higher. The average credit score nationwide is 660.

This dynamic and changing credit card landscape is reshaping how marketers are courting consumers. Here’s a few tips to help you stay abreast with changes in the marketplace.

#1 Less pizzazz, more practical marketing

What not to do: Financial marketers shouldn’t be using celebrity spokespeople like Lil Wayne to woo consumers. In fact, they should avoid using any celebrity, diva, singer, rapper, fashionista — basically anyone with a 90210 ZIP code (or equivalent) — in their marketing efforts. Criticism from the media around Suze Orman’s recent prepaid card offers marketers a clear-cut lesson: dressing up not-so-great product with great marketing doesn’t cut it anymore.

What to do: Market practicality, not pizzazz. Consumers demand financial products and service that are straightforward, easy, intuitive and transparent. The emergence of “consumer-friendly” products with “we-are-on-your-side” messages will be a growing trend in the financial industry.

The CFPB is also busy reforming the credit card industry, pushing issuers to adopt a simplified format for credit card agreements so that terms and details are easier to understand. More impending regulations from government watchdogs will continue to tip card marketing towards consumer interests.

For example, Citi’s Simplicity credit card relies on clear and concise messaging that emphasizes no annual fee, no late fees, and no penalty rates. It quickly communicates that the card is the go-to alternative to the typical pain points of credit cards. Credit unions, which have always had historically lower interest rates and less fees, should likewise realign marketing messaging to emphasize their natural advantages over banks. You already have it, why not flaunt it?

Take Affinty FCU’s credit card copy: “What you see is absolutely positively what you get. Low rates, no hidden fees, and no surprises. No bank could ever give you these.”

How can your marketing messages and in-branch conversations reflect the new, simple, customer-friendly approach consumers are looking for in credit card products these days?

#2 New technologies = new products

What not to do: Be slow to adapt to emerging technology and trends. For example, EMV chip technology is fast becoming a standard in the credit card marketplace. First there was Visa in August 2011, then in January 2012, MasterCard became the second major issuer to announce its transition from magnetic strips to EMV chips in the U.S.

What to do: Play catch-up faster than your competitors. As EMV chip cards begin to hit the mainstream, having innovative technologies like this gives you a competitive edge.

If EMV technology has yet to be implemented into your plan, your bank or credit union can still offer innovation in the form of truly valuable features. For example, at CreditKarma.com, we feature credit cards according to credit score range. Positioning credit cards according to a relevant parameter — credit scores — is valuable because it’s one of the most important aspects to know before applying. Credit Karma has also partnered with other financial institutions, including UW Credit Union and A+ Federal Credit Union, to provide credit scores to members as a way to enrich product offerings and aim the right credit card offers to the right consumer.

Other examples include Capital One’s Journey student credit card, which offers a credit education and monitoring program, and Citi’s Forward card, which rewards cardholders with lower interest for maintaining good credit.

What truly valuable and innovative services can you add to your credit card offers?

So be prepared for an era of EMV-chipped cards with CFPB-friendly terms popping up, but only aimed at the small segment of credit-healthy consumers.

#3 The New Marketplace

What not to do: Keep doing the same ol’ same ol’.

Credit card direct mail offers surged last year, jumping 69% in 2011 vs. 2010. But stuffing mailboxes didn’t seem to pay off. Consumers use of revolving credit had actually seen one of the biggest decreases.

What to do: Go to where your consumers and their friends are hanging out. One in four cardholders has become a fan, friend or follower of their credit card brand or issuer, reports Synergistics Research Corp. Facebook or Twitter doesn’t seem like the primary place to shop for financial products, but take a look at any of the major issuers’ Facebook fanpage, from Discover’s Facebook page to Capital One’s page for “Card Finder.” You’ll see social media becoming an accepted platform for cross-selling.

Marketing to consumers who are already fans or followers of your brand is a perfect channel to cross-sell and promote special offers. In fact, the primary reason people connect with credit card brands via social media is to give them access to special promotions, rewards or financial offers. Why don’t more financial institutions follow this practice?

A look at one of the most popular credit union Facebook pages illustrates a trend consistent across many financial institutions social media efforts: a lack of cross-selling. If your consumers went to your company’s Facebook page, would they find a few semi-interesting Wall posts, or hear about your latest and greatest product?

Justine Rivero is the Communications Manager for CreditKarma.com, a free credit management website that helps nearly 4 million consumers access their truly free credit score.

This article © 2012 by The Financial Brand and may not be reproduced.

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Monthly account fees are going up. Fees for replacing lost cards are up. Wire transfer fees, up. Money orders, up. Fees for certified checks, up. There are more conditions to waive fees. Customers who want paper statements must now pay fees. New mobile deposit fees are on the way.

Fees, fees and more fees. It’s all about fees.

The banking industry faces income pressure from multiple directions — a bad economy, a weak lending environment, Reg E, the Durbin Amendment. Financial institutions feel forced to explore an unprecedented range of new fees, from some that are tame and mild, to others that sound a little absurd.

“Banks are going to raise existing fees and institute new ones,” predicts Alex Matjanec, co-founder of MyBankTracker, a consumer-education website. “It’s all part of this push to get back lost income.”

Last year, a Pew Charitable Trusts study found that bank customers could potentially incur 49 different fees on a typical checking account.

And there isn’t a financial institution anywhere willing to promise that they won’t be introducing new- or higher fees in the near future.

“The sad but honest truth is that free checking was supported by interest rates and fees. Both those options are not available to banks now,” said Hank Israel, partner at Novantas.

“They have got to make up the income some place,” Vernon Hill, founder of Commerce Bank, told the NY Times. “I think we will see a lot more fees.”

“Banks may try a spectrum of charges — even for good customers.”
– Consumer Reports

Starting with increases in monthly account fees. Last year, BofA quietly raised the cost of its MyAccess checking account to $12 per month, up from $8.95. Citi’s basic checking product jumped from $8 to $10. And Chase started charging $12 to many customers who previously paid nothing at all.

