Weekly Term Accounts APY Spread and Premium Index–April 14

by tom 14. April 2014 16:14

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.
 
APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

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Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

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Creating a Banking Service Matrix to Satisfy Everyone from Baby Boomers to Millennials

by tom 10. April 2014 13:22

Our research report, "Growth and Revenue Potential from Emerging Financial Services,” offers real insight into what financial service products consumers want, and what they are willing to pay. One of the trends we noted in compiling the study is that different services appeal to different market segments. This article was penned by Dr. Dan Geller, executive vice president for Market Rates Insight, for this BAI Banking Strategies on the challenge of meeting the needs of all customers, from boomers to millennials.

Financial institutions are facing extreme polarity in the financial needs and wants of the baby boomers, on one side of the spectrum, and the millennials on the other. The shift in demographics and advances in technology are forcing financial institutions to make difficult strategic decisions on product and services moving forward.

The post-World War II baby boomers grew up with traditional banking services and perceive the relationship with their financial institution as the focal point of their financial life. This generation is slower to adapt to using alternative financial services and is likely to be intimidated by drastic changes in the way those services are offered.

By contrast, the up-and-coming generation of millennials, born in the 1980s and 1990s, grew up with the Internet, mobile devices and a new perspective on financial services. For them, the notion of having a bank account for the purpose of making basic transactions, such as buying coffee or going to the movies, is unimaginable.

And, of course, there is the middle, which is currently the largest segment of financial services customers. This group is “sitting on the fence” as far as their preference for banking services. As such, any drastic change in the current structure of their financial services might sway them to look elsewhere for what they consider “a better fit” for their financial needs.

Financial institutions can use our Strategic Matrix to consider the various options available to them. The goal is to choose the optimal combination of strategic options for your client base without alienating any major segment. One thing you can be sure of: you can’t be all things to all people because you end up alienating everyone. While reviewing the matrix, here are some of the implications of choosing various options:

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Options 1 and 2: Offer a value-added checking account bundled with emerging financial service such as identity-theft alerts and credit-score reports as one option, and a free-standing prepaid card as another option. By providing both options, yet not combined, you cater to both baby boomers and millennials and have the best chance of fending off intrusion by alternative financial services.

Options 3 and 4: Offer traditional checking with reduced or no fees on activities such as overdraft protection transfer along with a low-cost “checkless-checking” account with no overdraft option. This combination of options will be attractive to the more transitional banking customers and may attract some low-end users but leaves the majority of the alternative banking customers out of the picture.

Options 1 and 3: Offer a value-added checking account bundled with emerging financial service and a traditional checking account with fewer fees. This combination of options will promote loyalty and longevity among the value-added customers and the more budget-oriented customers. However, it leaves out the majority of the alternative banking customers.

Options 2 and 4: Offer a free-standing prepaid card and a “checkless checking” account. This combination of services will be very appealing to current users of alternative banking services but is likely to alienate customers who are looking for value-added bundled services.

Options 1 and 4: Offer a value-added checking account bundled with emerging financial service and a “checkless checking” account. This combination of services will be very appealing to customers who seek bundled banking services but is not likely to retain customers who seek transactions with no checking accounts.

Options 3 and 2: Offer traditional checking with reduced or no fees on activities such as overdraft protection transfer and also offer a stand-alone prepaid card. This combination of services will be very appealing to current customers who are “price sensitive” and those who are most likely to migrate to alternative banking services. However, this option is likely to alienate customers who are looking for value-added bundled services.

Choosing the right combination of strategic options is a challenging task because the option of satisfying the financial needs of all customer types is impossible. However, the option of not doing anything can be much more damaging to your customer acquisition and retention efforts.

Weekly Term Accounts APY Spread and Premium Index–April 7

by tom 7. April 2014 16:39

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.
 
APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

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Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

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Remote Deposit Capture In Demand But Undermarketed

by tom 3. April 2014 16:25

Our research shows that consumers want bank services that make their lives easier, and they are willing to pay for these services. In addition to generating more fee revenue for banks, these lifestyle financial services also tend to promote customer loyalty; if you have a bank that makes financial management easy and transactions more or less painless, then you tend to stay with that bank. And one of the latest services that has been taking the financial industry by storm is remote deposit capture (RDC) – one of the most valued services that is completely undermarketed by banks and credit unions.

