It has been an another amazing year for Bank Marketing Strategy in 2013. The blog was named a top financial industry blog for the second straight year by The Financial Brand and bank and credit union industry followers viewed articles more than 600,000 times during the year.

But which of my 72 posts in 2013 were the most popular? Based on readership, it looks like posts dealing with banking strategies, mobile banking, new competition, and distribution topped the list over the past twelve months. Readers also read my crowdsourcing posts in record number, where dozens of global industry leaders contributed their insights.

Below are this year's top 10 articles with links to each post.

Banking Leaders Predict Major 2013 Trends

Moven: From Mobile Banking to Mobile Money

Curiosity about new financial industry players like Moven, Simple, GoBank and new product introductions like Bluebird from American Express continued to generate a large number of readers in 2013.

While these mobile-first banks may have been ahead of their times a couple years ago, much of their vision of simplicity, an improved user experience and integrated personal financial management tools are quickly becoming table stakes in the battle for the mobile banking customer. This post illustrated how Moven continues to be one of the leaders in being able to leverage the power of the smartphone as a payment device with the ability to provide immediate feedback with every spending decision.

Banking Leaders Discuss 2014 Strategic Planning Priorities

9 Ways Marketing Can Help Acquire New Mobile Banking Customers

Top 10 Retail Banking Trends and Predictions for 2014

Building a Winning Mobile Banking Strategy

From Passbook to Mobile: The Evolution of the Bank Account

5 Bank Marketing Strategy 'Quick Wins'

Will The Power of Mobile Make Bank Branches Disappear?

Migrating Customers to Digital Channels

Demographics No Longer Effective For Financial Direct Marketing

It's time for banks and credit unions to consider the potential of providing mobile banking customers single-click live customer support similar to Amazon's Mayday button that is embedded on the latest Kindle Fire HDX tablets.

Similar to a virtual version of Apple's store-based Genius Bar, without needing to wait in line or leave your house, a banking version of Mayday could provide both basic customer support as well as specialized or advisory services that could revolutionize both mobile and online banking.

For the past three years, I have published an article on resolutions bank and credit union marketers should make for the upcoming year. While these posts have always been extremely popular and well read, many marketers still have difficulty achieving some of the most important resolutions.

Despite this lack of success by some, I am again providing suggested resolutions for financial marketers since research shows that people who make resolutions are ten times more likely to attain their goals.

When I published my first financial marketing resolution post in 2011(Ten Bank Marketer Resolutions for 2011), the primary emphasis was on replacing lost fee income caused by the Card Act, Reg. E and the Durbin Amendment. Most of the other resolutions addressed ways to either generate new revenues or reduce costs. I did discuss the need to test social media marketing, deliver on the mobile banking promise and reconfigure the branch model, but these were not the highest priorities in 2011.

My resolution post for 2012 (10 Resolutions Bank Marketers Can't Ignore in 2012) enlisted the support of more than 20 global banking industry leaders to help develop suggested strategies for the upcoming year. While the focus of many of the resolutions were similar to the prior year (communication channel mix, customer centricity, social media testing and building share of wallet), discussion expanded to include the importance of leveraging big data and embracing innovation.

As with any list of resolutions, last year's banking industry leader crowdsourcing post (22 Industry Leaders Provide New Years Resolutions for Bank Marketers) included several resolutions from prior years that still presented a challenge, such as enhancing the customer experience, improving measurement of results, integrating the mobile channel and continuing to innovate. The major difference last year was the increasing importance of focus and grabbing the lower hanging fruit due to all of the distractions caused by new regulations and compliance initiatives.

This year, I again collected ideas from some of the most prominent names in the banking industry in the development of my top resolutions for financial marketers. I also researched trends in other industries that are served by my firm, New Control. While some of the suggested resolutions are similar to those in the past, the impact of digital shopping, big data, the mobile channel and a contextual customer experience is evident.


Resolutions are intended to represent major transformational shifts in behavior that will impact personal or professional success in the future. With that in mind, the following resolutions are what some of the best global marketers believe are important for financial institution marketers in 2014.

1. I will move some budget from offline channels to digital channels.

With limited budgets and reduced response rates for almost all traditional marketing channels, there has never been a greater need to optimize marketing spend for bank and credit union marketers. One way to improve results is to supplement your investment in offline channels like direct mail, email and mass media with online tools that can improve results while decreasing costs.

One highly effective way to take advantage of the shift in the consumer's purchase funnel, where they begin their shopping experience online as opposed to in the branch, is to leverage digital retargeting. First discussed in a Bank Marketing Strategy article entitled, 'Banks Include Retargeting as Part of Digital Marketing Strategy' and also written about in a guest post for The Financial Brand, retargeting allows a financial marketer to improve the results of traditional marketing by reaching customers and prospects across their digital footprint in real time as they search the web on their computer or mobile device.

Providing additional touches at a fraction of the cost of traditional media, retargeting allows financial marketers to improve the results of direct mail acquisition or cross-sell campaigns, email programs, social media initiatives or other digital marketing programs while also reaching those prospects and customers who visit your web site or do searches in the financial services category.

While not stopping traditional direct mailings, customers of New Control have moved as much as half of their direct marketing budget to digital channels for one reason . . . it works in conjunction with offline media. That is why this is the first resolution for financial marketers in 2014.

2. I will engage with my customers on mobile channels. 

While referenced in previous resolution posts, the need to engage customers on both web and mobile channels has usually been more talk than action. Another relatively inexpensive initiative for bank and credit union marketers, the need to build engagement and sales across mobile touchpoints is akin to the first resolution regarding retargeting. 

Financial marketers need to leverage the mobile banking platform they already control to reach out to customers with contextual offers that reflect their current relationship, transactional behavior and potentially even their location. With the advanced tools and technologies available, banks and credit unions are in a position to integrate highly personalized offers within mobile banking applications that reflect the next most likely product or service needed by a customer.

As discussed in my post entitled, 'Banks Accelerate Mobile Banking Innovation', the most progressive banks are already monetizing their mobile channel by including custom product offers within their mobile banking application. In 2014, we will begin to see many more financial institutions enhance their merchant funded reward programs by taking advantage of location optimized offers that reflect both the customer's buying behavior as well as their specific location. 

3. I won't get distracted by 'big data'.

Thankfully, much of the hype has died down over the past 12 months, but there are still those who want to chase the next shiny object around big data. The key for 2014 is to capitalize on the ever growing silo of data already available within your organization. Sometimes referred to as structured data, this includes customer demographics, product ownership insight, transactional data, channel usage behavior as well as digital and social interactions with your organization.

In addition to narrowing the scope of data to more easily accessible insights within your firewalls, the importance of moving from data manipulation and reporting to data usage and application has never been more important. As I mentioned in my BankDirector.Com article entitled, 'When It Comes to Big Data, Start Small', competitive advantage is achievable through the better use of data in the development of lifestage trigger cross-sell programs, optimal branch configuration, pricing decisions and risk and fraud monitoring.

In my travels, I have seen that only the very largest of financial institutions are effectively using unstructured (big) data in the development and implementation of marketing programs. For the rest of us, it is better to focus on using the data at our fingertips to improve targeting, communicating, building offers and measurement of results on a real-time (vs. campaign-based) basis.

4. I will innovate through simplification.

According to Siegel + Gale's Fourth Annual Brand Simplicity Index, 75% of customers will recommend brands that provide a simple experience and use simple communications. In other words, if you offer products and services that make it easy to do business with you, your customers will spread the word.

Unfortunately, banks and credit unions sometimes equate innovation with 'adding on new bells and whistles'. Instead, 2014 should be the year we eliminate steps, simplify communication, and even simplify processes within your organization that can foster simplification and innovation.

Over the past few months, I referenced important innovations that simplified the customer experience when I reviewed the way Mitek Systems has leveraged the picture taking capability of a smartphone to remove steps from depositing checks, opening an account, transferring a credit card balance or completing forms ('Banking Innovation for the Fat-Fingered'). I also discussed research by A.T. Kearney and how Fifth Third increased sales and revenue by reducing their deposit services portfolio from 42 to 8 products ('Bank Product Proliferation: Too Much of a Good Thing'). 