Consumer Reports predicts that megabanks will lead in the three-way tango between financial institutions, their competitors and consumers. Consumer Reports says that big banks will continue to experiment with new fees and increases, while small institutions sit on the sidelines waiting to see if they should follow suit or woo angry customers by offering more competitive deals.

“Banks are closely examining what costs they can eliminate and where they might be able to charge, and what the market will bear and not drive customers away,” says Beth Robertson, director of payments research for Javelin Strategy & Research.

Financial institutions are responding to the dynamics of this fee-strained market with a range of different strategies. Some have deployed relationship pricing models pushing consumers to consolidate accounts. Other banks are shoving credit cards at consumers hand over fist, believing they have better margins with credit vs. debit cards. And banks will continue to do what they can to force consumers to electronic channels. If that means introducing new conditions that trigger fees, so be it.

Consumer Reports warns that banks might even try presenting new charges as a perk, not as a fee. They note TD Bank, who offers customers $1 off their monthly charges for switching to online statements instead of printed ones.

Mark Schwanhausser, a Senior Analyst with Javelin Strategy & Research, says banks that try to charge fees for things consumers used to get for free will fail. Instead, the industry “needs to find the fees people see value in.”

Banks Can Innovative… When It Comes To Fees

There are many critics who deride the financial industry as cowardly and anti-innovative. Not true. All it takes is a little income pressure, and whammo! Banks are willing to try anything, even a $5 fee on debit cards.

“Banks are adamant that they have been transparent about the price increases.”
– NY Times

“Banks are turning to all sorts of fees that fly under the radar,” notes Eric Dash for the NY Times. “Everything, it seems, has a price.”

Here are some examples of the creative new fees banks are gambling on.

Closing Account Fees
Some banks are now charging customers fees for closing an account too soon after opening it. US Bank and PNC charge $25 if it’s closed within 180 days. Chase tinkered with a $25 fee for accounts closed within 90 days, but dropped it in December 2011.

Teller Fees
For a while now, BofA has charged online customers for branch transactions. PNC will start hitting customers with a $3 fee for using a teller to transfer money.

Loan Payment Fees
HarborOne Credit Union in Brockton recently started docking borrowers $9.95 to make a loan payment with a credit or debit card. In the telecommunications industry, Verizon couldn’t even get away with a $2 fee for a similar service.

Online Bill Pay Fees
Wells Fargo charges $6.95 a month for online bill pay with its Value Checking account. After so many years where customers grew accustomed to free online bill pay, will they swallow new charges?

Card Replacement Fees
BofA hits customers for $5 when they need replacement debit cards — $20 if you want rush delivery (and who doesn’t?).

Savings Withdrawal Fees
BofA charges $3 for every savings withdrawal over three in a month, unless you keep $2,500 with them in savings. Other banks have introduced what they call “Excessive Withdrawal Fees” on savings- and money market accounts.

Mobile Banking Fees
A study by Pricewaterhouse Coopers found that most consumers in the UK would be willing to pay £10 ($15) per month for mobile banking services. Mercantile Bank of Michigan in the U.S. already charges customers $4 per month to view pending transactions on an iPhone.

Mobile Deposit Fees
US Bank charges $0.50 per check. Expect more banks to roll out fees for remote deposit capture as they introduce the service.

Pay By Phone Fees
According to Matjanec at MyBankTracker, banks also will start charging customers for paying bills over the phone as opposed to online. PNC started charging between $2 and $3 for teller-assisted transfers made over the phone. BBVA Compass charges $3 for this service, too.

Minimum Balance Fees
Citizens Bank now charges money-market customers $50 if their account balance falls below the minimum. Similarly, BofA charges a $25 fee to customers who dip below minimums on premium-checking accounts.

Check Cashing Fees
TD Bank unit will start charging noncustomers a $5 fee to cash checks at any of its branches. Chase and BofA both charge $6 to cash checks for non-customers.

Paper Statement Fees
Bancorp South now charges a $2 monthly fee if you get a hard copy of your statements mailed

Banks vs. Credit Unions

An analysis performed for Consumer Reports by Informa Research Services found differences among the more than 1,000 financial institutions it tracks. For example, among those that charge a monthly fee for noninterest checking, the average was $10.27 at the largest 10 banks, compared with $7.45 at banks with less than $4 billion in assets, and $6 at the 10 biggest credit unions. The fee was higher ($6.91) at credit unions that had assets below $4 billion than at the largest ones.

Source: Informa Research Services

Overdraft Fees

Banks have lost billions since Reg E went into effect. In 2010, banks only earned $30 billion in overdraft income, down sharply form the record profit of $37.1 billion one year prior.

That should explain why U.S. banks jacked overdraft fees up $2.50 in 2011. According to a study by Moebs Services involving 2,500 banks and credit unions, overdraft fees hit $30.00, up from $27.50 in 2010. Moebs said the fee hike was the largest one seen in 30 years.

“We went to banks themselves, and first thing they told us was that the regulatory cost is so onerous they have to offset it with higher fees,” Moebs said.

Some banks, like BofA, felt the situation with overdrafts had become so challenging that they completely nuked their overdraft programs altogether. Now BofA requires customers to link another account (e.g., credit card or savings) with sufficient funds if they want purchases made in excess of their available checking balance to go through. That’s right: customers can no longer “go into the red” at BofA — no more overdraft credit. For this pass-through “payment assurance” service, BofA only charges $10 per use.

That decision hit BofA hard. According to research from Credit Suisse, BofA lost an estimated $3.3 billion in overdraft income in the first year following Reg E’s implementation (and that’s on top of $2 billion in annual interchange revenue lost to Durbin).

