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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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.

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• Consumers Sour on Big Banks, Sweet on Credit Unions
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• “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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Technologists say it is possible — at least in theory — for financial institutions to link data available in social media profiles with marketing strategies and lending decisions. With the unprecedented volume of personal information people willingly volunteer on social networks, surely there must be a future for big, social data? Right?

Before you dismiss the concept as one of those far-fetched sci-fi tales told by prognosticating futurists and other soothsayers, consider that online pioneer Lending Tree has been utilizing social intelligence in its decision-making process since at least 2009. The peer-to-peer lender incorporates multiple sources of social information into its identity verification and fraud detection systems.

And many organizations — not just financial institutions — are mining social media already to screen job applicants. There aren’t many hiring managers left who aren’t tempted to take at least a peek at the Facebook profiles of prospective employees. For instance, what if they find a photo of an applicant drunk at 3am with status updates containing racial slurs? Doesn’t that sound like a sure-fire formula for big HR nightmares?

What Banks and Lenders Can Look For

“Tweeting about walking away from your home may translate as an indicator that you may be delinquent on a future loan,” explains Ken Lin, CEO of Credit Karma, a free credit management service that provides credit scores and other financial education resources. “Banks are doing the math to determine whether these kinds of comments or tweets actually prove true down the road.”

In an article on Mashable, Credit Karma’s Lin outlines some of the things financial institutions might be looking for on consumers’ social media profiles.

• Anything indicative of changes in your financial circumstances. These may include phrases or keywords that you use on social media platforms, such as walkaway, laid off, fired, broke, moving to your parents house, etc. Banks will examine the correlation between these tweets and actual financial behaviors.
• What your social media connections are doing financially. The idea here is that your friends have similar habits and characteristics as you. If one of them tweets about financial hardship, to banks that could mean you might also have trouble later on. UCSD professor James Fowler explores a similar concept in a study about divorce: Being friends with someone who gets divorced makes that person 147% more likely to get divorced themselves.
• Upcoming life changes. Similar to financial changes, the idea here is that banks want to know when you’re approaching major life events, such as getting married or buying a safe car to transport your new child. This information allows banks to tailor certain products and services toward you.

Brett King, author of Bank 2.0 and founder of the recently minted Movenbank, says his nascent startup plans to integrate social data heavily into its business model. In terms of social intelligence what is he looking for? “Which customers have influence to drive positive sentiment or create believable influence?” he tells The Financial Brand.

For Movenbank, King has engineered what he calls the CRED ecosystem, “a behavioral, social, viral, gamified” platform.

The CRED system awards points, badges, rewards and incentives for behaviors like accomplishing a savings goal or referring friends to Movenbank. Movenbank will then use customers’ CRED scores to influence marketing, service and underwriting decisions.

JJ Hornblass, publisher of BankInnovation.net, describes CRED as “a super credit score.”

“What we were really trying to do was change the way our bank communicates with customers about their relationship, and the way we assess their value to us as an institution,” King says.

The alpha release of Movenbank’s site will give customers their first glimpse of the CRED ecosystem, starting with a financial personality profile that users can compare with one another. Then Movenbank will ramp up CRED for commercial release sometime next year, with broad availability expected in summer  2012.

King also wants to get Movenbank customers involved in early design of products/services so that they “feel more attached to the result.”

“If we’re getting push back to a certain strategy — e.g., pricing or fees — how do we respond?” he asks himself. “Are we (Movenbank) prepared to engage in a dialog with customers openly and transparently, rather than just pushing our key messages or defending our brand?”

Of course, most banks and credit unions aren’t ready to throw away their traditional risk assessment models and rely instead purely on information gleaned from social media sites. But if they integrate social data as a component of credit worthiness, they may be able to see a more complete picture of potential borrowers.

Gregory Meyer, Community Relations Manager for Meriwest Credit Union, says social media is “a great way to keep up with my 10-year-old nephew, but it doesn’t have a place in the credit process.” However, he offers this concession regarding business loans: “I can see how Facebook would come into play. It would be useful to look at comments about a person’s business, see what the complaints are and how they respond to them.”

“This is an area that will need rigorous testing before you bet the farm on it,” cautions Netbanker author Jim Bruene. “But the theory sounds promising.”

Exploring Network Connections

There is more to social intelligence that just looking at isolated, individual profiles. Marketing inferences could be drawn from the interconnected relationships shared among the users of social media communities. For instance, if you lent money to ten people, all of whom are friends with one another (i.e., socially connected online), and they all paid you back on time, wouldn’t you feel better about granting a loan request from friend #11?

“Social graphs allow credit issuers to know if you’re connected to a community of great credit customers,” writes Erica Sandberg for CreditCards.com. “Creditors can see if people in your network have accounts with them, and are free to look at how they are handling those accounts.”

Movenbank’s Brett King has another idea. He talks about a situation where someone who brings in referrals might get a $500 line of credit. Even if they default, you’d have paid them that much for the referrals anyway, right?

