Weekly Term Accounts APY Spread and Premium Index–June 29

by tom 29. June 2015 16:55

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 rates | Deposit Products

Wearables Are the Next Hurdle for Mobile Banking

by tom 25. June 2015 15:17

Last week we discussed ways banks are adopting new technology to promote greater customer satisfaction and loyalty. The problem with using technology to deliver banking services is that technology changes rapidly and there is always something new on the horizon. In fact, banks are starting to become the largest employers of software developers as they work to keep up with the latest consumer technology. The latest technology hurdle banks and credit unions face is porting their mobile banking appsimage to work on wearable devices.

More than 17 million wearable tech devices shipped in 2014. Apple has reportedly sold 2.8 million iWatches to date, including 1 million on the first day of pre-orders, and there are already 3.500 apps available for the iWatch.  Barclays has already released an iWatch application in the United Kingdom. And one third of smartphone users are expected to buy a wearable device within the next year. Clearly, forward-thinking banks and credit unions are already introducing banking apps for the iWatch and other wearable platforms. The challenge is trying bundle the features and functions consumers want in such a small package. Clearly, services like remote deposit will be impractical, but banks and credit unions can harness wearables in other ways to improve customer service and the customer experience.

The biggest drivers for buying wearables according to users surveyed by PowerReviews is improving the in-store experience (82 percent) and touchless, one-click payments (22 percent). E*Trade Financial also says that one third  online investors want to check their investments using wearables.

American Banker reports that Citi, Tangerine Bank, and USAA are among the first banks to develop iWatch apps. Citi's Mobile Lite app, for example, lets users check account balances, see their last few transactions, and monitor credit card spending including a graphic view of spending against their credit card limit. The Citi iWatch app is also set up to work with Apple Pay.

Of course, with a new technology platform come new design concerns. For wearables like the iWatch, banking app developers have to deal with new issues:

First there is the smaller form factor, which makes display size limited.That means executives have to decide what information is most important to customers since there is no display real estate to waste.

Then there is authentication and security. The wearable interface is limited in terms of input capability, so new strategies need to be developed to verify users. There is no way to do two-way authentication so other devices and strategies need to be adopted for security.

Some banks are looking at wearables as a novelty item that they have to embrace to stay relevant for younger customers. Most banks are still relying on smartphones and handhelds with larger screens and more interactive capability for complex mobile transactions. Still, porting banking apps to run on wearables is a concern for many financial institutions. Is it really essential to have an iWatch app to be competitive, or are those software developer resources better utilized elsewhere?

New technology platforms are like buses – there’s always another one coming along. However, technology moves so quickly it’s hard to know which platforms are worthy of attention before they become passé. With 2.8 million units sold the iWatch is probably here to stay for a while, but banks and credit unions have to start developing for these emerging platforms long before the hardware hits the market. That means making educated guesses about which emerging platforms to support.

The best strategy, of course, is stay close to your customers. Understand how they bank and what platforms they use today and are most likely to use tomorrow to meet their banking needs. Customers may not consider lack of an iWatch app a deal-breaker today, but support for specific banking technologies may be an important consideration in the future. The only way you will know is to keep talking to your customers.

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Weekly Term Accounts APY Spread and Premium Index-June 22

by tom 22. June 2015 16:22

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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CD rates | National Pricing Indicator | Deposit Products

Using Technology to Achieve Customer Satisfaction

by tom 19. June 2015 11:37

As banks and credit unions continue to compete for the new generation of depositors, it becomes increasingly clear that banks are not particularly good at embracing new technology.

An article posted this week by The Financial Brand this week notes that while more mobile banking technology continues to reach the market, consumer satisfaction in mobile technology is starting to decline. The technology market and consumer expectations are moving at a pace that exceeds banks’ abilities to keep pace. As a result, more consumers are less than satisfied with the latest mobile and online banking technology.

The Financial Brand article cites a new study by J.D. Power Associates on retail banking satisfaction. The demographics clearly show a shift from on-site and online banking to mobile. Of Gen Z customers surveyed, 38 percent use mobile banking versus 19 percent of other generational groups, and Gen Z customers use their smartphones for banking an average of 48 times per year versus 39 times per year for other groups. That said, there is an overall decrease in mobile satisfaction as fewer customers in all groups say they understand the features of mobile banking (47 percent satisfaction this year versus 57 percent in 2014).