The Congressional and consumer backlash against overdrafts isn’t over, and things could get even more difficult for banks on the fee front. The FDIC, for instance, is recommending banks not charge overdrafts on smaller items, so cardholders won’t get dinged $30 for a $4 cup of coffee.

This article © 2012 by The Financial Brand and may not be reproduced.

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This article © 2012 by The Financial Brand and may not be reproduced.

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• State of Bank & Credit Union Marketing In 2012

Inadequate budgets.

According to The Financial Brand’s 2012 Bank & Credit Union Marketing Survey, bank and credit union executives say their organization’s lack of marketing investment is what holds them back, this despite the fact that nearly half saw their budgets increase in 2012. They also feel that their I.T. systems are limiting, that it’s difficult to get employee support for marketing initiatives, and (of course) there’s always a boatload of compliance headaches.

If financial marketers seem cranky, maybe they have good reason to be. The turbulence of 2011 strained both banks and credit unions alike, and it doesn’t look like 2012 is shaping up to be much easier. Indeed, marketing executives at banks and credit unions have their work cut out for them this year. They say their number one priority is to increase their financial institution’s lending portfolio. How? By cross-selling mortgages, auto loans and credit cards to existing customers. But the lending market — everything about the entire economy — isn’t cooperating. There aren’t many consumers brave enough to apply for credit in this rotten economy, and only a handful meet lenders’ new, stricter requirements.

The 2012 Bank & Credit Union Marketing Survey also revealed that financial marketers plan to emphasize their e-strategies more in 2012, with a specific focus on social media, PFM and online advertising. Meanwhile, the more traditional aspects of bank marketing — TV/radio spots, physical branches and even print ads — continue to hold steady ground.

You can review the full results of The Financial Brand’s study in detail below. There is also a companion piece to this article,“What’s The Single Biggest Financial Marketing Issue In 2012?“ highlighting answers to the survey’s only open-ended question.

Special thanks go out to all those who participated in the survey. These folks appreciate the value of collective insight — that you can learn a lot by contributing a little. The Financial Brand also extends a big thank you Jim Marous, Senior Marketing Director with Harland Clarke and publisher of Bank Marketing Strategy, for his logistical and marketing support that contributed so much to the success of this survey. You can read Jim’s take on the survey here at his blog. Thanks go out to the good people at ACTON Marketing as well, who helped recruit survey participants.

Breakdown of Participants

The survey was completed by 228 total participants, including 84 banks, 30 community banks and 104 credit unions. 82% of respondents worked in a marketing capacity. Financial institutions in all asset classes were well-represented — 15 responses came from those with over $100 billion in assets, while 57 responses came from those with less than $100 million in assets.

Biggest Marketing Challenges in 2012

What do financial marketers feel is holding them back? Topping the list in 2012, half blame insufficient budgets and manpower. It is perhaps a bit ironic that financial marketers feel they are (#1) inadequately funded and understaffed considering that they struggle with measuring and proving the impact of their efforts (#2 on the list).

Many of the challenges facing financial marketing executives involve other departments, particularly  I.T., sales/operations and HR. In order for bank and credit union marketers to succeed, they need forge closer ties with these departments in 2012 and beyond. An isolated marketing department can only achieve so much.

It is simply stunning that only 9% of financial marketers see consumers’ lack of trust in the banking industry as a significant marketing challenge in 2012. (Try telling that to BofA.)

Reality Check: For consumers, their economic meltdown is far from over and banks are still to blame.

Changes to Marketing Budget in 2012

When asked how their financial institution’s marketing budget will change in 2012, 45% said it would increase, 12% anticipated a decrease, while 39% said it would stay about the same. The Financial Brand has frequently noted that marketing budgets at banks and credit unions should equate to approximately 0.1% of assets — a $1 billion financial institution should have a marketing budget around $1 million.

Top 3 Marketing Priorities

For this question, respondents were asked to rank their top three marketing priorities over the next 12-24 months. The data in the table signifies the number of respondents who ranked that priority either a #1, #2 or #3 on their list. The majority of financial institutions see cross-selling and loan growth as critical to their success in 2012.

If banks and credit unions want to deepen relationships, you’d think they see value in retaining those relationship, but they paradoxically put “customer/member retention” at the bottom of their priorities.

Reality Check: It may be easier to sell to an existing customer than to find a new one, but you can’t cross-sell customers/members (#1 in the list) that you don’t retain (#10).

Most Important Products & Services

In the survey, this question presented respondents with a randomized list of financial products and services, asking them to check those that their bank/credit union will concentrate on promoting most heavily in the next 12-24 months. Not surprisingly, lending products such as home loans, auto loans and credit cards top the list.

Most Important Marketing Channels

Despite many predictions declaring that traditional media is dead, roughly half of all bank and credit union marketers assert that print, TV, radio and outdoor advertising will have about the same importance in 2012 as it did last year. However, financial marketers also say that online advertising, social media and PFM tools will be growing in importance over the next 12 months. This data suggests that future of bank and credit union marketing will shift to the internet, but old habits die hard. It’s also worth noting the increase in significance of data-driven initiatives such as onboarding, database/matrix marketing, CRM systems and direct mail.

Utilization of Marketing Vendors & Suppliers

Roughly two-thirds of banks and credit unions utilize the services of an outside ad agency or design firm. A similar number turn to web developers for their online needs, while nearly 3-in-4 use a production company for their TV and radio spots. Only about a quarter of financial institutions utilize a third-party vendor to help them in areas like public relations, social media and financial education.

Primary Tools Used to Measure Branding and Marketing

Anyone who works in management — especially those in marketing — knows how hard it can be to correlate advertising and branding with results. When you look at the tools financial marketers are using in 2012 to assess and measure the success of their efforts, you see the usual suspects, mostly metrics that gauge the overall health and performance of a financial institution. But what’s startling is the number of bank and credit union marketers that don’t look at these things. Nearly a third (28%) don’t view marketing activities through the lens of customer acquisition. One in three don’t incorporate customer feedback. Three in five don’t factor attrition/churn rates.

