Jim Marous is a direct marketing strategist and senior vice president of corporate development for the direct and digital marketing agency New Control, where he focuses on bank marketing. He specializes in creating innovative, multichannel marketing solutions that drive revenue through customer acquisition, engagement, expanding share of wallet and retention. He is a frequent industry speaker and author of the award-winning Bank Marketing Strategy blog. He can also be followed on Twitter and LinkedIn.
What sort of changes are banks being forced to make due to changing regulations? What processes have gotten harder? What requires more paperwork or oversight/audit capability?
The majority of recent regulations were intended to protect the consumer and help community banks. However, most would agree that these regulations have not had the desired impact. While the intention of the overdraft and interchange income regulations was to reduce consumer costs, consumers have yet to realize any tangible monetary benefits, and the entire banking industry saw non-interest income drop significantly. In addition, compliance costs skyrocketed as banks of all sizes have had to increase documentation, respond to CFPB [the Consumer Financial Protection Board, set up in 2010 to help Americans better understand financial products and services] inquiries and monitor processes that the back office of most organizations were ill-equipped to support. To cover these added costs, many financial institutions have had to cut back across the board and reduce planned investments in improved systems and infrastructure that eventually will affect the consumer.
What processes in general take the most time or are the most paper-intensive?
As with most industries, banking is trying to build digital alternatives for most historically paper-based functions to reduce costs and improve the customer experience. The challenge is that back office systems are still siloed, with data and functionality that has a foundation in a branch-based, product-centric world. These legacy systems make it increasingly difficult to move from paper to clicks and from product- to relationship-based customer views without replicating some of the antiquated processes from the past.
The result is a less-than-stellar customer experience compared to industries that were formed in the digital age. This disruption has also spawned a new form of function-based digital competitor that can provide merchant services (Square), payment services (PayPal, Google, etc.), depository services (Bluebird, Moven, Simple, GoBank) and even P2P lending services more efficiently and effectively than traditional financial institutions.
What are the biggest challenges facing banks today?
Outside of the revenue/cost dilemma I just mentioned is the channel migration that has occurred due to the rapid acceptance of intelligent mobile devices. Unlike any channel migration in the past, the acceptance and use of mobile devices for basic banking transactions is taxing both the back office and customer-facing components of banking.
While the rapid increase of digital transactions has not been offset by a similar decrease in branch-based transactions, the functionality (and structure) of the corner branch bank is being analyzed due to the high cost of supporting a vast branch network. At the same time, differentiation of banks is occurring at a breakneck speed as new banking apps are developed that address the needs of the new mobile consumer. Beyond supporting simple banking transactions, financial institutions also need to address a new buying process that begins online and may not reach the branch until the point of purchase, if at all. The new sales funnel is requiring banks to build new systems and processes to replicate the branch sales person.
On the horizon is the challenge of a new payments process, which has already affected the use of checks. While the players, technology and even the currency of the future has not been defined, leading banks need to play “payments roulette,” placing multiple bets on different combinations of players and technology to avoid being left behind when the marketplace settles. While there will be investments that don't pan out in the payments space, sitting on the sideline is not an option for those financial institutions that want to survive.
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