But analyzing the vast pools of data in a social ecosystem by crunching the connections within a network will require radically new tools and technologies. The systems available today simply won’t cut it.

“The key to all this is combining together social analytics, which can deal with the unique aspects of social media with big data, which can process vast, real-time information flows quickly enough to matter,” notes Dion Hinchcliffe in an article on eBiz.

Big Brother Twists His Mustache, But Is It An Impossible Dream?

In response to Lin’s Mashable article, titled “What Banks and Lenders Know About You From Social Media,” reactions among commenters included “creeeeepy” and “scary.”

Robert Catalano is one consumer concerned that his Facebook Timeline posts might be used against him. His satirical fear: “Oh you want a loan…? Well I noticed that on Aug 4th of 2003 at 2:15 pm blah blah blah blah NOT APPROVED! Good day sir!”

Jesse Torres, President/CEO of Pan American Bank and publisher of the Social Media Banking blog, thinks mining social media data is a stretch for banks. “Perhaps one or two of the major banks may be scraping social media data (though probably not), it is actually quite unlikely and definitely not being done by the run of the mill bank,” Torres says. “It is just too much for them to handle.”

“The majors — BofA, US Bank, etc — have the resources, but it is not their core competency,” Torres adds. “They are not likely to be doing this at the macro level.”

Torres also sees issues with correlating online profiles with real world identities. “How do you know MrBigManOnCampus on Twitter is John Doe?” he asks. “How do you know which of the 150 John Does on Facebook are John Doe with SSN 123-45-6789?”

Ron Shevlin, a Senior Analyst with Aite, agrees. “The big issue is the validity of data,” he says. “There’s no way to verify information.”

On the wider subject of social intelligence, Shevlin thinks it’s impractical for banks and credit unions to even try and decode the data. “They have no ability to incorporate this kind of data,” he explains. “They can’t develop a systematic process to analyze social information.”

Nevertheless, folks like Credit Karma’s Lin maintain cautious optimism. “The earliest we’ll see banks and lenders begin to act is five years down the road, once they’ve had time to evaluate and correlate specific social media behaviors to actual credit risks,” he notes.

Could This Represent the Real Future Value of Social Media in Banking?

Maybe down the road, people will feel comfortable filling out loan applications on Facebook. If so, financial institutions will be able to correlate nearly every relevant financial detail to people’s social media profiles — the key to unlocking social data’s real potential.

If all the predictions pan out and financial institutions do wind up weaving social data into their marketing strategies, the industry will have probably be forced to reconsider the value of social media as a “tool for dialogue” — the predominant stance on its significance today. Should social intelligence deliver on the promise of its power, it would seem that a financial institution’s only real ambition on social networks would be to gain access to users’ data. To paraphrase, “Like us on Facebook, then authorize our app (a game? a free tool? an entry into a contest?) that grants us permission to analyze your friends and personal details.” Who cares if they post something on your Wall? You’ve got their info, and that’s what really matters, right?

Ten years from now, we may look back on all the hype about fostering “engagement” between banks and their customers as a quaint and naïve notion. “If we only knew then how we’d really wind up using social media today…”

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

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Based on checking account performance data provided by BancVue, the company who pioneered REWARDChecking, Aite concluded that high-yield checking accounts trump free checking along nearly every vital metric, specifically that high-yield checking accounts helped financial institutions acquire more accounts and generate more interchange revenue.

BancVue’s data encompassed 120 of its community bank and credit union clients, spanning a two-year period ending April 2011.

“The profitability of REWARDChecking accounts from May 2009 through April 2011 didn’t come solely from account growth due to higher-than-average rates,” said Ron Shevlin, senior analyst with Aite Group and author of the report. “Profitability was also driven by cost savings resulting from steering customers to lower cost channels, and from the revenue generated from debit interchange.”

One of the most surprising findings in Aite’s research report is that reduced debit interchange will not have a materially negative impact on high-yield accounts. Over the two-year period analyzed by Aite, interchange revenue accounted for an average of 18% of the total income generated by high-yield checking accounts. If Durbin’s debit interchange legislation had been in effect during that period, high-yield accounts would have been only 14% less profitable each month, but still more profitable than free accounts.

Aite says high-yield checking accounts have a vital place in the product portfolios of community banks and credit unions. A separate Aite study of checking account prospects in 2008 found that 94% of online consumers listed interest on balances as a “must- have” or “nice-to-have” feature, and that 64% ultimately selected an interest-bearing account over a non-interest bearing account.

Aite also believes other revenue sources associated with high-yield checking accounts will continue to accelerate. “Looking ahead, a new source of revenue from checking accounts will emerge in the form of merchant-funded incentives,” Shevlin said in his report. “Increasingly, financial institutions will compete for brands’ marketing dollars by providing brands with more effective and efficient ways to reach customers and prospects through the financial institutions’ online banking and personal financial management (PFM) platforms.”

“The higher penetration of online banking adoption among REWARDChecking account holders (compared with free checking account holders) will enable financial institutions to generate higher levels of additional income on deposit accounts,” Shevlin added.