Changes in Size of Branch Network

Pundits have been predicting the demise of branches since the mid 90s, but (for now) banks and credit unions seem reluctant to accept this. Rather than close branches, 42% say they are planning to open more locations in 2012, while nearly half say the size of their branch network will not shrink and at least stay the same. Only 6% of financial institutions say they intend to close any branches in 2012.

Utilization of Online Marketing Tools

When The Financial Brand conducted a similar study back in 2010, only 69% of banks and credit unions said they utilized email, but that number increased 10% in 2012. Similarly, 68% say they now pay for online banner ads vs. only 54% who said they did so in 2010 — an increase of 14 percentage points. Those pursuing an SEO strategy grew by 13 percentage points. But it was ads in eStatements that saw the most growth, moving from 44% in 2010 to 63% in 2012 (up 19 points). Fewer financial institutions say they are using microsites in 2012 (52% vs. 38%), signalling a significant slowdown in this once-popular internet marketing approach.

Utilization of Social Media Tools

Two in five financial institutions either have a blog today or plan to soon. Three in four use Facebook, making it the dominant social channel for banks and credit unions. Just about half are using the other three major social platforms: Twitter (54%), YouTube (49%) and Linkedn (48%).

In an August 2010 study, only 46% of financial institutions were using Facebook. 35% were using Twitter, and 25% were using YouTube. In both the 2010 and 2012 surveys, the same number of banks and credit unions said they had a blog (18%). Financial institutions utilizing an online discussion forum dropped by a quarter, down to 6%.

Staff Time Spent on Social Media

When asked how many staff hours are applied to social media every week, a staggering 40% of banks and credit unions say only 1-5 hours. And financial institutions wonder why they don’t get more out of it? There is practically nothing in marketing worth doing that only takes 1-5 hours per week — and that’s especially true with social media. You’re going to get out of it what you put into it. Little investment = little/no return.

When Was the Last Major Website Redesign?

The Financial Brand looks at hundreds upon hundreds of bank and credit union websites. Based on what we see, it’s hard to believe that nearly one in three financial institutions have undertaken a major redesign in the last year, or that two-thirds of banking websites have been refreshed within the last 2-3 years. There are still many websites in the financial industry that look dated (e.g., more than five years old).

Do You Have Formal Brand Guidelines?

When asked if their financial institution currently has a formal, written set of brand guidelines, 53% said yes, although it’s likely that many of these respondents have only a set of graphic design standards rather than a broader brand manual applicable to all employees. One in five financial institutions don’t have brand guidelines of any kind, but an equal number intend to.

This article © 2012 by The Financial Brand and may not be reproduced.

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How does it work? A financial institution feeds its transaction data into the Segmint system — credit and debit card activity, deposits, withdrawals and online bill payments. Every transaction a customer makes is anonymously analyzed to determine his or her hobbies, activities and life events (more on that in a moment). Then all these lifestyle triggers are assigned tags that Segmint calls Key Lifestyle Indicators, or KLIs.

KLIs can fall into one of two distinct categories: “activity-based” and “event-based”:

• Activity-based – when the customer has demonstrated a history of transactions in a specific product category
• Event-based – when the customer has demonstrated a history of transactions across related product categories that point to a specific life event.

It’s Segmint’s KLIs that set the company apart. Based on the unique blend of KLIs assigned, each customer can be presented with a customized mix of offers, specific to his or her needs and interests, and in any of these three locations:

• Within the online banking platform
• On a financial institution’s public website
• On the open internet

The Segmint system has a web interface that allows bank employees tailor specific acquisition, cross-sell, retention and collection campaigns by tying banner ads to specific KLIs. For instance, you can target a home equity promotion at someone who is planning a wedding and another person who is remodeling their house. The banner ads for each KLI — the fiancé and the remodeler — can be contextualized, with one showing wedding rings, the other showing home improvement tools.

Segmint says its system offers dramatic reductions in money wasted on presenting irrelevant offers (e.g., via direct mail) because customers are more likely to take advantage of such highly targeted offers. And, as an added bonus, financial institutions can generate income from third-party advertisers two ways: through incentives offered within the online banking system, and with ads displayed when customers browse the open internet.

John Relyea, VP Marketing & Implementation/Segmint, says the company has entirely reinventied the online experience for bank and credit union customers. “We help banks build personalized online relationships with their customers by delivering the right message to the right customer at the right time — a segment of one,” he explains.

Segmint was founded in 2008, with its first product launching in 2010. Segmint, which has seven different patents pending, is a perennial favorite at Finovate, the premier conference on innovation in banking. Segmint first demonstrated its services at FinovateSpring 2010, and the video can be seen online here.

SEGMINT DEMO VIDEO

If you really want to get a good idea for how Segmint’s system works, you should take a look at this 7-minute elevator pitch the company put together for its inaugural appearance at Finovate.

Segmint currently has 14 employees, but has plans to grow. In May 2011, The company received a $1.5 million, seven-year loan from the Ohio Department of Development to spur job creation, which will help double the company’s staff. The company has committed to adding 20 new positions in the next 12 months.

Segmint Goes Social With Facebook KLIs

In the fall of 2011, Segmint rolled out SegmintSocial, an analytics platform for banks and credit unions that combines KLI analytics with Facebook.

Prior to SegmintSocial, most financial institutions responded to customers on Facebook without any knowledge about the full relationship each customer may (or may not have) had with them. With SegmintSocial, a financial institution’s Facebook administrator can list each customer’s Key Life Indicators along with a complete breakdown of their product mix, demographic data and lifestyle spending patterns. SegmintSocial can also present customers with targeted Facebook pages containing customized offers and rewards.