Innovating through simplification is not simple. It just takes a dedication to stripping away legacy steps and messages, leaving behind only key elements. But it is a necessary role for financial CMOs in the future as we try to respond to the needs of the digital consumer.

5. I will maximize the value of my current customers.

Similar to the resolutions that most people have around losing weight or getting fit, the financial marketing resolution of maximizing the value of current customers needs to appear on each year's list of resolutions. This is not because bank and credit union marketers don't already make attempts in this area. It is because so many of the basic tenets of success are either missed or not allocated the appropriate human and/or financial resources.

In 2010, 2011, 2012 and again in 2013, I provided the business case and steps required to implement a successful new customer onboarding program. In the next few weeks, I will update some of my recommendations to include digital and mobile components that can improve the important welcome process. Despite this emphasis (and documented financial success in the marketplace), more than half of the financial institutions still haven't introduced a multitouch, multichannel onboarding program that encourages engagement in the first 90 days of the relationship.

In addition, many financial institutions are not leveraging the customer insight they have at their disposal to build a real-time cross-sell process that is based on customer insight as opposed to product goals. It's time to break down the product silos at your organization and use trigger marketing to communicate to customers when their needs are highest as opposed to when your institution's needs are highest.

6. I will get actively involved in branch transformation efforts.

As noted in my Top 10 Retail Banking Trends and Predictions for 2014, while we may not be moving to a branchless banking environment anytime soon, it is clear we are moving to a 'less-branch' distribution structure due to the rapid acceptance of online and mobile banking and the resultant reduction in branch-based transactions.

Bank and credit union marketers may or may not be at the table during the discussions around branch transformation, but the outcome of these discussions will definitely impact customer communications. So make a resolution to get involved.

In the future, a customer will engage with our bank or credit union using multiple channels based on their needs and channel preferences. As noted in two 2013 posts entitled, 'Migrating Banking Customers to Digital Channels' and 'Rethinking the Multichannel Banking Experience', it is not a good strategy to 'force' a customer to use a specific channel. It is also clear that as a customer uses multiple channels (including digital channels within a physical branch), they will expect marketing communications to be consistent across channels.

Its time to become a holistic financial marketer, moving from developing programs for specific channels to supporting real-time marketing experience across all channels the customer may use.

7. I will increase my use of email.

I realize that my resolution of moving budget from offline channels like direct mail, email, and other traditional channels to digital channels may sound counter to a resolution of increasing email, but it comes down to segmenting lists and improving the content of email, resulting in better leads. As one of the most important tactics in achieving the share of wallet goal in resolution 5, personalized emails can improve open rates by 14% and conversion rates by 10% according to recent research by Hubspot.

Despite Google's assault on email last year, the power of personalization, improved segmentation, linked videos ('Improving Bank Onboarding, Cross-Selling and Retention With Personalized Video') and improved response tools positions email as one of the strongest marketing tools for communicating to current customers.

It is time for financial marketing CMOs to demand the ability to effectively leverage the email channel at those institutions that have either restricted or severely limited the use of this channel.

8. I will assume the role of Chief Experience Officer.

At the end of the day, all of the above resolutions will fail if your customer has a poor experience when engaging with your bank or credit union. Unfortunately, as technology has advanced, communication channels have multiplied and the customer has assumed control of the sales and engagement processes, the ability to 'manage' the customer experience is no longer viable. Instead, it becomes the CMOs role (or a designated team) to view your organization from the customer's perspective.

The good news is that the customer has the ability to share their (good or bad) feelings about your organization whenever they desire through a vast array of social channels or using various channels we have developed for transacting and communicating. The bad news is that most of this sharing is now done in public where the interaction can be viewed by hundreds of thousands of other unrelated people.

While the ultimate responsibility for the customer experience needs to reside in one place, the ongoing responsibility needs to be shared with everyone within the organization. When everyone feels empowered to 'make things right' with the customer, the customer usually wins.

My Resolution

Resolutions are usually only successful when they are embraced and measured. I only scratched the surface on resolutions I believe are important for 2014. I may have listed too many and I am sure I missed several.

The key is to make whatever resolutions you set central to what you want to achieve in the new year. In the meantime, I will be collecting research and insights on all of the resolutions above to help readers achieve the above goals using the experiences and findings of others.

My resolution (beyond losing weight and becoming more fit) is:

I will be the 'go to' resource needed by C-level executives and their teams for insights into the constantly changing retail banking marketplace.

Good luck on your resolutions in 2014 and feel free to provide input into how I am doing on my resolution.

Additional Resources

It's time to shut down the mobile banking operations at most banks. I say this after watching the development of mobile banking sites worldwide and realizing that most traditional banks don't understand the needs of the consumers they serve or the competition they face.

Mobile banking should not be a delivery channel for branch-based banking services. It should be an entirely different contextual experience, with a clean design, simple interface and an engaging platform to manage money. Unfortunately, most mobile banking sites look like miniaturized bank websites as opposed to money management applications. This is a problem as we try to serve Customer 3.0.

With a significantly lower cost structure, the emergence of pure-play mobile banks feels like a similar trend in the 1990s when direct online banks were in vogue. Some of these banks still exist such as First Direct and ING overseas and Capital One 360 (originally ING Direct US), USAA, Ally and Discover Bank in the U.S.

While many traditional banks have imitated some of the direct bank advantages, deposits at the top four direct banks have grown at three times the industry average according to TNS Global. Interestingly, while once having a pricing advantage compared to traditional banks, consumers also rate these direct organizations as 'more convenient' than traditional bricks and mortar banks.

The question is, will traditional banks ever fully embrace the process of managing money through mobile as opposed to simply providing mobile access to accounts? Will they lose the 'convenience advantage' with the mobile channel also?

The Soon Difference

Comparison between sign-in page of Soon and Wells Fargo Opening an account is as simple as snapping a picture. No more long forms or extended account opening process. With Soon, a new customer simply takes a picture of their identification, proof of residence (a bill sent to their home) and a evidentiary signature and the account is opened. Opening of associated savings account and a credit card is just as easy. Once an account is opened, the experience leverages many of the unique benefits of a pure-play mobile application. If the customer wants to save for a project or future expenditure, Soon uses a 'nudge' behavioral science approach, which encourages a customer to behave responsibly with encouragement provided along the way. Not only does the application help a customer save, but it looks at future planned expenses and upcoming revenue to determine if a current purchase should be made. The dynamic vision of providing a projection of purchasing power in real time is similar to the GoBank 'fortune teller' and Simple's Safe-to-Spend features and very unlike a traditional mobile banking application that simply shows balances based on cleared items. An analogy would be the difference between looking out a front window to the future as opposed to the rearview mirror.

As opposed to simply a current balance, Soon provides a Safe-to-Spend value

Transactions can be associated with pictures, comments and even emotions

P2P is made easy with the PayPal integration

Mobile-First Target Audience

The Reinvention of Mobile Banking

Expectations from today's consumer are outpacing the ability for banks and credit unions to keep up. The digital consumer is hyper-connected, highly informed and demands a highly personalized approach with regards to communication, product development and customer service.

On January 13, 2014, I was the featured guest for a global Twitter chat hosted by @IBMbigdata entitled, "Customer Experience Innovation in Banking". During the hour, there were 158 participants, 1,095 posts and over 6M impressions!

A1: Biggest challenge for traditional banks is . . . tradition. Legacy systems, processes and mindsets #CXO
— Jim Marous (@JimMarous) January 13, 2014

A1: #CXO Customers expect online commerce--facilitated by e-banking--to become core of all transactions.
— jameskobielus (@jameskobielus) January 13, 2014

Not only seamless online transactions but also seamless online SECURITY. #cxo A1
— Lois Martin (@LoisMarketing) January 13, 2014

Q2: How can FIs improve the customer experience as customers move from the branch to digital channels?

In a post-crisis financial environment, customers are demanding solutions to satisfy their unique needs for money management. Additionally, they are showing preference for simpler products where benefits and risks are easy to understand and the feeling of control over the product increases their loyalty.

Therefore, banks and credit unions are facing a crossroads: acknowledge and embrace the demands of customers wanting more personalized and simplified services or try to push customers into a dated mass production model.