Austin-based BancVue introduced its REALChecking system, which includes REWARDChecking, seven years ago. More recently, BancVue rolled out Kasasa, a national, third-party checking brand.

A summary of the Aite Group report is available for download free here.

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

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BofA is taking a mountain of flack for tacking a $5 monthly fee on customers who use their debit cards to make purchases. The backlash to the bank’s move from both customers and media alike (detailed in the article below) has been swift and ferocious.

The news broke September 29, just two days before the Durbin Amendment’s controls on debit transaction fees was to take effect. The plan was disclosed in an internal memo to senior BofA managers which was obtained by the Wall Street Journal.

Justifying its decision, BofA says that “the economics of offering a debit card have changed.” No joke. Those “economics” just became painfully clear to the bank’s 50+ million customers.

BofA says it will be waiving the $5 monthly fee only for those who have a mortgage with the bank, or $20,000 on deposit.

BofA isn’t the only bank slapping new fees on debit card activity. Consumers who swipe their debit card anywhere besides an ATM are staring at monthly charges ranging from $3 at Wells Fargo, $3 at Chase, $4 at Regions, all the way up to $5 at SunTrust. At $5 per month, customers would have to shell out $60 a year for a convenience that had been free for nearly two decades.

Consumers are left wondering what’s next? Are online banking fees on the way? Or maybe even a “Bill Pay Privilege Fee?”

Citi is the only big U.S. bank to openly declare it has no intentions to introduce a debit usage fee.

“We have talked to customers and they have made it abundantly clear that ‘if you charge me to use my debit card, I would find that very irritating’,” said Stephen Troutner, head of Citi’s banking products.

Citi is, however, jacking fees on its checking accounts. Its Easy Checking Package that had always been free, is being replaced in December with a new package that has a $15 monthly fee or requires a $6,000 minimum deposit.

Key Questions: Why did BofA think consumers would swallow a “Debit Card Usage Fee” more readily than an overall checking account fee?

The media blisters BofA

In the first 24 hours after BofA’s new fee leaked to the press, mass media outlets pumped out no less than 2,000 articles about the $5 fee, with another 500 in the days that followed. The Philadelphia Inquirer was unabashedly telling its readers to switch banks. Fox News anchor Gerri Willis cut up her BofA debit card live on TV in protest. The Chicago Tribune say this is a reminder to shop around. The Washington Post is offering switching tips. As is MSN Money. The Kansas City Star is complaining that banks are adding new fees even after they got taxpayer bailouts. The LA Times says BofA isn’t just having its cake and eating it too, it’s serving itself another piece. And of course the Huffington Post is happy to chime in.

Outraged customers rip into BofA… Will they switch?

Check the web for consumer reaction to BofA’s $5 fee and you’ll find an avalanche of scornful, angry and derisive comments. Just about everyone with a keyboard is taking shots at America’s biggest bank, and every online article includes dozens — if not hundreds — of nasty comments.

Social media sites, of course, are alight with furious customers raging against the bank. The day after news of the $5 fee broke, there were 4,470 mentions of BofA on Twitter, up from the average of 1,750 per week. And that was on a Saturday. Sunday saw another 3,490 tweets about BofA. Most were negative.

If BofA makes good on its $5 debit fee threat, will customers change behaviors or change banks? In a Wall Street Journal poll, 93.1% said they would not pay a monthly fee to use a debit card. 4.2% said they might, and 2.7% said yes. Over 2,250 people responded to the survey question.

Javelin Strategy & Research estimates that as many as 60% of consumers would find an alternative payment method if their bank charged any fee for debit purchases. In a separate study, J.D. Power and Associates found that 68% of customers would switch to cash or checks for everyday purchases.

When Time posted a poll asking BofA customers how they planned to respond to the fee, 75% of nearly 1,000 respondents said they’d switch banks. 11% said they’d use their credit cards to dodge the fee, 7% said they’d switch to cash, and 4% said they’d go back to paper checks. Only 3% said they planned on paying the fee.

“I’ll go back to checks and cash before I pay to use the convenience of plastic,” said Dennis Couturier, a tech worker in Virginia.

Going back to paper checks is the option that would hurt banks the most, which is much more expensive than processing debit transactions.

“If consumers banded together and switched to paper, I think it would be a very telling impact,” Michael Beird, director of banking services at J.D. Power told Time.

“It won’t drive me to cash or credit, but it did prompt me to change my accounts to a credit union,” said Mark Olwick, a website manager in Seattle.

Jose Bucheli, a graduate student from Albuquerque, agrees. “I would not change my behavior, I would change my bank,” he said. “When this fee comes into effect, I am pulling my money from BofA and moving somewhere else.”

As Time reporter Martha C. White observed, “If consumers want to bank with a smaller institution that didn’t dive headfirst into risky, unsustainable business practices and now doesn’t have to nickel-and-dime its customers to make up for lost profits, that’s their call.”