SEGMINT SOCIAL – FACEBOOK CUSTOMER PERSPECTIVE

A customer experiences a highly customized Facebook interaction with a bank representative. The Facebook experience is personalized based on the customer’s mix of KLIs and products/accounts held.

SEGMINT SOCIAL – BANK ADMIN PERSPECTIVE

When a customer comments on a financial institution’s Facebook page, the Facebook admin can quickly respond with a full understanding of the customer’s unique mix of KLIs and the extent of the customer’s relationship.

Proprietary Data & Privacy Concerns

Segmint requires that its bank and credit union clients assign unique, anonymous identification numbers to every customer/member before they will run any of the data through the their system. Segmint’s system is designed so that it never receives or contains a customer’s name, street address, social security number, account number(s) or any other identifier that could be used to identify them.

For example, the customer “Smith and Sons LLC” becomes “Business 123456” before the data is fed into Segmint. The Segmint engine performs its analysis using only the customer’s ID number, returning results like “The following business customers should be shown a banner ad for payroll services: 123456, 234567, etc.” A customer’s actual identity never resides in Segmint’s system.

This article © 2012 by The Financial Brand and may not be reproduced.

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For years now, retail financial institutions have surreptitiously manipulated the order of consumers’ purchases and deposits to trigger millions upon millions of dollars in unexpected overdraft fees — charges customers would not have incurred if transactions were processed in a first-to-last system.

If you’re still doing this, stop. Today. It may be legal (for now), but this is precisely the type of issue the new US Consumer Financial Protection Bureau will be looking to smack down. And just because it’s legal doesn’t mean it’s the right thing to do — for consumers, or for your brand.

What makes reordering transactions so diabolical is the implicit deception. It’s inherently nasty. Banks know nearly everyone thinks their transactions are processed chronologically, and yet banks make no effort to alert consumers about the surprising structure of their overdraft schemes. Such a method of calculating account balances is so wildly divergent from what people expect — it’s so completely illogical and counterintuitive — that folks get very cranky when the truth comes out. They feel passionately that they have been misled, and that they should have been warned more clearly upfront. And by banks failing to do so, consumers assume that someone had something to hide (they probably did), and that someone was trying to deliberately screw them and get away with it (they probably were), often to the tune of hundreds of dollars.

Trust is the fundamental basis of every relationship everyone has with every brand. If consumers don’t trust you, you’re dead in the water. Once a consumer’s trust is blown, you can forget about selling them anything. You’re done. You’re a liar and a cheat. You’re in the same shoes as a husband busted for having an affair; it will take years of work to rebuild trust, and that’s if you’ve got any chance at all.

If you have a competitor in your market(s) reordering purchases and you aren’t, go for their jugular. Take the fight for checking accounts directly to their doorstep. With people as prickly as they are right now about bank fees, you could snatch up oodles of new relationships …simply by telling consumers the truth.

Interactive Example of Overdraft Calculations

Pew Research created this graphic to illustrate how banks can post debits and withdrawals in non-chronological order to trigger the maximum number of overdraft fees charged to a customer. Pew is encouraging an end to this practice and for banks to post transactions in a fully disclosed, objective and neutral manner that does not maximize overdraft fees.

To use the tool, you can compare the order of one customer’s purchases with how the bank processed them by toggling between the two tabs.

The federal district court in Northern California found that Wells Fargo’s large-to-small posting practice for transactions was an unfair and deceptive practice. It ordered the bank to change its practice — at least in that state — and refund $203 million back to customers. In November 2011, BofA agreed to pay a $410 million settlement in a similar case. And it’s not just big banks being targeted with lawsuits. Smaller banks like Bank of Oklahoma, which just settled for $19 million, and Associated Bank, which settled for $13 million, are also finding themselves on the losing end of court battles.

Currently, BofA has no overdraft product. The bank is rejecting debit card transactions if there is insufficient funds in a customer’s account. They had planned to provide a text message solution with an option to go ahead with the transaction for a $35 fee, but BofA surprised everyone when it announced they were scrubbing the plan.

Since losing its court case, Wells Fargo has promised to post the most common types of transactions, like debit card transactions, chronologically (or low-to-high) for all accounts.

Wells Fargo has joined other big banks like Chase, Citi and HSBC who have decided this year to abandon overdraft reordering.

There are, however, still quite a few retail financial institutions gouging customers for as many unnecessary overdrafts as they can.

“Banks make the dubious claim that they are do customers a favor with this practice,” wrote Willy Staley, a reporter with MyBankTracker.com. “Larger purchases are more important than smaller ones, typically, and banks are merely helping more important purchases clear first because most customers prioritize them.”

Ardie Hollifield from The Pew Center, who spoke with MyBankTracker about the report, says this is difficult to swallow.

“Do banks make complex systems upgrades based around other perceived customer preferences — ones that they have no stated financial interest in?”

It’s a fair question.

This article © 2012 by The Financial Brand and may not be reproduced.

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In Canada, ING DIRECT had four separate one-day offers on some of its signature branded products:

• 1% bonus on contributions to The Streetwise Funds, ING DIRECT’s own mutual fund
• 2% interest on a one-year guaranteed investment certificate, or GIC
• $300 cash bonus on a new Unmortgage
• $123 bonus on a THRiVE Chequing Account

These deals were available for 24-hours on Cyber Monday only. Customers could take advantage of the offers on ING’s website or over the phone.

A microsite used for the campaign (ingdirect.ca/saleonmoney) was already unavailable as of Tuesday morning. There’s no obvious reason a site like this couldn’t be up all year, even after the deals are removed. ING could create a reusable URL — something like ingdirect.ca/cybermonday — that could become part of consumers’ seasonal shopping bookmarks.

ING DIRECT purchased homepage takeovers of major Canadian websites including FinancialPost.com, GlobeAndMail.com, Moneyville.ca and YouTube. Initiative Media handled the buy, while the concept and creative for the campaign came from digital ad agency Dashboard.