From Cookie Cutter to Papering Over the Cracks 

• The number of new vehicle models has risen from 140 to 270.
• The number of TV channels has gone from 5 to over 200.
• The U.S. market makes available to consumers more than 145 over-the-counter pain relievers.
• There are more than 7,500 different prescription drugs.
• Consumers can find over 3,000 types of beers and 50 different brands of bottled water in the market place.
• There are more than 350 breakfast cereals. 

A lot has changed since Henry Ford and the assembly line production of the Model T and I am comfortable in saying that the mass-production model will no longer satisfy the overall customer demand. While customization is a recognized strategy in many business-to-business models, today’s retail consumer markets are also motivating companies to increasingly offer personalized solutions.

“Brand Keys, a research firm that studies customer loyalty, found that personalization is 30 percent of what draws a person to a brand today, as opposed to only six percent in 1997.”

Banking is Far From Personalized

In market research conducted by GfK which obtained results from consumers with over $10,000 in deposits, over 40% surveyed said they would be more inclined to continue their relationship with their primary bank if they offered products where the economics of the product could be personalized.

An example of a degree of personalization is Spanish Novagalicia´s Personalized Deposit:It lets the depositor make a key decision such as the amount to invest, the interest to earn and the deposit term. The customer can decide the interest rate he wants to earn, how much to invest and for how long just by introducing the number. Once the numbers are introduced, the customer will be offered a variety of mixed deposits in which a part goes to a time saving and another part goes to an investment fund. A higher interest rate, leads to a larger allocation to investment funds and a lower portion in the fixed term interest deposit. This new combined deposit is a big step in the right direction towards personalization.

Another good example of applying the ideas of personalization to the banking industry is Turkey’s Garanti Bank with its ‘Flexi Card’. It lets the cardholder make a few key decisions, allowing them to set over ten parameters. When applying for a card, customers can manipulate variables like reward rates and types, interest rate and card fee. The rewards system is especially flexible, not only letting customers determine reward ratio and type (cash or points), but also enabling them to choose which payments will earn them extra rewards: whether it’s broad categories like restaurants, or specific stores like Zara. 

Interest rate, bonus rate and card fees are selected by sliding bars that render various combinations of rates and fees. Card fees, for example, can be pushed back to zero by committing to a monthly spending minimum. A lower interest rate leads to a lower bonus rate, etc. Lastly, after making serious decisions about financial terms, customers can design their own card, choosing from different colors and a gallery of images, or uploading their own image. There’s even the option of picking a vertical card, which is a world’s first for Visa. 

With its flexi Card Garanti has been able to offer added value to their customers and adjust credit card to each customers´ lifestyle and needs.

New Generations

Why Personalize?

• Personalization will improve customer satisfaction, a primary driver of loyalty. Services that meet customers’ specific needs should naturally be more satisfactory than a one-size-fits-all offering.
• Personalized services will help the customer believe a firm is appreciative towards him or her, increasing trust, another loyalty driver. Additionally, trust is also impacted when the customer can create their own product with a more transparent risk/reward understanding.
• Personalization also increases stickiness as consumers will view these services as difficult to replace with another provider. Once a personalized product has been created at their existing FI, customers are less willing to try and replicate the solution at another institution.

“We need to create a positive interaction dialog with customers. Customers do not want to be sold to, customers want to buy” - Howard Putnam, ex-CEO of Southwest Airlines

• Retain existing customers through added value perception and brand strength.
• Attract new customers as word of mouth marketing is a highly effective tool and satisfied customers will recommend a preferred FI.
• Better understand customer demands and needs by collecting and aggregating information from a segment of customers (Big Data). As a result, new products for the mass market segment can be planned more efficiently utilizing this non-biased research.

In market research conducted by GfK which obtained results from consumers with over $10,000 in savings products over 1 in 5 savers said they would switch their primary banking relationship in order to access personalized savings products.

Risks and Barriers

• Production Cost: If an automated process is not available and utilized, personalization will be more expensive than mass production. This is why many FIs have limited personalization to only the highest value customer segment levels.
• Timely Delivery: It is necessary to have a flexible system that allows FIs to create new products quickly and without high upfront costs.

Final Thoughts

The choice at this crossroads seems clear but let us wait to see which road the financial institutions take.

About the Author:

Matthew Lifshotz is the director of global business development for financial services and technology for Choice Financial Solutions.

Before this, Lifshotz was a wealth advisor at Merrill Lynch and led business development efforts for the Financial Campus division of SmartPros. Today, he works with banks to develop innovative product solutions to drive profitability and improve competitive positioning.

Additional Resources and References

Banks and credit unions are taking differing approaches to dealing with the recent security breach involving credit cards and debit cards used at Target stores over the holidays. Some banks are identifying compromised debit or credit cards and issuing fresh cards immediately while other banks are taking a watch-and-wait stance, taking action on a case-by-case basis if fraud is detected.

Either way, many banks are using a proactive, multichannel approach for keeping customers informed which can build much sought after loyalty and trust.

In what may turn out to be the largest data breach of its kind, Target reported in December that hackers had stolen credit card and debit card information connected to as many as 40 million customers who shopped at Target stores between Nov. 27 and Dec. 15. Since then, Target has issued additional information that another 70 million customers may have had personal information compromised, including names, phone numbers and email addresses. 

"In today's environment, it's not a matter of if a data breach will occur, but when it will occur, and how well you respond. Do everything you can to prevent data breaches, but also fully plan out how you will respond if a breach occurs. Today's media and consumer demands that two-pronged approach." - Brian Lapidus, COO, Kroll Fraud Solutions 

"More than 55 percent of respondents said the notification about a data breach occurred more than one month after the incident, and more than 50 percent of respondents rated the timeliness, clarity and quality of the notification as either fair or poor."- The Consumer's Report on Data Breach Notification

The day after the initial reports surfaced, Target emailed millions of customers it thought were affected, and for whom it had email addresses. It has done the same for the additional customers it's now found to be involved. 

The company also created a dedicated page on its website for the data breach, including resources about identity theft and credit reports. Target has said that it plans to offer a year of free credit monitoring and identity theft protection to anyone who shopped in Target stores in the United States.  

Finally, Target also sent postal letters and posted a series of short YouTube videos to explain details around the security breach, what the company was doing about the situation, and a discount offer to customers. It also provided the first set of steps a customer could take to protect themselves and where they could go for additional information.

Target Letter to Customers

One of a series of YouTube videos from Target CEO to customers

Bank Communications

Consumers Credit Union Customer Communication (Dec. 19) Source: Competiscan

Chase and PNC Bank were also very quick to respond using email to inform customers that a data breach had occurred even though little or no detailed information was available at this time. Chase assured customers that they would monitor their accounts while PNC referenced their Security Assurance Pledge and linked to a continuously updated FAQ page.

Chase eMail Communication (Dec. 20) Source: Competiscan

PNC eMail Communication (Dec. 20) Source: Competiscan

Due to the sketchy information available during the first few days after the data breach was discovered and the need to proactively communicate to as many customers as possible, organizations like USAA, FirstMerit and Peoples United leveraged social media to help expand the scope of communication.

USAA Facebook Notification (Dec. 20) Source: Competiscan

FirstMerit Twitter Communication (Dec. 20) Source: Competiscan

People's United Twitter Communication (Dec. 20) Source: Competiscan

Chase made a rather dramatic move right before the holidays, limiting both purchase and ATM transactions at a time when customers were most likely to need access to funds for the holiday.

JPMorgan Chase was also the first major bank to announce a plan to ultimately replace millions of its 23 million debit cards. While not conducting a wholesale reissue of credit cards, which are harder to defraud quickly, the reissue of debit cards provided both a safety net for the bank as well as a bit of 'surprise and delight' to the customers who may have been worried about the risk of using their cards.

Chase eMail Communication (Dec. 23) Source: Competiscan

Citibank also recently announced plans to reissue all customer debit cards involved in the data breach at Target. The bank said it did not replace the debit cards sooner because it wanted to minimize disruptions during the holiday shopping season, according to a person briefed on the company’s decision who spoke on the condition of anonymity. It will begin sending out new cards soon. 