SCRIPTED RESPONSES
This internal training document circulating the internet explains
how BofA staff should answer questions about the $5 fee.

How much is really at stake?

BofA’s debit fee could come at a high cost to the bank. A study by America’s Research Group found 37% of customers polled would change banks if they felt the fees were becoming unreasonable. And according to research from J.D. Power and Associates, roughly two-thirds of people who threaten to switch banks follow through. Worst case scenario, BofA could see as many as 20 million customers close their checking accounts.

BofA’s fee income was already dropping, even before the Durbin Amendment took effect. The bank’s deposit portfolio generated only $1 billion in Q2 2011, down 34% from $1.5 billion for the same period a year prior. BofA’s card services division reported fee income of $1.9 billion, down 23% from $2.5 billion in Q2 2010.

So how desperately does BofA need to replace their lost debit fee transaction income? The Los Angeles Times tried running the math. BofA has 57 million consumer and small-business accounts. If a majority of them use debit cards, BofA’s looking at a windfall of about $3 billion a year — $1 billion more than they are currently making from debit transaction fees.

Here’s another way it could be calculated. Thanks to the Durbin Amendment, BofA’s debit card revenue drops from 44¢ to 24¢. Multiply that 20¢ difference by a customer’s average of 25 debit transactions every month and it comes to $5.

Anne Pace, a spokesperson with BofA, told the LA Times that the convenience of debit cards “comes at a cost,” and that BofA is “trying to be clear and transparent with customers” about its fees, but she declined to say how much it really costs the bank to process a debit card transaction.

“Until BofA and other banks come clean on how much it really costs them to process plastic and provide related services, we have to take others’ word for it,” LA Times reporter David Lazarus wrote. “The Feds say 21¢ is a realistic fee for a debit card sale.”

This will move more money than ‘Move Your Money’

Banks’ current fee-for-all frenzy will undoubtedly get more consumers to switch checking accounts than the Move Your Money project even dreamed about. The difference is that the Move Your Money effort appealed to people’s sense of justice and dignity — an intangible, purely psychological angle — while a heap of new fees hits consumers right where it hurts most: their wallets.

Credit unions, who have been unable or unwilling (or both) to get their collective act together with any kind of coordinated campaign attacking banks, are sure to benefit most from the recent spate of bank fees. In fact, banks’ new fees are probably going to do more to help credit unions than credit unions could ever do for themselves.

Online banks like ING Direct and Ally Bank will probably also be big benefactors from BofA’s decision. Ally is one of the most aggressive online advertisers in the financial industry, and its ads are sitting atop- or next to the thousands of anti-BofA articles consumers are reading on the internet every day. Indeed, even Ally’s latest “Don’t Accept It” TV commercial about bank fees seems to have taken on new relevance. Ally’s ubiquitous anti-bank message is sure to strike a chord with prickly BofA customers.

Financial Marketing Solutions noticed Texas First Bank had pounced on the opportunity created by BofA’s $5 fee with this tweet: “Our debit cards are free. About to be charged for yours? Open an acct with us & join the community bank family www.texasfirstbank.com”

At the same time, USAA was sending out a similar tweet: “While the other guys are charging fees, we’re reaffirming our ‘fee-losophy’ of free debit/checking,” along with a link to a post on USAA’s blog about how they have “no plans to add fees to its debit card.”

The morning after BofA said it would start charging customers the $5 fee, Coastal Federal Credit Union announced it would pay customers to use its debit cards. Coastal’s members with Go Green Checking can earn 2.51% APY when they post 30 or more debit transactions to their account each month.

From bad to worse

It’s been a tough year for BofA, to say the least. Earlier this year, BofA introduced $7 fees on some accounts just for talking to a teller or requesting a paper statement, a move that was received with similar derision. The bank is also reeling from foreclosure problems, faulty mortgage paperwork, massive lawsuits, a battered stock price and even website outages.

Only a day after news of BofA’s fee broke, their website went down. Hard. For everyone. The message: “Home Page Temporarily Unavailable — We’re sorry, but some of our pages are temporarily unavailable. Thanks for your patience.”

That was Friday. Then Saturday. And Sunday. By early Monday morning, the bank said its website was back to normal. But shortly thereafter, it was down again. The problem continued into its sixth straight day.

BANKOFAMERICA.COM WEBSITE CRASH

BofA swears the crash was unrelated to the uproar over the $5 monthly debit card fee. There are also no hacker groups laying claim to a denial-of-service attack.

In the meantime, a ConsumerAffairs.com analysis of 980,000 comments on Facebook, Twitter and other social media and blogs found net sentiment about BofA sinking from 45% positive to 20% negative over the last year.

A dicey political blame game

BofA’s timing of its debit fee coincided perfectly with the start of Durbin’s interchange cap, which went into effect October 1. Was the timing deliberate? Maybe. Perhaps BofA hoped that the press would neatly link the $5 fee with “unfair government regulations.” If that was the strategy, it backfired. Badly.