The bank also used social media channels to push the promotion. ING has over 4,000 followers on Twitter, and more than 15,000 fans on Facebook, putting it among the top most-active financial institutions globally in the social media space.

ING DIRECT cafes played a minor role in the campaign, with only a limited amount of printed material distributed at each location. Of course, there isn’t much point in producing a mountain of offline promotional pieces for a sale that lasts only 24 hours.

The cyber promotions are accurate reflections of ING DIRECT’s brand and the type of financial institution they’ve become — all digital/online, retail-centric and always focused on the “savings” theme.

“Putting money on sale breaks the mold of what Canadians expect from a bank,” said Peter Aceto, President and CEO. “A sale like this reinforces ING DIRECT’s commitment to help Canadians save, and shows that saving can be as fun as spending.”

Mark Nicholson, head of digital and interactive at ING Direct, said the campaign differentiates it from other financial institutions by acting “more like a retailer than a bank.”

“We are always looking for unique and creative ways to bring savings to Canadians,” said Andrew Zimakas, VP Marketing, ING DIRECT.  “What better way is there to get savers’ attention than by putting money on sale?”

According to a survey by the bank, one in four Canadians hit the web on Cyber Monday looking for the best bang for their buck. The survey also revealed that 35% of Canadians intend to spend less this year compared to last, with $450 being the average saved for holiday-related purchases.

ING describes its one-day sale as “an early gift for Canadians looking to save even more.”

ING DIRECT’s American counterpart also participated in 2011′s post-Thanksgiving  sale-a-bration. Starting on Black Friday and running through the weekend, available offers included:

• $107 bonus on Electric Orange checking accounts
• $32 bonus for new MONEY teen accounts
• $27 bonus for Kids Savings accounts

2011 marks the third year in a row that ING DIRECT has held promotions on either Black Friday or Cyber Monday. In the first such event in 2009, ING’s Black Friday deals included a $121 bonus for opening Electric Orange checking account and a one-year 2% CD. In 2010, ING’s offers weren’t as strong.

While ING has tinkered with its specific products and offers over the years, they haven’t monkeyed with the basic formula very much at all. It seems clear that they are committed to the concept — presumably because it works. Limiting the deals to a 24-hour period minimizes exposure, so these campaigns can’t cost much. Even if ING only nets a handful of new customers, the PR value of media coverage alone probably makes it worth it.

This article © 2012 by The Financial Brand and may not be reproduced.

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Based on a nationwide survey of 5,000 credit unions, CUNA estimates at least 650,000 consumers joined credit unions in October, a 13-fold spike over the average month. Also during that time, CUNA estimates credit unions brought in $4.5 billion in new deposits.

To help put those numbers in perspective, credit unions added around 1.3 million new members total in 2010. That means credit unions have added half a year’s worth of new members in a single month.

As of Friday, November 4, one day prior to Bank Transfer Day, ABC News reported that the number of people switching to credit unions and community banks had already topped 1 million.

And on Bank Transfer Day on Saturday, November 5, CUNA put the number of new credit union members at around 40,000, bringing $80 million in deposits along with them.

CUNA said growth was particularly noticeable at larger credit unions — those with $100 million or more in assets, a pool which accounts for around 20% of all credit unions but represents 80% of the industry’s total membership. More than 70% of such credit unions reported growth in both members and deposits since September 29. (By inference, that also means 30% did not.)

Bankers dispute these credit union growth numbers, questioning the accuracy of CUNA’s survey methodology.

Alan Theriault, President/CU Financial Services and critic of the study, told American Banker that “clearly CUNA [has] skillful ways to spin stories to get the impact they want.”

What fueled this mass exodus? While there are plenty of aggravating factors — including Kristen Christian’s Bank Transfer Day and Molly Katchpole’s online petition — it’s impossible to attribute the impact of each. Indisputably, the root cause was clearly BofA’s now-aborted decision to charge debit card users a $5 fee. While it’s uncertain how big banks as a group fared through the month of October, what’s obvious is that BofA bore the brunt; they were their own arch-nemesis.

Money Floods From BofA

If you want to get a good, data-driven perspective of the money flooding from BofA, Bob Chatham, CMO of Andera, a provider of online account opening and switch kit technologies to more than 500 credit unions and banks, is a good person to ask.

“It looks like a few people actually put down the remote over [the Bank Transfer Day] weekend and did move some money,” Chatham said in an interview with the Credit Union Times. “Not on an oh-my-God-the-world-is-a-dramatically-different-place-afterwards scale, but kind of like a 4.5 magnitude earthquake in Virginia. You feel the shudder, and people are talking about it.”

Chatham said Andera’s client credit unions saw an average of 7.5 opened accounts over the Bank Transfer Day weekend, with $500 million to $1 billion credit unions averaging six new accounts, $1+  billion credit unions recording at least 19 new openings and $5+ billion credit unions averaging 55 new accounts.

According to Andera’s data, credit unions and smaller banks saw the biggest influx of BofA money around October 10, two weeks after news of the megabank’s debit card fee broke but also before Bank Transfer Day achieved viral velocity. You’ll notice Andera’s ACH transfers out of BofA into credit unions started to skyrocket immediately after BofA’s fee became public on September 28. But switching volume had begun to ebb by the middle of the October.

The Bank Transfer Day idea didn’t really take hold until mid October. One of the earliest references to Bank Transfer Day in the news can be found at the Credit Union Times on October 10.

Among 244 of Andera’s clients, the number of online applications completed during the Bank Transfer Day weekend totaled 2,772. That was 1,148 than the previous weekend.

One could bicker about whether BofA gave a rip about Bank Transfer Day, some online petition with 300,000 signatures, or the onslaught of nasty, derisive comments made in social media circles. But it’s almost certain BofA was able to monitor — and took serious note of — ACH transfers to credit unions.

