Actionable Insights From APT's Financial Services Practice

Make Effective Use of Outsourcing

August 4th, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on Make Effective Use of Outsourcing)

Firms have questioned recently whether they’ve taken outsourcing too far.  To quote the Economist, “Service companies, for example, contract out customer complaints to foreign call centres and then wonder why their customers hate them.”   

Sound familiar?  At APT, we’ve helped banks work through understanding this issue.  While the cost savings of outsourcing customer calls tend to be clear, whether there is a decline in cross sell revenue, customer satisfaction, or retention is less so. 

The magnitude of this impact varies by type of customer and type of call.  It is important to look back and assess the impact of outsourcing and develop an optimal strategy for each customer type and call type.  This can allow banks to effectively use outsourcing to maximize profits and minimize any impact to customer satisfaction.

More Banks Hopping on the Cost Cutting Bandwagon

July 25th, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on More Banks Hopping on the Cost Cutting Bandwagon)

The Wall Street Journal recently reported an increasing effort across banks to cut costs amidst declining loan volumes and the effect of Durbin and other regulations.  This is of course a reasonable and necessary response to the challenging external environment.  The challenge lies in understanding how deep to cut before the cost cutting does more long term harm than it’s worth. 

It can only take one interaction with an overwhelmed teller or one call with a 15 minute hold to lose a customer’s support.  Banks have the data and should be able to know in advance what will happen if they cut various customer facing functions, or even entire branches.  If they look, what they should see is that the customer sensitivity to these pull backs vary greatly by channel, by customer type, and by geography, but these variations are also predictable.   Bank should know where the low hanging fruit is and be to know in advance where and how deep they can cut with minimal negative customer response.

Increasing Innovation at Banks

July 14th, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on Increasing Innovation at Banks)

Banking Strategies recently published an article titled “Why Banks Struggle with Innovation.”  The article contends that banking is one of the least innovative industries today.  From our experience, we agree that many banks struggle to truly innovate and are behind the curve relative to other industries such as retail.

This article contends that there are two problems – “The first is: how to measure the business value of innovation. And the second is: we want to innovate, but have to choose something easy.” (more…)

Will You Benefit from Increased Transparency Around Fees?

July 5th, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on Will You Benefit from Increased Transparency Around Fees?)

The majority of financial institutions are increasing fees to make up for lost revenue due to increased regulation.  Unsurprisingly, this has taken a toll on customer satisfaction. 

An American Banker article detailed a survey of brokerage customers by J.D. Power that showed “a significant decline – down to 703 points from 733 points in 2010 – in overall satisfaction.” However, the lower customer satisfaction was not uniform, and some institutions did perform very well. (more…)

The Value of Being Channel “Agnostic”

July 1st, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on The Value of Being Channel “Agnostic”)

The Economist recently published an article on retail banking called the Road to Agnosticism about the growth of internet and mobile banking and the evolving nature of the branch.  The article discussed the divergent strategy banks are taking regarding their branch channel as it co-exists with the more emergent channels. 

We think branch agnosticism is a great term and should be the goal for every bank.  Banks should be focused solely on maximizing profits and customer satisfaction with an agnostic perspective on the channel mix that accomplishes this.  (more…)

Should Banks Scale Back Marketing Spend?

June 1st, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on Should Banks Scale Back Marketing Spend?)

American Banker  recently reported that many banks have been scaling back marketing spend, due in large part to “mounting pressure to cut costs because the economy is not recovering fast enough.”  As the article highlights, reducing marketing spend is one of the easiest ways to cut costs.  However, doing so can also potentially have significant effects on future growth.

As tempting as it is to cut such spending in a tough environment, it is imperative to make an informed decision on the right level of marketing spend.  (more…)

Chase Rolls Back $5 ATM Fees

May 18th, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on Chase Rolls Back $5 ATM Fees)

JP Morgan Chase recently announced that it is ending its test of $4 and $5 ATM fees in select markets.  Most banks currently charge $3; Chase decided to push the envelope, in part to find ways to make up for lower fee income due to increased regulation.  Chase reported that ATM transactions dropped too significantly to continue pursuing the strategy.

While some may view this as a failure at first glance, it is exactly the opposite.  Consumers have broadly accepted $3 ATM fees, and since Chase customers don’t pay fees at in-network ATMs, there was no risk of losing current customers.  A $4 ATM fee represents a 33% increase from current levels, meaning that transactions from non-customers would have to drastically decline to result in less revenue. (more…)

B of A Considers Bringing Back Overdraft Protection

May 13th, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on B of A Considers Bringing Back Overdraft Protection)

Last March, Bank of America decided to get rid of overdraft protection.  The changes to Regulation E won’t take effect until July and only required that customers opt-in to overdraft protection, but Bank of America felt that removing overdraft protection was better aligned with what customers wanted.

A Bank Technology News article reports that B of A is considering a change to this policy that would give customers the ability to respond to a text message and allow overdraft coverage for a particular transaction, as customers are now responding that they would like some version of overdraft protection and would like “more options and more control.” (more…)

How to Drive a 5% Improvement in Performance

May 6th, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on How to Drive a 5% Improvement in Performance)

Businesses have huge amounts of data available to them.  A recent New York Times article looks at whether that data actually helps companies make smarter decisions and drive value. 

The article cites a study by two professors from the Wharton School, which found that companies “that adopted ‘data-driven decision making’ achieved productivity that was 5 to 6 percent higher than could be explained by other factors.”  That level of performance increase is massive and would provide a significant advantage over competitors.    (more…)

Using Cross-Sell to Make Low Margin Loans Profitable

April 29th, 2011 | Posted by Will Weidman in Uncategorized - (Comments Off on Using Cross-Sell to Make Low Margin Loans Profitable)

Many banks are offering attractive loan pricing to try to gain market share.  American Banker recently published an article titled “Sacrificing Spread to Get Loans in the Door.”  Since loan demand is still weak, banks have felt the need to use low prices to maintain volume.

However, American Banker also reports that companies “are seeing little payoff” from the approach so far.  To make it work, banks need to turn those new, low-margin loans into a larger relationship.  Banks need to actively cross-sell new loan customers during the onboarding process. (more…)