There’s a nasty war between Congress, banks and retailers, resulting in a lot of finger pointing. Banks are pissed at retailers, who they blame for the Durbin Amendment. Retailers are upset with banks over their debit card usage fees, and complain that banks like BofA will force consumers to spend less. The ABA accuses Congress of meddling with burdensome and anti-capitalistic regulations. Congress says banks wouldn’t be under their thumb if they had behaved responsibly in the first place. It’s a vicious circle.

Meanwhile, consumers feel they are the ones getting screwed. In the wake of an economic meltdown — one that most people blame on reckless and greedy financial institutions — no one is in the mood to hear banks whine about what they think is fair and what isn’t. Do consumers care who started it? No, not really. All that matters to them is that they are paying more — a lot more — for basic checking.

A few weeks ago, the ABA distributed a press release with a headline stating that “71% of bank customers pay nothing for banking services.” It was cleverly crafted PR spin. More accurately, what the ABA study actually proved is that 71% of consumers would like to think they don’t pay anything, but people really have no idea how much they cough up for basic banking services. But now, if 50 million people — 20% of the U.S. population — are going to get dinged $5 by BofA, the ABA’s number just shifted down. Way down.

A recent study by Bankrate.com found that only 45% of checking accounts are now free, with no strings attached. This is down from 65% in 2010, and 76% in 2009. The trend has become irritatingly clear to consumers. As long as banks continue rolling out new fees, the hemorrhaging negativity and bad press will compound. Any financial institution toying with additional fees had better brush up on their PR and crisis communications skills, because you’ll have plenty of chances to practice the backstroke. Both customers and the media are primed for a fight.

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

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Fifth Third Bank has just introduced its Duo Card, a combined credit and debit card, making them the first card issuer in the U.S. to offer this dual functionality in one piece of plastic.

With the Duo Card, customers can choose to make purchases using either a line of credit or funds debited from their checking account. To use the Duo as a debit card, cardholders would simply select the debit option at the point of sale and enter their PIN, at which point they can also get cash back from the merchant. Or they can use the card to withdraw money from their checking account at an ATM.

To make a purchase on the Duo using the credit card account, customers would select the credit option and sign to complete the transaction. They would no longer be able to sign for debit card purchases. All online purchases would also count as credit card transactions, which (as the Detroit News points out) may be a big drawback for some customers.

Reality Check: When grocery store clerks ask shoppers, “Debit or credit?”, most consumers are confused. Some mistakenly think their debit card can actually function like a credit card — with a line of credit. So many dismiss the choice, thinking that “if it all comes directly out of my checking account, what difference does it make whether I choose debit or credit?”

If a Duo customer accidentally makes a debit purchase for more than the amount in their checking account, the Duo Card’s credit line automatically kicks in, providing built-in overdraft protection. A customer’s purchase would never be declined unless they had exceeded their available line of credit.

Duo cardholders will receive two separate statements. Debit purchases will appear on monthly checking account statements, while credit card purchases will be itemized on another.

Fifth Third’s Duo Card incorporates the bank’s Real Life Rewards program that gives customers points for credit purchases. Customers earn two reward points for every $1 they spend on gas, grocery, and discount store purchases, and one point for every $1 spent on all other credit purchases. Points can be combined from multiple Fifth Third rewards accounts, and there is no limit on how many points you can earn. Customers can redeem points and view their balance at FifthThirdRewards.com

The card comes without any annual fees. Depending on the checking account a customer chooses to tie to their Duo Card, Fifth Third charges between $7.50 and $15 for monthly fees, but these can be waived if certain minimum balance requirements are met. Credit card balances carry an interest rate ranging from 13-24% once the 0% offer for the first 12 months expires.

Every signature or credit purchase is covered by MasterCard’s Zero Liability Protection.

“The Duo Card gives these consumers the freedom to choose how to pay and access their cash without having to carry multiple cards.” said Jon Groch, SVP/Director of Bankcard Services for Fifth Third Bank.s “We believe the combination of added convenience, flexibility and security is a key differentiator for this product.”

“Consumers today want payment cards that provide them the ability to make purchases when, where and how they want,” said Tim Murphy, Chief Product Officer, MasterCard Worldwide.

Back in 2008, Virgin Money in South Africa rolled out a similar dual-featured credit card (previous coverage on the outrageous launch campaign here). The Blingola card worked like a credit card with an savings account attached. The card paid a whopping 9.5% interest rate on all positive balances, with a 20.5% on negative/credit balances.

The bank has had the capability to create this card for quite some time,” said Stephanie Honan, PR Manager at Fifth Third. “This card was largely created based on customer response and a desire for such capabilities.”

The Duo Card will likely appeal to consumers who don’t regularly need a credit card, those who don’t like carrying an “extra piece of plastic” in their wallets, and those who struggle with debt/credit but still need some flexibility for emergencies.