A very interesting study by Compete, a web traffic analytics firm, graphed trends for unique visitors at credit union websites up through September 2011. While the data stops just short of BofA’s debit fee bombshell, it’s still worth a look for reference. Traffic clearly spikes at certain sites in the wake of BofA’s $5 fee.

As an anecdote, Arizona State Credit Union saw 75 online applications over the November 5th weekend, compared to the 21 they might normally see.

How Much Is At Stake?

Assuming that 1 million consumers did indeed switch to credit unions in the wake of BofA’s $5 fee, that would still only represent a fraction of the relationships held by big banks. BofA has as many as 50 million, with Chase, Citi and Wells Fargo not far behind. Even if all the fee-fleers came from BofA, it would only total about 3% of the bank’s checking customers. Nevertheless, something caught the attention of BofA — along with all its competitors, and all at once. If there’s any one thing that undoubtedly concerned big banks, it would have to be the number of relationships they hemorrhaged, not a bunch of social media noise. In a war of attrition, they felt like they were losing the battle of body counts.

As of June 30, credit unions held just 8% of federally insured deposits, compared with 70% for banks that have assets of more than $10 billion. In 2011, FDIC-insured deposits have brushed up on the $10 trillion dollar mark, while credit union deposits only amount to 8% of that, or $800 billion. So if CUNA is right and credit unions added around $5 billion in deposits, that would represent a 0.6% increase and only 0.05% of big banks’ holdings.

A study by cg42, a management consulting firm, estimated that $399 billion in deposits are currently in jeopardy at America’s ten largest banks — BofA, Citi, Wells, Capital One, Chase, TD, BB&T, US Bank, SunTrust and PNC. The study, which surveyed 5,600 primary checking customers, predicts that $185 billion in deposits will leave those banks in the next year. Do banks even care if they were to see 1.9% of their deposits walk out the door, especially in such a weak lending environment?

The cg42 report says 10.3% of BofA’s customers are expected to defect and move their deposits to another institution in the next year.

You Could Call It ‘Black October’

Either way you look at it, October 2011 can be regarded as “Black October.” For big banks, it was a hugely negative event like Black Monday in 1987, only a whole month of it. For community-based financial institutions — especially credit unions — it was a major boon to business, like 30 straight days of Black Friday.

So how did credit unions fare through Black October? Generally very well.

First Entertainment Credit Union saw the number of new accounts increase 40% in October. The credit union typically signs up an average of 550 new members each month, but that number hit 1,042 in October 2011.

Bethpage FCU said it saw an 85% increase for the month of October. In the final week before Bank Transfer Day, the credit union saw a record-breaking 1,471 new checking accounts compared to 383 opened the same week last year. 672 of those accounts were opened during the Saturday event alone. However, only around 25% of new members were in the 25-44 age range. The bulk were presumably older.

In September, Westerly Community Credit Union only had 111 new members. But in the month of October, that number ballooned to 375. That’s also compares with the mere 113 new members the credit union added in the same period last year.

Glendale Area Schools drew 118 new members in October, 40 more than it did in the same month a year prior. One depositor brought in $250,000.

The number of new members at Northwest Community Credit Union was triple the amount from last October, totaling over 1,500. Burbank City FCU saw the monthly number of its new members double in October to 180. Elevations’ new business jumped about 150% during October, gaining 953 new members vs. 620 for the same period the year prior.

Schools Financial, which has 11 branches in the Sacramento area, had 1,064 new member sign-ups in October, an 11% increase over the previous month. Greater Alliance FCU estimated a 20-30% increase in new accounts in October, above and beyond the 150 accounts they normally open. Highmark FCU gained 25% more members this October than in 2010, the difference amounting to 81 vs. 65 new members. Financial Benefits Credit Union gained 21 new accounts in October, compared to only 3 in the prior month.

Michigan Schools & Government Credit Union estimated its new membership increase was 25-50% at one of its nine branches. The credit union’s membership grew by only 4% last year, but had slowed to about 3.5% until BofA’s debit fee debacle. Now the credit union expects enrollment will be up 5% by the end of the year.

First Community Credit Union in Houston said it saw a 43% increase in new accounts. Boulder Valley Credit Union also reported a 40% increase in new member accounts for the five-week stretch leading up to Bank Transfer Day. Blu Current Credit Union said they observed a growth rate around 30%. While Community Credit Union in Brevard, Florida said new memberships spiked to 100 per month, a 25% increase. Same thing for iQ Credit Union. The Credit Union of New Jersey saw a more modest 20% rise in new accounts in the weeks following BofA’s debit card fee announcement.

McGraw-Hill Credit Union, however, reported a 173% increase in membership in the last two weeks of October. And MaPS Credit Union figured its new checking accounts were up 73% compared with October 2010.

For the month of October, APL Federal Credit Union issued 70% more debit cards than last year. Hits on APL’s debit card page spiked 323%, while the credit union’s switch kit page was up 50%.

The Big Day Itself: Saturday, November 5th

On Bank Transfer Day itself, Saturday, November 5th, BECU in Seattle signed up a one-day record 699 new members. Compared with a typical Saturday, that’s an increase of nearly 40%, BECU said. The following Monday, the credit union welcomed an additional 799 new members.

BECU’s competitor, Seattle Metropolitan Credit Union, reported a 215% increase in new accounts on Bank Transfer Day.

In the week ending on November 5, Redwood Credit Union had gained 600 new members — six times normal activity — most switching from BofA. Redwood reported an overall increase of 83% increase over the same period last year.

Randolph-Brooks FCU opened 350 new accounts on November 5, up 67% from the same day a year ago. Firstmark Credit Union added 33 members Saturday, up as much as 50% over the typical Saturday.

Veridian Credit Union added 178 new members over the course of the Bank Transfer Day weekend. SF Fire Credit Union claimed over 200. First Entertainment opened 99 new accounts vs. the 16 they might normally open.