Citi’s move highlighted the potential for continuing damage to consumers, banks and Target as data stolen in the breach may keep leaking into the black market. It also provided some goodwill to customers that was beyond what Target was doing (free credit monitoring, etc.)

The major consumer banks have been taking slightly different approaches in their responses to the Target breach. The other three consumer banks among the nation’s five largest — Bank of America, Wells Fargo and U.S. Bank— have said they are carefully watching cards for signs of fraud, but they have not broadly reissued debit or credit cards.

Chase eMail Communication (Jan. 13) Source: Competiscan

Capital One eMail Communication (Jan. 14) Source: Competiscan

Additional communication beyond what Target did is important for customers since banks are generally responsible for charges made on stolen credit cards, but debit card users do not have the same protections and can be responsible for up to $500 in losses depending on when they report the fraud. 

"Sixty-Three percent of respondents said notification letters received after breaches offer no direction on the steps consumers should take to protect their personal information. Fifty-seven percent said they lost trust and confidence in the organization." - The Consumer's Report Card on Data Breach Notification

One of the clearest and most direct communications came from Discover Card, who replaced cards, provided very direct guidance as to what their customer can do to further protect themselves and provided a link for more information. 

Of all of the communication reviewed, Discover appeared to be the only communication that could be easily viewed and responded to via a mobile device. Seeing that recent research indicates that close to 50% of all emails are viewed on a mobile device, it would be wise for more institutions to take this into account as they develop email communications.

Discover Email Communication (Jan.10) Source: Competiscan

In recent years, banks have given customers more tools than ever to help monitor accounts. Many consumers monitor their transactions daily on their smart phones, even getting text alerts for transactions in almost real time. All these tools help manage and stop fraud before it gets to far out of control. Communications from banks and credit unions should include a reference to these tools for the next several months.

Keys to Data Breach Communication

There are a number of resources available to assist with communications to customers in the event of fraud or a data breach. Most of the professionals in the communications business agree on the key components of a good emergency communications plan. All of them also agree that good communications is not just a good protection against financial loss, but also provides the potential for goodwill and loyalty going forward if done well.

The keys are:

• Prepare in advance - Consider a data breach likely and plan accordingly, designating a breach response team and developing a comprehensive and detailed plan. According to the communications agency Media Logic, this plan should include:
• Contact information for key executives (and their assistants)
• Responsibility list (including identified official spokesperson and team heads)
• Social media resources and access credentials
• List of media contacts
• Style guide specific to breach communications
• Approved templates to provide a starting point

• Be accurate and timely - Speed is of utmost importance. Understand the details and scope of breach and identify all impacted customers while determining appropriate message.
• Keep message brief, but complete
• Avoid unnecessary information that could cloud the issue
• Keep message consistent across channels
• Remember foreign translations

• Keep communication lines open - In addition to direct communication to customers through direct mail and email, social channels can provide an excellent means to update customers on an ongoing basis. Allow for social sharing of updates.

• Be open, honest and transparent - In a data breach situation, the details are important. Communicate as thoroughly as possible:
• The cause, date(s) and extent of the occurrence
• Steps being taken to fix the problem and avoid a reoccurrence
• Be specific regarding the quantity of damage
• Provide resources (phone numbers, web addresses and links) so customers can find out more
• Continue the communication as more details emerge

• Provide next step solutions - Communicate remediation and/or mitigation processes and provide customers ways to feel more secure going forward.
• Make it easy to understand what you want them to do
• Provide reassurance if possible and if valid

In the case of the Target breach and any retail industry breach that may be uncovered in the future, the communication should not be a one and done thing. It should be ongoing as new information is uncovered and should assume the customer is looking for guidance and security on an ongoing basis.

Additional Resources

Responses and Resources Related to Target's Data Breach - Target Corporation Web Site

Initial Target Website Notice to Guests - Target Corporation Web Site

Letter From Target CEO Published in National Press - Target Corporation

Are You Breach Ready? What Financial Institutions Can Learn from Target’s Recent Data Loss - Media Logic (Jan. 2014)

First Email to Guests: 12/19/13 - Target Corporation

Email to Guests: 1/15/14 - Target Corporation 

INNOVATION 

Established by two former bankers, the Bank Innovators Council was developed to help financial institutions that may lack internal resources come together to brainstorm and test new ideas that could eventually be shared. Partnerships with Finovate, NextBank, BankersHub and Innovation Agency will hopefully provide additional momentum. 

By JP Nicols^®, founder and CEO of the research and innovation firm Clientific, a partner at Bank Solutions Group and co-founder of the Bank Innovators Council.

Why It’s Different Now

The Commodity Trap

• Business process knowledge and insights are widely distributed
• Manufacturing of products is moving producers with very low costs
• The shrinking amount of time a product lasts in the market before a new and improved one takes its place

The Collaborative Advantage

It’s Better Together

If you want to go quickly, you walk fast and you walk alone. But if you want to go far, walk with others.                  - African proverb

From the “I” Word to the “R” Word

Besides, we are a whole lot more fun than the business prevention department.

About the Author

JP Nicols, CFP^®is a former bank executive and the cofounder of the Bank Innovators Council, a membership organization that helps support, promote, and facilitate innovation within and amongst its member banks. His work has been featured in leading industry publications and on his blog at jpnicols.com

MOBILE STRATEGIES

The cellular company that promised to shake up the wireless industry, has now disrupted the banking industry by introducing a free way for customers (and non-customers) to keep money in a checking account, make direct and mobile deposits, pay bills and get fee-free ATM access to cash with a Visa debit card.

Not to be mistaken for the future Isis mobile wallet (backed by AT&T, Verizon and others), the T-Mobile Mobile Money solution is the latest in a wave of neobank competitors such as Simple, Moven, GoBank and Amex's Serve. The major difference is that this offering comes with a vast distribution network, an established customer base, significant marketing muscle and more.

1. T-Mobile Has an Established Customer Base

Source: T-Mobile Customer Mobile Money Web Page

Source: T-Mobile Mobile Money Web Page

“It’s ridiculous that families, especially those who can least afford it, have to pay so much for basic check cashing services that many of us take for granted. Mobile Money levels the playing field to put money back in consumers’ pockets for important things – like bills, groceries or vacations. The typical household using a check casher to cash their paychecks could save about $1,500 per year, and customers tired of getting hit with overdraft fees can switch and save an average of $225 a year.” - Mike Sievert, chief marketing officer for T-Mobile.

3. T-Mobile Understands Mobile Money

T-Mobile's Mobile Money has inked a deal with The Bancorp similar to its other private-label banking arrangements (including one done with Simple). The deal has The Bancorp using its bank charter to support T-Mobile’s new Mobile Money service that the company introduced. Like done with Simple, the agreement centers on a Visa prepaid card issued by The Bancorp and produced by Blackhawk Network Inc. but the Mobile Money product itself is definitely mobile-first.

It is assumed that the back office operations would be similar to what has been associated with Simple, eliminating much of the early testing and trial and error done by Simple and other earlier entrants. In addition, unlike the majority of the neobanks, T-Mobile made no mention of 'waiting lists' or a staged introduction.

As mentioned, in addition to the debit card, a customer can use their new Mobile Money app on an iPhone or Android smartphone to take photos of checks, make a deposit into an account, pay bills, add funds, view transactions, transfer funds, and find ATMs.

While there doesn't appear to be any ability to search or sort transactions, budget or access a 'safe-to-spend' functionality at this time, the app still appears to have the simplicity in design and ease of use associated with a neobank offering.

Some of the available screen shots appear below:

A drawback to T-Mobile’s service at this time is that it only lets you send money to other T-Mobile card holders and you’ll need to know their phone number and last four digits of their card number. While this may change in the future, it does limit the functionality compared to traditional banks.

4. T-Mobile Is An Aggressive Marketer

T-Mobile is anything but a wallflower in the mobile industry, so we should expect nothing less as they enter financial services. Known for their cheap rates, lack of binding contracts and aggressive marketing, even today's press release took on the highly competitive personality of T-Mobile's president and chief executive office, John Legere.