Dual Campus ID + Credit Card

The Duo Card isn’t the only thing going on around Fifth Third’s bankcard division. They also recently introduced the cedarville1card, a combined campus ID and debit card for students, faculty and staff. The campus card allows cardholders to use their ID for ATM- and PIN-based debit card transactions both on- and off campus.

The cards became available with the start of the fall 2011 semester. To use the cedarville1card as a debit card, cardholders need to link to a Fifth Third Bank checking account. Students and faculty are not required to open an account if they only want an ID.

Too bad it doesn’t work as a room key for students living in dorms too.

Fifth Third, headquartered in Cincinnati, has $111 billion in assets, 6 million customers and 1,314 branches.

Cedarville University is located in Cedarville, Ohio with an enrollment of more than 3,200 undergraduate and graduate students. Fifth Third Bank currently operates two ATMs on the 400-acre campus.

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

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Green Ops: Operation Easyswtich is a sprawling YouTube campaign from Kiwibank designed to get New Zealand consumers to switch core checking relationships.

The effort, which feels a lot more like the marketing launch for a movie premiere or a new XBox game, looks nothing like a traditional bank ad campaign. The initiative is focused primarily around a unique, interactive YouTube channel sporting the look-and-feel of a first-person-shooter POV-style online game.

Hosted on a bespoke YouTube channel (a robust, highly-interactive channel on steroids), the social media campaign is built around a loose narrative sharing bits about an elite Kiwibank team whose mission is to help rescue customers from bad banking experiences.

Visitors to the channel can hunt for interactive hotspots where they can find humorous clips encouraging them to switch banks, There is an omnipresent button inviting viewers to click though to a website where they can start the switching process. The channel also incorporates social media features allowing users to share Green Ops with friends on platforms like Facebook.

Green Ops is way more than just a YouTube page. It is essentially an entire microsite hosted on YouTube. Indeed it is by far and away the most sophisticated, elaborate and professionally-produced YouTube effort in the history of the retail banking industry.

If you can’t view YouTube videos at work, you’ll want to check out Green Ops when you get home. It will blow your mind.

KIWIBANK – GREEN OPS TRAILER

A sensationalistic teaser spot with all the glamour and excitement of an action movie trailer, shown in cinemas. There is a shorter, 30-second version used for TV commercials.

Nicky Ashton, Head of Brand & Marketing Communications for Kiwibank, says that the gamification approach of the web site aims to provide a richer and more engaging experience for consumers.

“It’s kind of like ‘Get Smart’ meets the ‘Bourne Identity,’” says Ashton.

Yeah, that… and some heavy doses of Call of Duty: Black Ops. Kiwibank’s effort is called “Green Ops” after all.

“How many times have you heard a state-owned bank use first person shooter game words like ‘ops’?” asked one advertising critic in his review of Green Ops. “And where you see agents in a secret vault and alarm bells going off?”

“Kiwibank needs to stand out from the competition, so it is our job to continually find new ways to connect with new customers,” Ashton adds.

Easyswitch: Just One Signature and We’ll Do the Rest

“We make banking easy. End of story,” Kiwibank says on its website. “Just one signature and we’ll do the rest.”

“We’ll close the accounts at your old bank and move all your regular payments to your new Kiwibank accounts,” they promise.

The online switching form is simple enough, but it’s really just a conversation starter. You can’t do it all online in one click, so more steps will be required — probably including a trip to the branch.

(Tip: If you’re looking for a cool way to give people switching options, click here and check out how they handle the “Switch to Kiwibank” button.)

KIWIBANK – TECHNO SMART CAR

A short — but very cool! — video showcasing the sleek-black spy version of the Smart Car Kiwibank is giving away as part of Green Ops.

As part of the spy-ops themed campaign, Kiwibank is giving away a sleek, black Smart Car. A winner will be chosen October 24 from a pool of those who switched to Kiwibank. A lime green Smart Car named “Raymond” has starred as the central character in Kiwibank’s brand advertising for some years now.

The Green Ops site is supported by a multimedia campaign including cinema trailers, movie posters with QR codes, outdoor, radio, online advertising and TV spots, all produced by Kiwibank’s ad agency Ogilvy New Zealand. Teasers spots started running in early August, with the full campaign breaking shortly thereafter.

The campaign kicked off September 9, and the contest ends October 23, 2011.

So far, Green Ops has garnered some 26,623 video views on YouTube. How many of those resulted in people making the switch? We’ll probably never know.

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

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They call it The Echo Project, a highly-customizable, geographically tailored Gen-Y program focused primarily on loan growth. According to company president and CEO Olivier Raoust, the initiative is “designed to talk directly to the Echo Boomer/Gen Y crowd in a specific market, and bring in the lucrative loans credit unions are looking for.”

Credit unions have struggled to grow Gen-Y members ever since the term was coined. Today, the average credit union member is 47, nearly 10 years older than the median age of people in the US. Back in 1985, the average age was 40.

“Most credit unions need to bring the average age of their membership down,” notes Raoust. “They have been trying to appeal to the 71 million Echo Boomers in the population — those aged 22 to 34.”