What the study reveals is that regional and community banks are catching up to the big banks in mobile and online banking as features such as mobile check deposit become commonplace. However, the newest generation of bank customers are looking for both a positive in-branch experience as well as a positive online and mobile experience. Customer expectations are outpacing bank technology and customers are becoming increasingly disappointed.image

One way to solve the problem is to learn from other technology sectors. Mobile apps and e-commerce sites have spent billions learning how to nurture online customer satisfaction, and banks can learn from their experience. The two specific areas where banks can step up their game is in delivering an omnichannel experience that offers customer personalization.

The omnichannel experience ensures that customers get the same banking and service experience across all channels – online, mobile, ATM, and at the teller window. Retailers have been addressing this challenge with crossover marketing and service programs such as buy online for in-store pickup, or ensuring that special sales and promotions are available across all channels. Banks need to follow this model by simplifying the mobile and online banking process so a transaction by smartphone is as easy as using an ATM or talking to a teller.

Personalization is also vital. E-commerce sites have become incredibly adept at tracking consumer activity and preferences, and delivering the right data at the right moment. You have undoubtedly noticed that after you surf various websites you will encounter customized ads for goods and services you may have viewed on those sites. E-tailers are good at keeping track of online activity and anticipating customer needs. Banks can take a lesson here by delivering personalized data to aid online and mobile customers. For example, why not apply technology to mine information banks already have about their customers to deliver real-time data to help them monitor and control spending, manage their budgets, and provide customized advice.

As we have said in the past, it’s all about customer satisfaction. Technology can be used to enhance the customer experience or it can get in the way of providing personalized service.

One credit union that has found a way to address the challenge is Xceed Federal Credit Union in El Segundo, California. The credit union has developed a video banking app that allows members to talk face-to-face with credit union associates via smartphone, laptop, or desktop webcam. The Xceed Xperience Center harnesses the latest web technology to allow members to talk to an associate whenever they want as part of the mobile and online experience – the perfect blend of personal service with technology.

A new generation of depositors means new strategies for banks and credit unions. Those institutions that will thrive in the years ahead are the ones that continue to listen to their customers and are proactive in meeting their needs, with or without the aid of technology.

The Latest from ProductBuilder Alert

Interested in the latest product trends from banks and credit unions? Be sure to signup for ProductBuilder Alert, our weekly sampling from our ProductBuilder database of financial product ideas. Here’s a sample from this week:

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Weekly Term Accounts APY Spread and Premium Index–June 15

by tom 15. June 2015 17:57

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.

image

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 rates | Deposit Products

Banking on the Millennials

by tom 11. June 2015 11:45

The banking community is becoming more focused on Millennials as their next generation of customers. As the Baby Boomers start to retire the fresh capital is coming from the new generation entering the workforce, many of whom are looking at lower salaries than their parents, and most of whom are carrying more debt than ever before. The characteristics that define Millennials’ attitudes about personal finance are different, and will require a banks and credit unions to apply different tactics to get their business.

The U.S. Council of Economic Advisers reports that Millennials are the largest and most diverse segment of he population, making up about one-third of the country. Their world is shaped by technology, they value family, community, and creativity above all, and they are much more willing to invest in human capital. They also are in debt with student loans and are much more debt-imageaverse, being less willing to take on credit card debt, car loans, and mortgages.

In its profile this week of Young Americans Bank, American Banker reports that those who were raised during the recent ‘08 recession are now reluctant to borrow; a trait that may follow them into adulthood. The Young American Bank is trying to educate the younger generation about credit to combat some of the fear of debt that has become a trademark of Millennials.

Bankrate conducted a study that shows that 63 percent of people between the ages of 18 and 29 do not have a credit card, and 35 percent of adults over 30 do not have a credit card. Of those 37 percent who do have credit cards, 40 percent pay the balance every month, as opposed to 53 percent of those over age 30. Although experts note that avoiding credit cards does damage their credit scores, this generation doesn’t seem concerned because they don’t intend to borrow. Another study conducted by Princeton Survey Research Associates International (PSRAI) shows that 33 percent those aged 19 to 29 say they are better off today than they were a year ago even though, statistically, Millennials earn on average $2,000 less than their parents at the same age.