At Northwest Community Credit Union, 85 people became new members on Saturday. Some of them opened up multiple accounts, totaling 137 new accounts opened.

Elevations Credit Union signed up around 50 or 60 new members during the Saturday, November 5th event.

North Jersey Credit Union picked up 48 new accounts during the Saturday event, compared to the 4-5 they might typically see.

Oregon Community Credit Union said they opened 101 new accounts, with 40 new members. That’s triple the number of new members they get on most Saturdays.

Santa Cruz Credit Union added 35 new members during the Bank Transfer Day event — 5-10 times what they usually see.

First Financial FCU gained 23 new full banking relationships on Bank Transfer Day.

At Oregon Employees FCU main Salem branch, about 15 people opened new accounts, while nearby competitor Rivermark Community Credit Union say only five. Up at Rivermark’s Portland branch, the credit union added around 30 new members.

Fall River Municipal Employees Credit Union opened a dozen new accounts on November 5.

APL Federal Credit Union added nine new members on the 5th of November, up from the four or five they usually see.

Alameda Credit Union picked up eight new members on November 5. The credit union saw new membership growth double in the month prior to the Bank Transfer Day event.

From August through October, Northwest Georgia Credit Union with 12,500 members gained 316 more, compared with 231 in the previous three months, a 37% increase. However, they said new member signups slowed down noticeably in the last few days before Bank Transfer Day.

Some Didn’t See Diddly Squat

United SA Federal Credit Union said it did not see anyone coming in Saturday, November 5, because of Bank Transfer Day. They described the whole day as “pretty slow,” despite opening all eight of its branches specifically for the event.

When one of Vantage Credit Union’s vice presidents surveyed branch staff in October about the source of new accounts, some said people mentioned Bank of America by usually did not mention Bank Transfer Day.

According to a survey conducted by CUNA, one in five larger credit unions did not open a single account on Bank Transfer Day.

“Did we get more accounts than we normally would on that day? Yes we did,” said Nick Bavaro, President/Northwest Community Credit Union in Morton Grove. “We got a handful more, but people weren’t standing around the corner waiting to apply.”

Most banks on the other hand — even small community institutions — had much more lackluster Bank Transfer Day results than their credit union peers.

“Bank Transfer Day wasn’t an extraordinary event for us,” said Rolff Nelson, SVP Retail Banking/Exchange Bank, headquartered in Santa Rosa.

Broadway Bank, Frost Bank and Jefferson Bank and even Security Service Credit Union — all in San Antonio — agreed that Bank Transfer Day was “uneventful.”

This article © 2012 by The Financial Brand and may not be reproduced.

Similar Articles:

• 4 Ways ‘Bank Transfer Day’ Is Silly
• Consumers Sour on Big Banks, Sweet on Credit Unions
• Thinking BofA’s Debit Fee Refugees Are ‘Unprofitable’ is a Huge Mistake
• Free Checking Not Dead Yet at Credit Unions

• “Bank of America’s strategy toward the unprofitable is ‘We’re firing them!’”
  — Mike Branton, Strategy Corps
• “The fee will affect only the bank’s lower-end customers, who are not profitable for the bank anyway. The result of those customers moving their accounts away from Bank of America will ultimately help the company’s bottom line and may actually be desired by the bank.”
  — Brad Strothkamp, VP/Forrester Research
• “Rather than flat out telling unprofitable — or potentially unprofitable — customers to close out accounts, BofA figures, ‘Hey, we’ll slap a fee on them, and if they don’t like it, they’ll leave.’”
  — Ron Shevlin, Senior Analyst/Aite Group
• “My take on BofA, Chase, Wells Fargo and others is that they see this as a opportunity to offload unprofitable customers.”
  — Paul Stull, SVP/Arizona State Credit Union
• “Bank of America execs are likely breathing a huge sigh of relief as unprofitable customers stampede for the exits and head for community banks and credit unions.”
  — Bill Anderson, Seattle Times
• “Let someone else have the unprofitable customers.”
  — Dana Blankenhorn, Seeking Alpha

Has BofA found the magic fee that drives away unprofitable customers only? No. It’s a ridiculous suggestion. Of course there will be plenty of profitable customers among those stampeding out BofA’s doors. But all this speculation about BofA tossing millions of unwanted and undesirable to the curb has community banks and credit unions wringing their hands. “Eek! Maybe we don’t want their discarded trash?”

It is dangerous to label BofA refugees as “unprofitable customers” with such a broad brush. Some of these customers may be unprofitable… to BofA only… and just recently due to Durbin’s new rules. But that doesn’t automatically mean these customers are unprofitable to other financial institutions, especially those unaffected by Durbin.

Think about it. If BofA’s customers were unprofitable prior to Durbin, well then why didn’t BofA implement this clever fee scheme to scare them off sooner?

If BofA’s customers were profitable pre-Durbin because of interchange revenue, then credit unions should be able to make them profitable too because they are unaffected by Durbin’s new rules. Have analysts forgotten that the Dubin Amendment only applies to financial institutions with $10 billion in assets or more?

The reason behind BofA’s $5 fee is simple: The bank is scrambling to show profits to its shareholders, and it’s running out of options. The $5 monthly debit card fee was more like a desperate Hail Mary play than a savvy strategy to clean up its balance sheet.

And besides, if it was such a stroke of genius, then why is BofA backpedaling? The bank is about to join all the other banks who are abandoning plans to charge debit card fees, including Wells Fargo, Chase, TD and SunTrust. If it was so brilliant, why is everyone reversing course?

This article © 2012 by The Financial Brand and may not be reproduced.

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• BofA’s $5 Monthly Debit Fee: The Backlash, The Fallout and What It All Means
• Financial Marketers Tip Toe Between Irritating New Fees And Profitability
• The Importance of High-Yield Checking Accounts in a Post-Durbin World
• So What Was The Final Body Count For BofA’s Debit Card Fee Debacle?