Consumer remote deposit capture services are available from most of the larger financial institutions as a convenience to customers, often at no additional cost. Consumers simply use their smartphone to take a digital image of a check, transmit the image to their bank, and the funds are deposited and available almost instantly. The consumers who use RDC love it, but surprisingly few consumers are even aware of RDC.

As reported in American Banker, a new survey by Synergistics Research shows that only 68 percent of mobile and smartphone users are familiar with RDC. While those consumers with a higher the income tend to use RDC, only about 12 percent of mobile users surveyed have used RDC in the past 30 days.

Apparently, the younger, more tech-savvy customers tend to use RDC more often. Most customers between 18 and 34 rated RDC as a valuable service; overall about 75 percent of users rated RDC as “very” valuable. Of those who don’t use RDC, only 40 percent saw RDC as valuable, and most of the positive reaction came from consumers from 18 to 49 years old with larger household incomes.

So what is to be learned from all this? Banks and credit unions are not marketing some of their most valued services to high net worth individuals who will want to use them. If only 25 percent of customers are using RDC, then there is plenty of room for growth in market adoption of remote check deposit, especially since U.S. smartphone adoption is now well above 60 percent.

If you have a winning service that consumers clearly want, why not promote it? With proper marketing, banks and credit unions can use services like RDC to re-engage with consumers and bring them in looking for more lifestyle services, some that could increase profit from fees.

Weekly Term Accounts APY Spread and Premium Index–March 31

by tom 1. April 2014 15:51

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.
 
APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

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Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:


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Taking the Friction Out of Moving Money

by tom 27. March 2014 19:42

We have done research in the past about the impact financial services have on customers satisfaction. We also track deposit rates for clients so they can stay current with their regional competitors. What if it were possible for depositors to switch banks with the click of a mouse to get a better rate? Or what if they didn’t have to rely on their bank to get the kind of services they want?

As Will Trout reports, the UK is already taking steps to make switching banks painless. For those of you not tracking the banking industry in the UK, they have a new competitive initiative launched by the UK Payments Council to allow customers to move their accounts from one institution to another in as little as seven days. It used to take up to 30 days to change banks and consumers risked rejected payments while waiting for the transition. Now UK customers can shop for rates and services much more easily, and switch their accounts with the click of a mouse.

British banking customers can use an industry-sponsored website to make the switch or simply call their new bank with their account information. The accounts are switched and any transactions sent to the old account is processed by the new bank for up to 13 months, mostly to cover any annual fees. And the changeover is guaranteed; any fees or penalties are paid by the new bank.

The British banking system has dozens of banks where the U.S. banking system has more than 7,000, so establishing  a similar centralized system for bank changeovers here seems less likely. However, this does point to a new trend. Consumers have more options for financial options than ever before – electronic payments, mobile payments, prepaid cards. While U.S. consumers may not decide to change banks, they still might look to other services for the convenience and service they want.

In Asia and Africa, for example, mobile phones are literally becoming mobile wallets and users are transferring cash between phones using biometric security. That’s about as frictionless and secure as you can get. As new technology continues to emerge, banks and credit unions may have to scramble to keep pace or they may lose customers to non-banking competitors.

What are your predictions for a frictionless future? How will the industry change to make it easier for consumers to maximize and move their money around? Where will the industry start changing? We’d love to hear your opinion.

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Banking Trends | Mobile Banking

Weekly Term Accounts APY Spread and Index–March 24

by tom 24. March 2014 17:11

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.
 
APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

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Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

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National Pricing Indicator | Market Research | CD Balances

Banks Take On Prepaid Card Competitors

by tom 20. March 2014 17:36

We have written here in the past about the migration to pre-paid cards offered by non-banks. As the prepaid card trend continues to gain momentum, more banks are stepping up, adopting the attitude that if you can’t beat ‘em, join ‘em.

According to Accenture, 35 percent of the market share for today’s banking institutions will be “up for grabs” by 2020 as new financial options, like prepaid cards, gain in popularity. The Pew Charitable Trust reports that consumers loaded $64 billion onto prepaid cards in 2012; double the amount from 2009.