In fact, the headline of the press release read, "T-Mobile Frees Consumers From Outrageous Check Cashing Fees With Innovative New Smartphone Solution." My favorite quote in the press release was:

“We’ve already transformed how Americans use and pay for phones, tablets and wireless service; why stop there? Millions of Americans pay outrageous fees to check cashers, payday lenders and other predatory businesses – just for the right to use their own money. Mobile Money shifts the balance of power for T-Mobile customers and keeps more money in their pockets.” - John Legere, president and chief executive officer of T-Mobile

Not only should bankers expect a no holds barred, in your face, marketing campaign emphasizing T-Mobile's 'Un-Carrier' (or Un-Bank) theme and positioning banks as villains, we should expect a lot of money being allocated to this newest expansion of T-Mobile's business model. This is because success with their Mobile Money solution can expand their cellular customer base and can also position them advantageously for a future with Isis.

Finally, and potentially most important, T-Mobile owns a marketing channel . . . the phone. They have the ability to reach their entire customer base at a very low cost through the phones their customers already carry. While they need to be careful about any outbound effort, strong linked video content can help with the marketing efforts either through text or email messages.

5. T-Mobile Has A Physical Distribution Network

It is believed that many of the innovators in the mobile and prepaid space could be negatively impacted by the lack of a physical distribution network. While several may argue that physical presence should not be a major concern for a mobile-first offering, the fact that Mobile Money from T-Mobile is supported by a fee-free ATM network of more than 42,000 machines (compared to 18,000 Bank of America machines) and from 70,000 points of distribution (Bank of America has 6,100 offices) can't hurt.

Interestingly, while T-Mobile is making a big deal about their ATM network, Simple actually has more locations, with 55,000 Allpoint ATMs, the country’s largest surcharge-free network.

T-Mobile customers can take out cash through retailers, just like customers can now do with any bank debit card and can reload their account at any retailer that supports Reloadit, MoneyGram and Visa ReadyLink as well as at any T-Mobile store or at Safeway markets (other locations will become available).

6. Mobile Money Is Not Just For The Underbanked

Let's not lull ourselves into a state of complacency. While the format of the service offered by T-Mobile is structured as a prepaid card, customers who sign up for Mobile Money are essentially getting a traditional checking account.

Customers can have money deposited directly to their Mobile Money account or deposit checks by taking a picture with their smartphone. Mobile Money customers also get a Visa debit card that they can use to make purchases, pay bills or withdraw cash from a network of 42,000 ATMs scattered throughout the nation.

In other words, while the talk initially is that the product is for those who have been 'left behind by the banking system', the reality is that the target audience could expand well beyond it's already surprisingly large 'underbanked' base to include the digital natives that every bank wants to serve.

In an interview with John Adams from PaymentsSource's, Gareth Lodge, a senior analyst at Celent's banking group stated, "The U.S., for a country of its level of development, has a pretty high level of underbanking," Lodge says, adding the U.S. has an unbanked population of about 12%, compared to about 3% in the U.K. "When you add in the underbanked, the number for the U.S. is estimated to be nearly to 30%."

That said, T-Mobile noted that they did a pilot in Miami and saw better-than-expected success beyond the original target audience. While it was assumed prepaid customers would primarily be interested in Mobile Money, they were surprised to see 40 percent of the users were more credit-worthy post-paid customers.

How does a traditional bank open the doors to let the 'lower third' of their customers leave without having a large number of digital customers leave with them?

Source: T-Mobile Mobile Money Web Page

7. Timing

Finally, T-Mobile’s timing comes when trust in traditional banks is still low, consumers are becoming more digital and comfortable with their mobile devices, and when more and more innovators in the financial services space are finding better ways to do basic banking.

Companies like Square, PayPal, Google, the neobanks mentioned above and others have benefitted from banks and credit unions falling asleep at the wheel. As long as innovation and product development within traditional banks continues to lag, and there is a market for simplification and improved utilization of new technologies, more entrants will emerge nipping at the edges of what was once the domain of rather staid banks and credit unions.

Unfortunately, while many of these entrants were not considered formidable enough to capture the 'best' customers, some believe the proverbial horse is out of the barn and it may be difficult to reign the positioning of trusted financial advisor back again with many households. And, how easy will it be to win back customers lost to mobile-first players when a traditional bank's offering doesn't look or function the way a neobank's mobile banking does.

Note: If you want to 'kick the tires' of the new T-Mobile Mobile Money prepaid product, they are already available in participating T-Mobile retail locations and online. Beginning in February, they will also be available in Safeway stores in the United States.

Additional Resources

Can Carriers Do Prepaid Better Than Banks- PaymentsSource (Jan. 2014)

T-Mobile Picks Another Villain to Attack: Banks- Bloomberg Business Week (Jan. 2014)

T-Mobile: Great Move Into Banking - Tom Noyes Blog (Jan. 2014)

TechCrunch Neobank Comparison Chart

MOBILE STRATEGIES

According to a report in the Wall Street Journal, Apple is gearing up to roll out a new payments system for physical goods and services beyond the walls of it's Apple stores.

If true, Apple would leverage the iTunes payments system, credit card data already on file for more than a half million consumers, and recent patents to become a big player overnight.

How will banks or credit unions respond? 

Why would Apple enter the mobile payments battlefield?

First of all, mobile payments is BIG business. According to Forrester Research, 31% of US online consumers who own a mobile phone are interested in or already use mobile payments for in-store purchases, up from 18% in 2011. However, while 61% of US consumers have heard of a digital wallet, only 11% use one.

But that is expected to change. Americans are expected to spend $90 billion through mobile payments by 2017, up from $12.8 billion in 2012, according to Forrester.

Secondly, current payments infrastructure is outdated. As can be seen from the recent data hacking done at Target, Neiman Marcus, Michael's and probably elsewhere, debit and credit cards are inherently insecure. And since most cards in the U.S. still use outdated magnetic stripes as opposed to EMV technology, personal data is relatively easy to steal.

Thirdly, each card in your wallet represents access to an account without real time insight or interface. A mobile-first payment application similar to what is offered by progressive financial institutions like Moven, Simple, and several banks overseas is a much better way to make payments. They allow you to see what is happening with your account in real time, provide instantaneous receipts, allow for interactive money management and have the potential to be more secure.

Lastly, similar to what banks do today, processing payments with a mobile device could enable Apple to charge a nominal processing fee, but more importantly, gather deep payments and behavioral data from customers and build even more brand loyalty.

Apple Mobile Payment Advantages

• Credit Card Access: The company said last year it had 575 million registered users with its iTunes store and that the customer base was growing at a pace of 500,000 per day. In addition, it has sold roughly 375 million iPhones over the past five years and about 155 million iPads since its 2010 debut. As a result, the size of Apple's customer base easily eclipses both PayPal (137M active accounts) and Amazon (182M customers)

Source: Horace Dediu (@asymco)

• Trusted App Integration: Current iPhone apps already have a relatively seamless integration of contacts, payment options, loyalty applications as well as GPS functionality. Should Apple enter the payments battlefield, there is little doubt the customer experience would be priority one.

• Familiar Digital Payment Process: Similar to Amazon, the online and even the store-level mobile purchase process is familiar to the vast majority of Apple customers worldwide. The mobile payments learning curve is one of the hurdles with today's mobile payment solutions.

• Mobile Wallet Platform: The very popular Apple Passbook app, while not positioned for payments at this time, already allows users to access gift/loyalty cards for use at various retail and restaurant chains. This could be the foundation for an eventual iWallet (a term used by the industry and not yet by Apple).

Apple Passbook Application

• Security: Apple's Touch ID fingerprint sensor on the new iPhone 5S provides would provide smartphone payments users with a strong security feature for ID authentication and to protect payment information. The sapphire technology associated with the Touch ID system provides Apple with a significant head start in ease of use authentication. Consumers mention security as the most significant reason for not using mobile payments.

• Cloud Interface: Apple recently introduced the iCloud keychain which stores passwords, credit cards, and all the information needed to automatically fill in billing information on desktop and mobile e-commerce platforms.

• P2P Platform: Apple AirDrop lets you connect with other AirDrop devices nearby using Bluetooth and to exchange information. This will make it easier for iPhones to connect to iPads and other AirDrop devices, laying the foundation for P2P or even merchant POS interface.

