Actionable Insights From APT's Financial Services Practice

Turn Customer Satisfaction into Profit

June 25th, 2010 | Posted by Patrick O'Reilly in Uncategorized - (Comments Off on Turn Customer Satisfaction into Profit)

Most retail banks spend a lot of time and money on maintaining and improving customer satisfaction.  It makes intuitive sense that customer satisfaction is an important component of retention and that improving customer satisfaction will translate to an increase in revenue.  However, most banks struggle to show a clear link between customer satisfaction and revenue or other key metrics.

A recent article in US Banker cited a study that found that “some of the nation’s worst-performing banks are among the best at delivering customer service.”  If good customer satisfaction doesn’t translate to better performance, then why should you spend money on it? (more…)

A Playbook to Survive Overdraft Regulation

June 21st, 2010 | Posted by Will Weidman in Uncategorized - (Comments Off on A Playbook to Survive Overdraft Regulation)

Also featured in American Banker

The new overdraft regulation will go into effect soon and will cost banks millions of dollars in lost revenue.  Many banks are still scrambling to get as many customers as possible to opt-in, and many haven’t announced a broader change in overdraft policy.  Simply complying with regulation is not enough to protect fee revenue.  Banks need to develop a forward looking strategy to maintain profitability in this new regulatory environment.   

Some like Bank of America and JP Morgan made sweeping changes to overdraft policy well before the new regulation took effect.  While changing overdraft strategy is vital, their approach of modifying policy for all customers is not the best one.  By changing policy quickly and uniformly there is no way to tell what impact it will have.  The changes may significantly hurt profitability, and it will be very difficult to roll these changes back. (more…)

Launch the Killer New Product

May 25th, 2010 | Posted by Jarred Brown in Uncategorized - (Comments Off on Launch the Killer New Product)

Consumers are demanding more, and regulators are stripping away key sources of revenue. It makes for a tough combination. One strategy every bank needs to pursue to face these challenges is to launch new products that attract new customers and to find ways to preserve revenue.

In a recent Banking Strategies article, Joseph Guyeaux (President of PNC) says “times like these – when the industry grapples with credit issues and heightened regulatory oversight – are precisely when banks need to carve out a differentiated value proposition and focus on sources of future growth.” However, it is challenging to determine which new products work and how to most effectively market them. (more…)

Using ATMs to Drive Innovation

May 24th, 2010 | Posted by Will Weidman in Uncategorized - (Comments Off on Using ATMs to Drive Innovation)

A recent article in Bank Systems Technology highlights how much ATMs have changed since they were first introduced back in 1966.

ATMs originally provided a quick, easy way to get cash. In recent years, banks have started greatly expanding what a customer can do at the ATM. Many have introduced remote check imaging that allows customers to deposit checks at the ATM.

Now retail banks are pushing ATM innovation even further. This article mentions some banks have started using video conferencing at the ATM that allows customers to talk to a call center representative after hours. While this type of innovation has the potential to improve performance and customer satisfaction, banks need to make sure they are investing in a targeted, smart way and need to understand the best cross-channel strategy to make this innovation successful. (more…)

Citi Spends Big on Branch Remodels

May 20th, 2010 | Posted by Jatin Atre in Uncategorized - (Comments Off on Citi Spends Big on Branch Remodels)

Citi has big plans for branch remodels. US Banker wrote about Citi’s major investment in its branches and how it plans to change the ways customers use the branch: “The company wants to transform its retail outlets to let customers handle much of their banking needs on their own, using self-service processes that have been perfected online.”

This broad effort will include enlarging the lobby, investing in new technology, and merging different channels to make banking more seamless.

Branch remodels are an important part of doing business to maintain the brand, stay competitive, and adapt to new ways of doing business. However, remodels require a huge investment, and banks often don’t understand the return on that investment and how to best target spend. (more…)

Too Little, Too Late: Missing the Boat on Overdraft Regulation

April 29th, 2010 | Posted by Jatin Atre in Uncategorized - (Comments Off on Too Little, Too Late: Missing the Boat on Overdraft Regulation)

Overdraft regulation is a sweeping change that puts a significant part of revenue at risk.  It is therefore shocking that a Moebs survey cited in American Banker found that only 1 in 9 of banks have started preparing for this change.

The majority of banks will find themselves unprepared when regulation changes take effect on July 1st.  Banks need to act immediately to determine how they will respond to this regulation. (more…)

The Battle with Online Banks Heats Up

April 26th, 2010 | Posted by Patrick O'Reilly in Uncategorized - (Comments Off on The Battle with Online Banks Heats Up)

Consumers are primarily looking for three things in their bank – convenience, competitive rates, and low fees.  As discussed in a recent Wall Street Journal article, online banks are winning customers over with their low fees and are making strides in becoming more convenient and offering attractive interest rates.  Traditional banks should be worried.

 The main appeal of online banks has historically been their customer-friendly fee structure.  Most have no monthly fees, pay ATM fees for customers, and have low or no overdraft fees.  As a result, many were enticed to switch to online banks and “could trim hundreds of dollars a year in fees.” (more…)

Intelligent ATMs Blur the Lines between Channels

March 23rd, 2010 | Posted by Will Weidman in Uncategorized - (Comments Off on Intelligent ATMs Blur the Lines between Channels)

New ATMs can now do more than just withdraw cash. Many ATMs take deposits, often without requiring an envelope. This increasing range of services is blurring the line between tellers and ATMs.

Now leading banks are taking it even further: American Banker predicts, “Integrating bank machines more closely with other channels – including the branch, call centers, online, and mobile – may be the next step in further broadening use of ATMs.” (more…)

Bank of America’s Shocking Announcement

March 18th, 2010 | Posted by Jarred Brown in Uncategorized - (Comments Off on Bank of America’s Shocking Announcement)

Many banks have acted in anticipation of overdraft legislation that takes effect on July 1st, but Bank of America’s response was the most dramatic yet. Bank of America announced that it would eliminate overdraft fees for purchases made with debit cards. The New York Times highlighted that this “could cost the bank tens of millions a year in revenue and put pressure on other banks to do the same.”

Will this strategy improve customer satisfaction and, more importantly, will this translate to increased retention, balances, and spread revenue? Bank of America will need to determine if these benefits outweigh the lost fee revenue. (more…)

Making Tough Decisions after an Acquisition

March 15th, 2010 | Posted by Patrick O'Reilly in Uncategorized - (Comments Off on Making Tough Decisions after an Acquisition)

Many banks have made acquisitions recently, and with acquisitions come rationalization of the network and integration of the customers at the acquired bank. A major acquisition and the subsequent integration is a pivotal event, and decisions made can significantly impact the success of the acquisition.

The first key question banks face after an acquisition is which branches to close or consolidate. This process is often straightforward at the start. Some branches may need to be closed to meet regulatory hurdles. If the acquired bank is in overlapping markets, there will also be branches in close proximity that can be consolidated.

But soon the right decisions start getting less clear. A recent article in the Wall Street Journal reports that this is the first year since at least 2002 that the number of bank branches will decline. This is often driven by closing “overlapping branches” after an acquisition, but banks are also “trying to zero in more aggressively on the most profitable locations in areas that generate the most deposits.”

While it is clear which branches are outperforming, it is extremely difficult to understand what will happen when a less profitable branch nearby is closed. The impact of closing a branch is influenced by countless factors: distance to the nearby branch, competitive landscape, demographics of the population, customer loyalty, and so on. This information can be combined in a predictive model that will calculate the impact of closing a branch and identify profitable opportunities. This can prove difficult in practice, but getting it right can make branch closure massively more profitable. (more…)