Consumers have been flocking to prepaid cards because of their convenience, the fact they can’t be overdrawn, and because they provide purchasing power online and elsewhere. And prepaid cards are becoming more popular. Starbucks, PayPal, Wal-Mart and other companies are offering their own branded prepaid cards and their customers love them.

The banks are responding with their own prepaid cards. For example,PNC Bank’s SmartAccess Visa card has been popular with non-banking customers since 2012. For a $5 monthly fee customers can use the card like a prepaid Visa card without usage fees, and it’s FDIC insured. JP Morgan Chaise has its Liquid prepaid card with a flat rate of $4.95 per month. Fifth Third Bank also has an Access 360 prepaid card available to customers for 4 per month and non-customers for $7 per month.

Bank of America has come up with a different strategy to attract prepaid card customers with a hybrid product. BofA’s SafeBalance account has no check writing or bank overdraft fees, but it provides access to traditional banking services such as online banking, mobile banking, service center access,  and ATM access, all for a flat fee of $4.95 per month. It’s designed to compete head-to-head with prepaid cards and woo the underbanked with an easy-to-use product that offers the same protection and costs the same as most prepaid cards.

This type of “banking lite” strategy might be just what consumers want to meet their needs. Most of those who use prepaid cards fit into one of four categories: 1) they won’t qualify for a checking account; 2) they don’t want a checking account; 3) they like prepaid cards because it controls spending; or 4) prepaid cards are useful for providing a payment mechanism for kids at college or other family members. Offering an alternative such as SafeBalance gives customers a choice, and lets BofA upsell and cross-sell to increase customers’ share of wallet.

So how big a threat are prepaid cards to your banking business? Are you looking at alternatives to attract the underbanked, or do you feel your current service offering is enough to compete, even if Accenture’s predictions are accurate and 35 percent of potentially bankable cash is going elsewhere? We would love to hear from you.

Weekly Term Accounts APY Spread and Index–March 17

by tom 17. March 2014 16:47

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.
 
APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.
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Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:
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National Pricing Indicator | CD Balances

Millennials Fed Up with “Old School” Banking

by tom 13. March 2014 15:49

Are banks becoming obsolete? Is the age of the Bitcoin and e-commerce going to make frictionless transactions so easy that consumers will have little use for banks?

That’s the immediate conclusion you might draw from the results of a three-year survey, The Millennial Disruption Index.  As reported in American Banker this week:

Over half (53%) of millennials say that nothing sets their personal bank apart from its competitors, according to the survey by Scratch, a brand consultancy division of Viacom. One in three said that they would consider switching to a new bank within the next 90 days. And the nation's four-largest banks — JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC) and Citigroup (NYSE:C) — are among the 10 least-loved brands in the survey, which asked respondents for their impressions of 73 companies in 15 industries.image

In the minds of the up-and-coming generation of prospective banking customers, online transactions rule and traditional banks are obsolete. The survey shows that more than half of millennials are counting on emerging technology to completely change the banking industry, another 68 percent predict that consumers will access money in a completely new way in five years, and 70 percent expect a new way of making purchases. As a result, 33 percent of millennials indicated they won’t need a bank AT ALL in the  future, and 73 percent would rather bank with Amazon, Apple, PayPal, or Google.

As if to prove the survey findings correct, this week the Milwaukee Journal Sentinel reported that more than 25 percent of U.S. households do not have traditional bank accounts.

Reloadable, prepaid cards are winning out as an alternative to checking accounts, and Mercator Advisory Group reports a 28.5 percent increase in prepaid card use in 2012 over 2011; a market value of $1.6 billion. Experts say that fees for these prepaid alternatives to bank accounts have declined and new services make these cards more versatile.

Not all the big banks are waiting to watch their millennial customers walk away. Bank of America is offering a new checkless checking account designed to appeal to millennials. The account has a fixed $4.95 monthly fee and uses no paper checks. The idea is to build loyalty with younger customers by charging lower fees and offering an account with online and card transactions only; something with which the new generation of customers are very comfortable. The new account also eliminates other fees, such as a minimum balance requirement or overdrafts, making it more appealing to consumers.

The idea, of course, is to win millennials loyalty early and then upsell later with savings plans, mortgages, car loans, and other services. Where other banks uses prepaid cards to collect added revenue from swipe fees and overdraft charges, Bank of America isn’t raking in added fees at a flat $4.95 per month, but they are securing a future customer base.


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