• Merchant Advantage: The new Bluetooth (BLE) powered iBeacon feature, available with iOS 7, could be paired with user accounts to facilitate in-store shopping, including mobile in-store payments and in-store offer distribution. A payments solution using this technology may not require merchants to buy new point-of-sale hardware which is a tremendous advantage. Finally, over 200 million active iPhones have Apple's iBeacon technology already installed. (Business Insider, 2013)

Apple iBeacon BLE Interface

• Link to Alternative Payments Technology: Recent patents indicate that Apple may be building a platform for payments that could pair up with NFC or other near range payments alternatives. In other words, it may not be an either/or proposition, but a partnership.

• Scalability: Apple has always been the 'elephant in the room' for payments industry observers. While solutions like Google Wallet, Isis, PayPal, MCX and others have tried, the inability to gain significant share of mind is a hurdle. This is obviously not a problem for Apple.

What Are The Mobile Wallet Strategy Options

Additional Research

CUSTOMER EXPERIENCE

It's time to build your simplicity capability.

Financial institutions are starting to realize that simplicity does not only improve the customer experience, resulting in trust and loyalty, but also reduces operational costs from redundant products, processes and dealing with customer complaints.

By Jin Zwicky, VP Experience Design, OCBC Bank, Singapore

Simplicity Resources

Simplicity Capabilities 

1. Understand definition of simplicity in banking
2. Increase design sensitivity
3. Master user-centered design process

Definition of Simplicity in Banking

Increase Design Sensitivity

Understand Customers - Prototype - Test

Simplicity Culture

The highest business impact can be achieved by cultivating ‘simplicity as culture’. To ignite the simplicity culture, ‘The law of conservation of mass’ sets the scene.

‘The law of conservation of mass’ is a theory in physics, which states that the mass of the system must remain constant over time, as system mass cannot change quantity if it is not added or removed.

Apply this theory by replace the word ‘system’ with ‘pain’. The mass of pain - bad customer experiences in banking such as complexity in communications, hard to use touch points - will remain constant, the quantity cannot be added or removed. This means the amount of pain will be there. It’s either for the bank to absorb, or for the customer to absorb. The more pain you absorb, the less pain there is left for the customer. There is no magic like removing the pain. Customer pain is in inverse proportion to the pain companies go through when designing customer experience. How much work do you put into the design process to absorb as much as pain as possible for your customer?

Acknowledging the amount of work to achieve simplicity, and willingness to absorb the pain to deliver simple customer experience...this is the mindset banks need to cultivate as the organizational culture.

As the headline to this posts say, simplicity in banking is anything but simple. We need intelligence from experts, but that is not enough. It requires your organization’s discipline and dedication and internal intelligence in cutting through complexity.

Take a step to cultivate simplicity as your organisational capability and culture. Understand the definitions of simplicity. Teach your bankers design as a noun and as a verb. Absorb customers’ pain. 

The rewards are real.

JinZwicky OCBC from NextBank on Vimeo.

About the Author

Jin Zwicky is the vice president, Experience Design, Group Customer Experience for OCBC Bank. She lead the bank's top priority customer experience design initiatives for retail, premier and private banking businesses. In her role, she establishes customer-centric design processes and fosters customer-centric organizational culture, cultivating 'Simplicity' as the organizational capability through training bankers and product managers. She also is the author/publisher of her own blog, Designful Co.

Additional Resources

There is no doubt that strategies around mobile banking are in the top five priorities for any financial institution. Even with this focus, many bankers have a difficult time making the paradigm shift that is required to build a great mobile banking application.

As a result, I asked Scott Bales, who is currently working on a new book entitled 'Mobile Ready' to share his thoughts on the keys to mobile app development success. 

Guest Post by Scott Bales, Regional Director for strategic advisory firm User Strategy

1. Get Out of the Building

2. Enlist Partners

3. Remove Strings

4. Leverage Personal Context

5. Build Engagement

6. Make Mobile Banking Simple

7. Build an App Unlike Your Website

8. Test and Learn

9. Focus on Performance

Digitally savvy users have no tolerance for slow performance, but a strong appreciation for mobile sites that get the job done. Ensure you take the time to ensure quality outputs. Build beta communities if you want to test things in the wild, therefore protecting your core mainstream users. Users that opt for beta programs have higher tolerances for bugs and performance, and often will passionately help you fix issues.

Scott Bales

Scott Bales is the Regional Director for the strategic advisory firm, User Strategy out of Singapore and Innovation Director for NextBank. Scott is a self-proclaimed extrovert, who has meshed his fascination with people and what motivates them, with his enthusiasm for technology. 

Bales is 'the most influential in financial services and mobility', with over a decade of international experience in innovation, thought leadership, implementation planning and strategy. He is an avid blogger and can be found often on Twitter.

BRANCH STRATEGIES

U.S. banks are closing branches in record numbers as customers are increasing their use of mobile and online banking. Yet, in conversations with seven of the nation's top ten banks, many more branches would be closed if there wasn't concern for public or governmental backlash.

Do banks have an obligation to keep branches open, or will the need to cut costs drive an accelerated wave of new closures?

Telegraph (UK) Consumer Survey (2014)

Closing Branches in Lower Income Areas

Closing Rural Branches

@PhiloCook @JimMarous @brettking @shukla @Chris_Skinner @sammaule The absence of branches does NOT mean losing access to people.
— rshevlin (@rshevlin) January 30, 2014

Cost of Closing Branches

Post Office Banking Alternative

The Future of Branches

Additional Resources

PRODUCT STRATEGIES

The checking account is the foundation of a customer relationship and has withstood the test of time even as electronic payments and debit cards have replaced checks, online banking has eliminated the need for paper statements and remote deposit capture has made a trip to the branch a rare occurrence.

But all that we have become accustomed to is about to change as we enter the era of the downloadable bank account.

Both Moven and Simple Provide Exceptional Mobile Banking Contextual Insights

Demand for a Downloadable Bank Account

Source: Celent Research on U.S. Mobile App Preferences, July 2013

My Personal Experience

PAYMENTS STRATEGY

At a time when payment innovation seems like an everyday occurrence, it is exciting when new ideas come along that embrace both mobility and simplicity. In separate personal user tests, LoopPay allowed me to make contactless payments at virtually every retail point-of-sale terminal while Square Cash enabled me to collect money from friends with an email.

Here's my review of both solutions.

The Loop Fob Wallet AppCessory Packaging

Loop Wallet Application Introduction Tutorial

Loop Wallet Use

During several weeks of testing, I found the Loop Wallet to be better than expected. Except for gas station pumps and ATMs that are not currently supported by the app, I did not run into an instance that my Loop Fob didn't work. It was also nice that I could access all of my payment, loyalty and gift cards within the app as opposed to being limited to a specific number of cards (such as with the Coin mobile device).

That said, I did realize some of the challenges associated with any contactless payments process in the U.S., especially at sit down restaurants. In these locations, the card reading POS device is usually located either at a waitress station or in the kitchen. While I initially asked to walk back with the waiter, I quickly realized that doing quick training on the use of the fob was sufficient. 

Overall, the best part of using the Loop Wallet was that virtually all POS terminals become contactless devices. So, while I am severely limited with the number of PayPass locations around my house, the number of traditional card readers (including PayPass locations) are virtually limitless.

The Future of Loop Wallet

According to Damien Balsan, EVP of LoopPay, the future of the Loop Wallet includes the introduction of an Android version of the LoopWallet application as well as the introduction of new payment devices including a phone case that will eliminate the need for the separate fob. Ultimately, LoopPay would like to partner with a financial institution, mobile carrier, etc. that would bring the benefits of the Loop Wallet within the phone itself.

When asked about the future of Loop Wallet in a world of NFC or EMV, Balsan said, "The industry is moving toward EMV, which will provide substantial security for cards. It will take several years to build the necessary infrastructure, however. Loop's secure technology can be implemented today. It is security and mobile payments at zero cost to retailers."

Loop Wallet Security

A key feature of Loop's technology is that it adds substantial security to transactions. The security is based on tokenization, which makes part of the card data seemingly random and unusable to anyone else but the intended recipient. Stolen tokenized card data is useless for creating working counterfeit cards or transactions.