The Echo Project is a white label program — an internal term only. Each credit union deploying The Echo Project will get its own unique name, logo and positioning.

“First and foremost it’s about financial education for Gen-Y,” Raoust explains. ”And number two it is to develop long-term loan relationships with younger members.”

Raoust + Partners promises to find the unique qualities and nuances of each credit union’s particular region, and through a research process, learn how Gen-Y in that area live, work, the schools they go to, events they attend, hangouts they frequent and the characteristics of their communications habits, then eventually funnel all that down to messages, visuals, topics, channels and events.

“Everything is customized for the particular region the credit union serves,” Raoust adds.

“Unfortunately, many credit unions are using canned, off-the-shelf programs that have little impact on the Echo Boomers in their field of membership,” Raoust adds.

The Echo Project is positioned as an alternative to existing Gen-Y programs for credit unions, including Young & Free and On Your Way.

“To effectively address the challenge of reaching this market, you need to do more than insert a ‘youth’ button on your home page or put your logo on a generic site,” Raoust says.

“The tremendous difference The Echo Project offers is that it’s customized especially for the Gen-Y in a credit union’s specific area,” Raoust explains. “As these folks are actively building credit and seeking loans, The Echo Project is designed to speak to them in a way they can relate to and connect with. This is the critical difference between The Echo Project and the cookie-cutter solutions you’ll find available elsewhere.”

The entire Echo Project program includes research, a creative strategy, a media strategy (online, offline and social), a custom-built website, in-branch marketing and debit/credit card designs. The Echo Project also incorporates social media elements including customized Facebook page, Twitter account, and YouTube channel. Raoust says they will host and manage each Gen-Y microsite it builds for its Echo Project clients, including quarterly refreshes to the site’s content.

What are some of the other critical differences Raoust sees between The Echo Project and what he labels “cookie-cutter solutions?” He says the program is designed for those ages 22 to 34, not high schoolers. Raoust’s Echo Project focused on a Gen-Y audience that is actively building their credit and seeking a resource for loans.

“A 16-year old member with just a checking account is an expense,” Raoust cautions. “A 25-year old member with a few loans and a checking account is a profit builder.”

“Parents are key to the growth of Echo Boomers in your credit union,” Raoust points out.

A Northwestern Mutual poll of college seniors showed that 57% cited a parent as the person they admired and respected the most. Four million Echo Boomers live with their parents, and more than 60% of all college seniors expect to move back home after graduation.

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

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Are you ready for a little island-hopping? Forget the Bahamas, Hawaii or Fiji. We’re embarking on something much more adventurous: a three-island tour of the financial industry’s most glorious (and innovative) hot spots for financial education. All set? Bon voyage!

Mo’Doh Island

Our first stop is Mo’Doh Island, developed by Thwakk, Inc. Mo’Doh is a 3-D, immersive financial education game for students 13 to 17 years old, hosted on the teen grid of Second Life. Users create a personalized avatar then navigate a series of simulated financial decisions.

You’re able to visit the actual island on Second Life’s teen grid (this is off-limits to adults except teachers and credit union personnel who have passed a background check), so Thwakk CEO Scott Moriarty serves as tour guide.

The game starts with a short video designed to introduce the gameplay and controls. Moriarty says that when Mo’Doh Island is used in school settings, there is additional work students complete in preparation for the game.

The first challenge is to buy a car, which you can do only after passing a quiz at the Mo’Doh dealership. With a little help from educational videos and informational posters located throughout the dealership, you can ace the quiz and secure financing — I can now buy a ride for my island stay! Keeping true to Mo’Doh’s real life simulation, I’m given a choice of buying an economy car, or spending beyond my means with a formula racer. I go with the conspicuously unsexy sedan. Had I opted for a budget-busting car as my first purchase, I’m told that I would have most likely gone bankrupt. A great lesson for teens, indeed.

The rest of my Mo’Doh Island experience is similar to real life. Get a job, buy a house, lose a job, get married, get another job, plan for retirement and even pay for unexpected car repairs. The game is addictive. And while I really want to stay longer (I’m here a total of nearly 30 Mo’Doh years, or about two hours), there is another island to explore…

MO’DOH ISLAND

The goal of Mo’Doh Island is to teach teenagers and young adults the importance of good personal financial decisions in a fun and engaging way that leverages the technology that we are already immersed in. It allows players the opportunity to safely experiment with personal finance within games and other interactive events and gain valuable experience and knowledge to improve financial confidence.

MO’DOH ISLAND – OVERVIEW VIDEO

MoneyIsland

Our next destination is MoneyIsland, developed by BancVue. MoneyIsland is an online game designed to teach tweens, ages 8-14 years old, skills in three categories: saving and spending, earning and investing, and using credit wisely.

