The Future of Free Checking

As consumers, we’ve come to expect that financial institutions offer some kind of free checking account.  We’ve come to expect it because seemingly every institution in the country offers a free account – even if the account is supported by fees.  But there’s been a lot of speculation in recent weeks about whether financial institutions can/should continue offering free checking accounts, and what those accounts will look like moving forward. 

Some recent articles include:

• In March BAI’s Banking Strategies ran an article called ‘Inflection Point’ in Checking Accounts saying that “Banks need to get creative when it comes to the most basic of products – the checking account – if they hope to offset the huge losses they will experience down the road.” 
• An article titled Is This the Beginning of the End of Free Checking? was posted on Wall Street Journal’s Real Time Economics Blog on June 18, 2009.  The article highlights a new checking concept from Probity Financial Services called Probity Checking – where customers willingly pay $19.95/month to avoid fees for overdrafts and foreign ATM usage.
• A few days later, the cover story in American Banker on June 23rd was Free Checking: A Customer Favorite is Re-Examined pointing out that “As scrutiny increases over how free checking works, the business model that underlies what has become an industry standard may have to evolve.” 

Most free checking accounts are the same as they always have been.  The Probity Checking Account is one example of the checking account evolving.  On the other end of the spectrum we’re seeing  BancVue, the company behind a popular free rewards checking program used by many community banks and credit unions, promoting it’s latest effort, Kasasa: a program that focuses on bringing consumers “free checking and savings accounts that give back to you in totally new ways.” 

This comes as BancVue announced that a Surge in Consumer Acceptance Pushes REALChecking Accounts Past Million-Customer Mark - apparently generating over $10 bil. in deposits through its accounts. 

So is free checking here to stay?  It’s difficult to imagine that free checking could simply disappear.  

This is especially true when we consider that BancVue’s accounts alone are used by more than 600 community banks and credit unions in markets across the country.   And these accounts are often perceived as different from other more traditional checking products – which is likely giving some institutions an advantage offering a differentiated product with a higher interest rate.  At the same time, these accounts are really an updated version of the familiar free checking product.

In thinking about Kasasa specifically, it will be interesting to see how consumers perceive accounts under the Kasasa product umbrella as the initiative gains traction.  Where institutions have historically developed unique names for similar rewards checking products offered by BancVue, it appears as though the Kasasa products all carry the same name (i.e. Kasasa Cash).  While it won’t likely be an issue initially, it will be interesting to see what happens when more than one institution in the same market is offering a Kasasa checking account – especially if that account has the same name, but different interest rate at two competing institutions.

At the end of the day, consumers have come to expect free checking.  If offerings do become more limited at a local level, consumers know they can turn to the Internet as the accounts are becoming easier to find online - whether it’s through a direct bank like ING Direct, through account finding services like Kasasa.com or CheckingFinder.com, or other venues.  And while some institutions may find it necessary to eliminate a free checking product because of costs, others are finding ways to add value beyond being free to the customer (i.e. offering higher interest rates). 

While the free checking model we’re used to seeing may not be appropriate for every institution or customer, it sounds like free checking – in some form or another – is here to stay.

Common Good Banks: Radical Banking Doesn’t Need to be Flashy

When we hear the words radical and banking used together, many of us think first about the latest and greatest flashy technology.  Applying for accounts online, depositing checks remotely, and doing business with online-only banks are examples that come to mind.  But as an article in this month’s issue of Yes! Magazine points out, radical banking doesn’t necessarily need to be flashy or involve technology. 

 The article – Small Banks, Radical Vision, talks about William Spademan, who is referred to as a ‘radical banker’, and his efforts to create a new banking model he calls a Common Good Bank. 

“For six years, he has been working to develop a new type of financial institution he calls a Common Good Bank.  Spademan’s bank combines two common financial structures – a credit union and a public bank corporation – directing the community focus of the former and the profit potential of the latter toward the good of society.  It’s an ambitious idea that would give communities democratic control over the creation  of money and its distribution – restoring public accountability in the financial system, and funding important public projects that have been ignored by Wall Street financiers.”

The idea of a bank borrowing organizing principles from credit unions, where customers/members take ownership in the organization, is certainly a departure from what we’re used to seeing from for-profit financial institutions. 

The article goes on to discuss this aspect of the Common Good Bank model:

“They would be stock-based corporations, but with strict rules that require them to be governed like a credit union.  What’s more, Common Good Banks could turn a profit, but they would have to spend it on charitable contributions.  Owners of the bank would vote on how to distribute profits to various charities, nominated by the owners themselves.”

Amidst all the back and forth between banks and credit unions, the Common Good Bank looks to be establishing a position for itself midway between – blurring the lines between bank and credit union, and doing so willingly. 

While Common Good Bank has yet to officially launch, Spademan has seemingly found a solid point of differentiation around which to organize this new effort.  Recent shifts in the economy have brought on new challenges.  These challenges have also introduced new opportunities.  While some financial institutions will continue to conduct business as usual, I think most of us would agree that consumers are looking for new solutions to new challenges – many of these new challenges simply can not be met with old models, old products, or old solutions. 

Appropriately, the magazine article appears in the section: The New Economy. 

According to Common Good Finance’s website, A Common Good Bank is “not just another bank with a social mission.  This is a social mission with a bank!”  It goes on to list important characteristics of the bank:

• All profits go to schools and other nonprofits
• Depositors decide what the bank should invest in
• Free local credit card processing for local businesses
• Micr0-loans for new businesses and community projects
• A full-range of secure, FDIC-insured banking services
• Committed to sustainability and economic justice

Additionally, it looks like the bank is looking to establish Common Good Banks in communities around the country with the help of partners and investors. 