Called Partial Tokenization, it creates a new cryptographically generated token for each transaction. Since the key needed to create a valid token is not known, a counterfeiter is unable to create tokens for fraudulent cards or transactions. When loaded into the Loop Mobile Wallet, any existing magnetic stripe card can become enabled for secure tokenized transactions, provided the card issuer supports Partial Tokenization.

Because retailers do not need to upgrade their systems to support Loop, they can immediately benefit from its security features as can the consumer.

Square Cash

The second new payment application I tested was the new Square Cash request function. I have been an avid Square Cash user since it was introduced last year, paying family members, friends and service providers using email as opposed to writing checks. The immediacy and simplicity of this P2P solution is second to none, and each person who has received payment from me with this application has commented on how easy it is to use.

Building on the success of the initial Square Cash solution, Square recently expanded the capabilities of the application to include the capability to request funds in addition to sending cash. Similar to the process used to send money, I can now use an email to request funds from one or more people.

In my tests, I simply determined the amount of money I wanted to request from a friend, family member, etc. and used the app the same way I did when I sent money, except that I used the 'request' button (above). When I wanted to split a bill for a group gift, I entered the amount and multiple email addresses (the amounts need to be the same for a group email request).

Similar to a Square Cash payment, a Square Cash request sent an email to the designated people I wanted payment from and they made the payment using their debit card number. When they completed the payment, I was notified of the payment via email.

One great additional feature of the Square Cash request solution is a new page on the Square Cash website that tracked which of my friends or family had made a payment to me. This is great, especially for a person who already receives too many emails, making it difficult to remember who may be a deadbeat.

Beyond group gifts and meals, I can see this as a great application for those who regularly collect money for events, teams, etc. Square definitely makes the bookkeeping and anxiety of the collection process easier (reduced phone calls). The immediacy and ease of use makes this great for everyone.

Square Cash Request Status Page

As always, Square Cash is free to send and receive, and there is no signup process (which makes it easier than either Google Wallet or PayPal where a sign-up process is required). Funds are directly deposited into the recipient's bank account as opposed to being held in a stored balance account. Square Cash is also available for both Android and iOS and works for anyone with an email account in the U.S.

Additional Resources

Loop: The Future of Mobile Payments or a Temporary Fix? - Tech Crunch (Oct. 2013)

Square Cash Challenges Gmail With New Email Request Option - ZD Net (Feb 2014)

Square Turns On Money Request App - Mobile Payments Today (Feb 2014)

MOBILE STRATEGIES

On the surface, the purchase of WhatsApp by Facebook for $19 billion seems to have little to do with retail banking. Digging deeper, however, the transaction illustrates the most important consumer trends today that bankers must understand or risk becoming irrelevant in the future.

Interestingly, these trends were also important to the sale of Simple to BBVA a day later.

The Shift to Mobile is Seismic

Mobile Requires Contextual Engagement

For WhatsApp, the size of their user base was impressive (450 million), but the level of engagement (72 percent active on a given day) was what made the deal happen. As shown below, users of WhatsApp did far more than just communicate via text. They shared videos, voice messages and photos...lots of photos.

Nothing tells a story or connects people more than visual engagement. Much like Facebook, Instagram and Snapchat, the primary engagement mechanism for WhatsApp is photos. Processing 600 million images per day, the acquisition of WhatsApp by Facebook cemented their position as the world’s most dominant social network (for now) by ensuring that it “owned” the mobile sharing of photos.

“WhatsApp is the only app we’ve ever seen with higher engagement than Facebook itself,” admitted Zuckerberg in a conference call to journalists after the WhatsApp deal was announced. As in any business (including banking), it wasn’t just users Facebook wanted to acquire, it was engaged users that used the mobile app regularly.

As the mobile downloading of photos and videos continues to escalate, it is important for banks and credit unions to also stimulate engagement by fully leveraging the camera functionality of the smartphone. This has already occurred with mobile deposit capture, photo bill pay, and the use of photos to facilitate the opening and onboarding of new accounts.

Beyond these uses of photos, banks can encourage engagement and social sharing by linking purchases with photos and videos. Simple allows customers to attach photos to transactions much like customers used to complete the memo line on a check. By doing so, Simple make spending data more dynamic, more organized and easier to share.

Simple Allows Customers to Assign Photos to Transactions

Progressive banks and credit unions are also using videos to guide customers on how to better optimize their relationships resulting in expanded share of wallet. When built for the mobile device, and linked to other forms of communication like email, video increases the effectiveness of communication.

Consumers Want Social Connection

WhatsApp differs from many other social media apps because of the focus on one-to-one or very small group communication as opposed to sharing information more widely. The application connects with those MIPs (most important people) in the user's mobile address book. Being developed mobile-first, it does not ask the user to spend time building a new graph of relationships; instead, it taps the ones that are already on the device.

Similarly, banks need to understand the desire for customers to use their devices to transact seamlessly with those who are closest to them. While not wanting to share their financial dealings through vast networks, customers want to easily execute P2P payments and even collect money using their mobile device. The recent introduction of Square Cash Request and Payment functionality is a great example of how engagement can be facilitated between individuals or small groups.

Square Cash App

Simple also allows customers to instantly move money between accounts of friends and family with no holds, no checks, no fees and no delays. Adding a contacts requires just an email address and phone number. Two-factor authentication during confirmation adds an extra layer of security without slowing down the process. Simple even allows for shared financial goals and provides a way for friends and co-workers to quickly settle up for shared bills (lunch, night out, party, etc.).

The key for banks in the future is to provide the capability for customers to connect financially and socially with those people in their MIP circle of friends...without requiring extensive data input.

Simple Design and Functionality Wins

One of WhatsApp's keys to success is its simplicity. WhatsApp became the SMS of the future by being lean internally and simple externally. With only 32 engineers, one WhatsApp developer supports 14 million active users, a ratio unheard of in the industry. Despite the low number of employees, WhatsApp still maintains greater than 99.9% uptime (referred to as dial-tone reliability).

The focus of WhatsApp was to be able to add features without making the product more complicated. Instead of responding to every customer request (desktop version, email capability, etc.) they focused on the utility of the app, its simplicity, the quality of the service.

When WhatsApp adds new features, it is only after it is determined that execution will simplify rather bloat the service. For example, the recent push-to-talk voice messaging functionality only takes a single tap to record and send a voice message. To play a message, a phone will automatically switch from speaker-mode to soft volume when its proximity sensor detects that it's being held near an ear.

For a bank to better understand what a simplified mobile banking app looks like and how it functions, they should look at the beauty of Simple, Moven and GoBank. They mobile-first providers support all of the functionality of the most important banking service (checking/current account) without the complexity and 'noise' associated with traditional bank mobile delivery of the same service.

It is this simplification of delivery that is thought to be the reason BBVA not only acquired the customers of Simple, but also wanted the Simple team to remain. It is difficult for traditional bankers to understand how to deliver an exceptionally simple design when surrounded by so much legacy complexity.

Buying Experience Trumps Building From Scratch

Both Facebook and BBVA could have taken a route of building the services they acquired when purchasing WhatsApp and Simple respectively. They could also have immediately absorbed the acquired organizations and placed a Facebook or BBVA logo on the acquisition for worldwide consumption.

Instead, both firms decided it was more prudent to buy the customers and associated talent, but to leave the organizations relatively intact as autonomously functioning units. This allows them to not compromise the attributes that made their acquisitions unique.

This is usually a faster route to success for industries that are in a state of continuous disruption. Benefiting from the learning curve of others, and bringing additional financial and human resources to the table, there is the potential for greater success in the future.

In an interview with the American Banker, Jacob Jegher, senior analyst at Celent said, "I think it's a really interesting deal. Simple is a disrupter in the industry and BBVA is a highly innovative bank. It sounds like a good match...Simple can't be replicated overnight."

According to the American Banker, Jegher believes consumers will care less about the bank behind the interface and more about the experience and receiving stellar service. "Any step like this pushes the industry forward," says Jegher. "It's part of building a culture of innovation in the bank."