The good news is that Millennials are saving. The same PSRAI study says that job security has improved (report 32 percent) and that young workers are saving for the future. Thirty percent said they are move confident about their savings.

We know that Millennials aren’t saving their money in a mattress and so they are using banks and credit unions, but they aren’t making maximum use of their money either. Fear of debt and the taint of the 2008 financial crisis have left younger depositors wary of financial risk, hence the “save without incurring debt” attitude.

What this means for banks and credit unions is that they need to use a different approach to attract Millennial dollars, not just for savings but for other financial needs:

  • More education – Financial institutions need to do a better job of educating their younger customers and helping them manage day-to-day finances. Even though they have accumulated tens of thousands of dollars in student loan debt, many college graduates don’t understand how to create a household budget. These consumers will have to deal with debt at some point when they buy a car or a house. Better financial education and providing tools to help them manage their finances is one way to encourage both accumulating savings and taking on responsible debt, thus increasing share of wallet for the bank.
  • More technology – Financial institutions have been aggressively embracing mobile banking, partly to attract tech-savvy younger customers. They need to do more. Millennials live online and on their smartphones, and banks and credit unions need to to more to incorporate financial management strategies into their online world. Developing integrated strategies that help depositors manage income, savings, debt, and spending as part of a holistic strategy will go a long way toward easing Millennial fears about debt. 
  • Better relationship banking – Building trust with Millennial customers starts with protecting their savings. Once they have an established relationship with the customer, developing new ways to help them save with credit card rewards, direct deposit, and other strategies will help customers achieve their savings goals and build trust with their bank.

The new generation of banking customers have different concerns than their parents, and a lot less trust of financial institutions. The banking community has to take steps to rebuild that trust, starting by understanding the needs and attitudes of Millennial customers.

The Latest from ProductBuilder Alert

Interested in the latest product trends from banks and credit unions? Be sure to signup for ProductBuilder Alert, our weekly sampling from our ProductBuilder database of financial product ideas. Here’s a sample from this week:

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Weekly Term Accounts APY Spread and Premium Index- June 8

by tom 8. June 2015 16:27

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.

image

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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The Mobile Payment Wars: A Report from the Front

by tom 4. June 2015 21:46

This October marks the deadline for retailers, banks, credit unions, and credit card companies to adopt the EMV standard for smart credit cards. The Europay, MasterCard, Visa (EMV) standard has been used in Europe since 2002 and is being adopted here to provide more secure credit card authentication. The transition has been painful, especially for retailers who need to upgrade their point-of-sales (POS) systems with new card readers to accommodate IC-equipped cards, but the alternative is for store-owners to assume liability for fraudulent purchases.

However, a side-effect of the migration to smart card readers is that the Payment Networks are now poised to control the next wave of transaction technology, mobile payments.

TechCrunch recently ran an interesting and insightful history by Dana Stalder of the battle for mobile payment dominance. The online payment innovators at PayPal and then Google saw the boom in mobile payments coming and took steps to place a stake in the coming market, but they lacked the resources to gain the proper foothold.

In the run-up for the mobile payment market, PayPal seemed to have a distinct head start. PayPal already has an established business model to handle billions of dollars in eBay transactions. Their plan was to extend that success to the offline marketplace. They started by working with major outlets such as Home Depot for in-store payments. The next step was to support mobile payments. PayPal was already linking eBay and other transactions to the Payment Networks, so migrating to offline payments didn’t seem a stretch. However, PayPal couldn’t find a mobile operator to partner with, and they were ahead of the technology curve for the right POS hardware to handle mobile transactions.

Google wanted to carve its own market niche for offline payments with Google Wallet. Their vision wasn’t to dominate payments, but to observe where the payments where being made to gather data to strengthen their online marketing products. While Google wasn’t able to claim a substantive market share, they did come up with two important innovations: near field communications (NFC) for payments and the use of tokenization for secure  transactions. NFC  is the contactless system that lets you make a transaction by scanning your smartphone. Tokenization is a security strategy that uses digital tokens to exchange secure proxy data, so the credit card data itself isn’t exposed,

Ultimately, the Payment Networks prevailed in the battle for mobile payments, at least for now. Their dominance was the result of being able to promote both NFC and tokenization as standards that were implemented as part of EMV. NFC was bundled as part of the new EMV-enabled POS systems for retailers, and tokenization was adopted for data security, eliminating the need for third parties to come up with their own security protocols.