Upon arrival at MoneyIsland, you’re greeted with a catchy calypso song that perfectly sets a tropical mood. Getting started is easy. I simply click the “Play” button and I’m given the option of kid, parent, or demo mode. The game begins with an well-produced animated short outlining the backstory of MoneyIsland: the main objective is to find Stone Broke, a boy who was bullied and never learned how to save, spend, invest or share money. As a result, his heart has hardened. He’s hiding somewhere on MoneyIsland. Find him, teach him about money, and bring him back to the mainland to collect your reward.

The story arc is an effective device to engage kids, and addresses two fundamental emotional needs that they have: empowerment and transformation. The simple telling of a story is a crucial element of game design (as well as youth programs), yet is so often overlooked. It’s great to see it implemented here.

On my quest to find Stone Broke, I’m treated to animated shorts, challenges and quizzes, all interactive and designed to address relevant financial topics. Everything in MoneyIsland is well-thought out, smart and looks great.

There are additional components to MoneyIsland that I didn’t have a chance to explore. Most notably, the teacher and parent resources. In addition, MoneyIsland is able to connect with BancVue’s lead management engine to provide sales leads based on collected data. This definitely helps make the business case for those wary of youth marketing.

MONEYISLAND

MoneyIsland is a virtual experience, but the kids earn real-life rewards too, such as a savings deposit, a gift card, or a classroom pizza party. It also gives parents and teachers tools to track their kids’ progress and assist in the learning experience.

MONEYISLAND – OVERVIEW VIDEO

Stagecoach Island

The three-isle journey ends at Stagecoach Island, a 3-D virtual world and role-playing game developed by Wells Fargo. Stagecoach Island lets young consumers learn about money while interacting with the Wells Fargo brand online. It also serves as a social hub where users can meet and interact with friends.

To begin our journey, you start by visiting the Stagecoach Island registration page… but something’s definitely amiss. The layout in Firefox for Mac is a jumbled mess. With a little research, I learn that Stagecoach Island only runs in Windows. I’ll have to use my agency’s lone laptop running Vista. This island adventure is off to a rocky start.

Fortunately, once I fire up the ‘ol PC, download the software and select an avatar, I’m able to start cruising the island within minutes. The user experience is nearly identical to Second Life, with one notable difference: this is one seriously deserted island. Not to be deterred, I make my way to the ATM—the home base for the game. This is where I can open virtual accounts and apply for virtual loans.

Here’s the educational hook: I can only do this after completing “episodes” on financial topics. While this is a great way to encourage learning, once I launch into the individual episodes, I’m met with page after page of dry text. Definitely a lost opportunity to create a truly interactive learning experience. I get the sense that more time was spent developing the 3-D environment than creating meaningful financial education. One option Wells Fargo may consider is to add video or audio to break up the massive amounts of copy. This will help provide a more balanced online experience.

STAGECOACH ISLAND

Stagecoach Island is an online virtual world created by Wells Fargo. You can explore the island and its hidden secrets, connect with friends and make new ones — all while learning smart money management skills. Once you register, you can create your own in world character and take part in activities such as building your dream home in one of our four neighborhoods; motorbike racing, snowboarding and skydiving; parties, talent shows, and nightly firework displays; and earning virtual money by visiting the Learning Lounge. The game also features Stagecoach Island University and virtual jobs so that you can learn, earn, build and play more in-world!

Reflections While ‘Traveling Abroad’

All three islands employ similar strategies to deliver financial education and connect with young consumers. By utilizing an immersive, experiential game, the programs are able to engage users on a much deeper level. However, before a financial institution seeks to implement a similar strategy, there are three questions to answer:

1.) Will anyone actually visit your site and play the game? The brutal truth is, probably not without some serious coaxing. Wells Fargo has major brand recognition, and executes a well-defined social media strategy for promoting its online properties. MoneyIsland and MoDoh Island tackle this problem by partnering with schools to gain access to a captive audience, as well as offering incentives and rewards.

2.) Is it within your budget? Developing an immersive gaming environment requires a significant commitment of time and money. These types of programs are not for the faint-hearted (or small-budgeted). Fortunately, MoneyIsland and Mo’Doh Island are white label programs available for credit unions and community banks to license, saving the aforementioned time and money.

3.) Will a game help you achieve your business objectives? This depends on your goals. Do you view youth financial education as a goodwill initiative to build community, or is it a means to generating real growth? It’s evident that each island I visited had clear business objectives built into them. Determine what your goals are before you launch any financial education initiative.

Further Reading:

• Virtual Banking Worlds Provide Tangible Lessons
• Best Practices For Designing Websites For Kids
• Q&A: Youth Marketing for Financial Institutions (more with James Flores)
• 56 Sage Street: Barclays Cool Online Financial Management Game

About the Author

James Flores is President/CEO at Subcat Marketing, is an expert in youth and family marketing, financial literacy and web marketing for banks and credit unions. Subcat helps financial institutions target specific consumer segments by combining behavioral research with innovative design and communication techniques.

Subcat also offers The Elements of Money, a youth marketing program that combines technology, social media, education and marketing strategies to help credit unions reach teens through multiple channels.

You can learn more about Subcat at the company’s blog, or you can connect with James on Twitter.

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

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