In a separate interview with the American Banker, Stessa Cohen, a research director at Gartner, said BBVA's acquisition of Simple and partnership with SmartyPig is another sign of its customer focus. "It's not oriented around transactions but around what the consumer wants and needs," Cohen says. "It's a whole new customer experience that really puts customers at the center of their own money." 

What may be most telling about the value of WhatsApp to the marketplace is that the company achieved their growth without investing a penny in marketing. Unlike most competitors in the industry, they never spent anything on user acquisition. The company doesn’t even employ a marketing or PR person.

Instead, WhatsApp created a strong connection with consumers by understanding the shift to mobile, the importance of contextual engagement, the dynamics of social and the power of simplicity. By doing so, WhatsApp benefited from word of mouth marketing and social media to grow at an unprecedented rate.

The question is whether the banking industry can learn from these lessons and move away from tradition, developing products and services that reflect the digital transformation of today's mobile consumer.

MOBILE STRATEGIES

In the past year, wearable technology has emerged as the next big consumer electronics market category, particularly in the areas of health and wellness. To capitalize on this growth opportunity, banks and payments firms are investing in wearable product innovation to expand their mobile banking platform. The question remains whether mainstream consumers will find an advantage to adding yet another device to do their banking.

One of the most interesting studies done on wearables has been done by TNS showing that awareness of both smart watch and headset wearable technology over the past several months is increasing rather rapidly. Unfortunately, during the same period, usage remains almost non-existent and desire to use the technology is actually decreasing.

The decrease in desire to use wearable technology could be caused by the high cost of early wearable technology introductions combined with the lack of strong, unique capabilities of the devices introduced to date.

These findings are similar to a late 2013 study by Harris Interactive, that showed that despite a lack of understanding on potential uses, nearly half of Americans (46 percent) are at least a little interested in owning a wristband or watch device with over one-quarter (27 percent) saying that they would be somewhat or very interested. Fewer were interested in an eyewear device (36 percent at least a little, 20 percent somewhat or very).

An Accenture study entitled, 2014 Digital Consumer Tech Survey also found 52 percent of consumers in six countries were interested in buying wearable technology, particularly for health and fitness reasons, with 46 percent potentially wanting smart watches and 42 percent seem interested in web connected glasses.

As would be expected, younger consumers, males and households with children under 18 were the most interested. Interestingly, there was no significant difference is level of interest based on income, despite the potential high cost of the technology.

The overall sentiment today is that there is still skepticism around the technology, with close to half of those surveyed by Harris believing the devices are just a fad (49%). Slightly fewer than four in ten Americans said they would only be interested in the technology if it could replace something they already use. However, one other finding of the poll is interesting: 48% admitted that they’d like to be able to access smartphone functions without having to dig in their pocket or bag.

Paypal and Several Banks Building Wearable Apps

The Eight Myths of Wearable Technology

1. Wearable devices are just another form factor for smartphones. The wearable device market extends well beyond smartphones and smart watches to include clothing, sports/activity trackers, wearable cameras, and even insertable devices beneath the skin and in teeth. 
2. Consumers will quickly embrace wearable tech. Accenture believes consumers will warm up to wearable technology at a gradual pace. For the public to embrace wearable devices, they must be educated about the value these products can deliver and convinced the associated applications will bring benefits that can't be obtained with other solutions that exist today. The industry is also dealing with aesthetic issues as evidenced by the term 'Glassholes' (a person who continuously talks to their Google Glass, ignoring the outside world). 
3. Wearable devices are standalone products. Similar to successful mobile banking executions, wearable solutions need to built for the device but be able to work seamlessly with other channels. A pivotal market driver will be when the devices do new things in new ways, remaining interconnected with current solutions.
4. The wearable market is new. Wearable devices have been around for decades, especially in healthcare (pace makers). Watch-based computing was actually introduced in the mid-1970s.
5. The wearable market will remain a niche. Accenture believes the market for wearable technology is going to include a broad set of products and applications across multiple industries. The most interesting development to watch will be the partnerships that could develop between the healthcare, insurance and potentially banking industries. Beyond consumer uses, there is also a vast opportunity for growth in manufacturing.
6. First to market is a can't-miss winning formula. When designing wearable applications for the consumer, function and fashion will be big considerations. As with the early smartphone, bulky designs, less-than-compelling functions, and impractical applications that don't justify their high costs may rule the day. The key will be to combine the best functionality within the device with a design the consumer will feel comfortable wearing and using. 
7. Power consumption and batteries will not be big issues. As the miniaturization of technology and expansion of functionality continues, devices become more power hungry. Manufacturers and application developers will need to compromise, doing their best to balance functionality with battery life.
8. Wearable devices are secure. Security and privacy are, and will continue to be, major concerns with wearable devices, particularly with regard to 24/7 video recording, personal data collection, and highly targeted ads. To prepare for this, manufacturers and application developers need to develop security protocols in anticipation of legal restraints and consumer concerns.

CROWDSOURCING SERIES

With the financial services industry changing so quickly, it should come as no surprise that many assumptions banks and credit unions believed to be true for years could actually be rendered obsolete. To uncover retail banking myths and provide new realities, I reached out to more than 40 global financial services leaders including bankers, credit union executives, industry analysts, advisors, publishers and editors, bloggers and fintech followers and got 43 myths.

Provide Your Myths

Virtually every bank and credit union has the acquisition of new customers as a top priority for 2014. But generating a new account is only the beginning. To generate near-term profitability and long-term relationships, the new customer must become fully engaged. 

Customer engagement can not be achieved in a day, week or a month. It is the foundation of a relationship that includes trust, dialogue, a steady growth in service ownership and a growth in share of wallet if done correctly. The alternative to focusing on building customer engagement is a relationship that does not meet its full potential or customer attrition.

According to Gallup research entitled, The Financial and Emotional Benefits of Fully Engaged Bank Customers, the tangible benefits of a fully engaged customer that is both attitudinally loyal and emotionally attached to the bank include the following:

• Increased Revenues, Wallet Share and Product Penetration: Customers who are fully engaged bring $402 in additional revenue per year to their primary bank compared with those who are actively disengaged, 10% greater wallet share in deposit balances and 14% greater wallet share in investments. Fully engaged customers also average 1.14 additional product categories with their primary bank than do customers who are 'actively disengaged'.

Source: Gallup (2014)

• Greater Purchase Intent and Consideration: An engaged customer not only holds more accounts at their primary bank, they also look to that same bank when considering future needs. At a time when so much of the shopping process is done online, improving your bank's chances of being in the customer's consideration set is important.

• Becoming a Financial Partner: Less tangible, but no less important, the Gallup research showed that an engaged customer builds a bond with their bank or credit union that every financial institution would covet. According to the research 54 percent of engaged customers strongly agree that their bank helps their financial dreams come true and a similar percentage believe their bank makes their life more enjoyable. Most importantly, 71 percent of engaged customers say they will use their current bank for the rest of their life.

Here are the secrets to setting the foundation for strong customer engagement:

1. Improve Acquisition Targeting

Customer engagement begins before a new customer even opens an account. With today's depth of data and processing capability, it is possible to find new prospects that are similar to the best customers who already have accounts at a financial institution. By building acquisition models that look at product usage, financial behavior and relationship profitability, opening accounts that have limited potential for engagement or growth is reduced.

Beyond demographic, financial behavior and product use modeling, geographic modeling is also important since the strongest potential trade areas are not always clearly defined by branch radius mapping. 

2. Change the Conversation

3.  Communicate Early and Often

A three-year study from Scratch, an in-house unit of Viacom, found that a third of millennials believed they won't need a bank in the future. These millennials, defined as those between ages 18 to 33, also ranked the top four banks in the "ten least loved brands" and would rather go to the dentist than to their bank.

• 53% don't think their bank offers anything different than other banks
• 1 in 3 say they are switching banks in the next 90 days
• 71% would rather go to the dentist than listen to what their banks are saying
• 33% believe they won't need a bank at all in the future
• Nearly half are looking for tech start-ups to overhaul banking
• 73% would be more excited about a new offering from Google, Amazon, Apple, Paypal or Square than from their own bank

How Do Banks Need to Respond