Apple Pay is the first platform to offer better security using tokenization in an NFC-enabled platform. Android versions of the same technology are sure to follow. And while the technology vendors fight for market share on the smartphone front, it’s the Payment Networks that come out the winners at the cash register.

So what can banks and credit unions learn from watching mobile payment battles play out in the marketplace? Whether the Payment Networks or services such as PayPal emerge as the winners, the banks will still make money since debit cards, credit cards, and bank accounts still serve as the financial foundation for mobile transactions. However, those financial institutions that can find new ways to tap into the mobile payments market will have an advantage. Seventy-seven percent of Americans have indicated that they are interested in using their smartphones for payments, and starting in October, the technology will be in place across the country to enable secure smartphone transactions.  Banks are already embracing mobile banking for routine funds transfers and deposits, and they are issuing new chip-enabled debit and credit cards to support EMV. Perhaps the next step is to start offering their own mobile debit cards so banks can take advantage of the same POS technology for mobile payments.

The Latest from ProductBuilder Alert

Interested in the latest product trends from banks and credit unions? Be sure to signup for ProductBuilder Alert, our weekly sampling from our ProductBuilder database of financial product ideas. Here’s a sample from this week:

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Weekly Term Accounts APY Spread and Premium Index–June 1

by tom 1. June 2015 18:33

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.

image

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:

image

Tags: , , ,

National Pricing Indicator | CD rates | Business Banking

What’s the Delay on Changing Overdraft Fees?

by tom 30. May 2015 14:14

With the Consumer Financial Protection Bureau (CFPB) gearing up to implement new regulations to limit overdraft fees, it’s interesting to note that for the first quarter of 2015, Wells Fargo, JPMorgan Chase, and Bank of America posted more than $1.1 billion in overdraft fees. At that pace, the big three banks will garner $4.5 billion in overdraft fees by year end.

So why haven’t overdraft fees slowed, or more to the point, why haven’t banks changed their overdraft fee policies in light of the pending CFBP ruling?

Part of the reason may be that banks are waiting to see exactly what the CFPB ruling on overdraft fees will look like. The CFPB recently announced that they are delaying any decision on overdraft fees until October, when they also plan to rule on debt collection. The CFPB has publicly indicated that they are “conducting additional research and assessing whether rulemaking is warranted.,” although industry observers say that an overdraft rule is highly likely, if not inevitable.

In the meantime, banks have not changed their overdraft practices and seem to be reaping the benefits of the CFPB delay. Even with the recent payday in overdraft fees, SNL Financial analysts estimate that overdraft fees make up only 6 percent of non-interest revenue for the big three banks.

However, the revenue U.S. banks see from overdrafts varies widely. For some smaller banks, overdraft fees can make up as much as 40 percent of non-interest revenue, although SNL Financial says the media is closer to 8 percent. Taken as a whole, the 600 U.S. banks required to disclose overdraft fees took in $2.52 billion in consumer overdrafts for the first quarter. That adds to more than $10 billion annually. According to Compass Point Research & Trading, overdrafts make up about 34 percent of total fees on consumer deposit accounts.

In a recent report by American Banker, they found:

“Woodforest National Bank, a $4.6 billion-asset institution with hundreds of branches inside Walmart stores, got 41.4% of its fee income from overdraft charges. At TCF Bank in Wayzata, Minn., consumer overdraft fees accounted for 27.0% of noninterest income. At Birmingham, Ala.-based Regions Bank, the figure was 19.3%.”

The same report notes that other banks that cater to high-wealth depositors report less than 1 percent in overdraft fees.

The disparity in overdraft fees reflects differences in the nature of the customer base,but also different policies for banks charging overdraft fees. Those banks that are aggressively marketing overdraft services as a source of revenue will be the hardest hit when the CFPB makes its overdraft pronouncements later this year. Those smaller institutions who rely more heavily on overdraft fees to buoy profits will have to find alternative sources of revenue through other fees or deposits, assuming deposit rates start to rise.

The Latest from ProductBuilder Alert

Interested in the latest product trends from banks and credit unions? Be sure to signup for ProductBuilder Alert, our weekly sampling from our ProductBuilder database of financial product ideas. Here’s a sample from this week:

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In The News | Fees | ProductBuilder Alert | Overdraft


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