In today’s marketplace, where consumer uncertainty is high and national banks are continually receiving negative publicity, Common Good Bank’s emphasis on a social mission – rather than the overused ‘commitment to the community’ – may allow the bank to make meaningful connections with its customers, and have a real and meaningful impact on the communities it serves. 

We’ll stay tuned and see if Common Good Bank lives up to the subtitle of the Yes! Magazine article: Local banks can change the world, one neighborly investment at a time.

Institutions Rebranding in an Effort to Change Perceptions

The Business section of today’s New York Times features the article: “In Ads, Banks Try the Warm, Cozy Approach.”  While the title refers to advertisements, the article really addresses the issue of brand – specifically, the fact that some institutions are rebranding themselves in an effort to change negative perceptions. 

The article highlights a few examples of banks we’ve heard quite a bit about in recent weeks and their taglines:

• Ally Bank: “A better kind of bank.”
• A.I.U.: “A unique franchise.”
• Redneck Bank: “Where bankin’s funner!”

Louise Story, the author of the article makes the point – “All are new names and new slogans for old companies with big worries and, in some cases, even bigger image problems”, and goes on to say “So with cheery, the-future-is-bright advertising, and, in some cases, revisionist branding, companies are trying to put their troubled pasts behind them, or at least out of the public’s mind.” 

We know that advertising only goes so far.  So, is rebranding the answer?

For some, perhaps.  But rather than focusing efforts on a new name or a new tagline, financial institutions looking to reshape perceptions should be more concerned about what their brand means to their customers, prospective cusotmers and their communities.    Negative media attention about the financial services industry has caused many of us to rethink the relationships we have with our financial institutions.  A new name or a tagline may generate attention, but it may be more of a distraction than anything else. 

Where many think of rebranding as the development of a new name, logo and tagline, today’s institutions may be better off thinking about rebranding as organizing more deliberately around strengths and unique points of differentiation.  At the end of the day, emphasizing those points and delivering them through action are more effective in shifting perceptions than simply changing names or adopting a new tagline.

Growth Opportunities Abound, But Irrelevant, Undifferentiated Messages Won’t Get the Job Done

Earlier this week, the Credit Union Journal published the article “Growth Opportunities Abound, But Old, Weak Messages Won’t Get the Job Done.”

At first read, I agreed with the headline, then I started thinking more about it.

Today’s marketplace is full of opportunity.  For many, the challenge is recognizing those opportunities.  For others, the challenge is figuring out how to take advantage of them.  Still, the greatest challenge may be the fact that many executives and marketers don’t recognize that their messages are old and weak. 

Recent shifts in markets across the country have resulted in a series of new challenges and new opportunities for today’s financial institutions.  In most cases, these new challenges and new opportunities need to be approached differently than those we’ve been presented with in the past. 

So after reading the headline the first time, I was in agreement:  old, weak messages won’t get the job done. 

But after giving it some thought, I realize that I only completely agree with the fact that weak messages won’t get the job done.  This is something I’m sure we can all agree with.  Anything that can be described as ‘weak’ isn’t going to get us very far: weak messages, marketing, products, people; the list goes on and on.

On the other hand, while many old messagesare ineffective and aren’t likely to support an institution’s efforts in taking advantage of today’s market opportunities, we can’t equate old with bad – just as we can’t equate new with good.   Consider Inc. Magazine’s Top Ten Slogans of All Time published last year.   Most of the messages included here would  be considered old by anybody’s standards.  At the same time, these old messages are among some of the most memorable, long-standing and effective.

Rather than focusing on whether or not their messages are old and weak, executives and marketers looking to take advantage of available growth opportunities should be thinking in terms of relevance and differentiation.  These ideas are more specific and offer a stronger direction for institutions looking to position themselves for growth.  That said, I’d tweak the headline:

“Growth Opportunities Abound, But Irrelevant, Undifferentiated Messages Won’t Get the Job Done”

As evidenced in the Inc. Magazine Top 10 Slogans, old messages can be relevant; and as a result don’t need to be changed at all.  Rather than updating messages simply because they’re old, we should be evaluating messages in terms of relevance:  are our messages relevant to our customers/members?  to our target customers/members? to our communities and markets served?  to our brand and brand promise? 

But in today’s competitive marketplace, we can’t rely completely on relevant messages.  Messages must also work to differentiate your institution from the competition.  Consumers have a seemingly endless number of choices when it comes to where they do their banking, why should they chose you?  A relevant and differentiated message begins to help make that choice easier. 

As markets across the country continue to experience change, tending to the issues of relevance and differentiation becomes more important – and must be an ongoing process.  Players are changing, consumer behaviors are changing, competing messages are changing – and there are growth opportunities embedded in all of these changes.

A Grassroots Approach to Marketing

After talking about guerrilla marketing in my last post, I was encouraged to see an article about grassroots marketing in Tuesday’s American Banker.  While the terms guerrilla and grassrootsare often times used interchangeably and are considered the same by some, the article got me thinking about my perceived differences between the two. 

When I hear guerrilla marketing, I think of something that happens to a group of people.  On the other hand, when I hear grassroots marketing, I think of something that happens/spreads within or among a group or people.  Both share the goal of building awareness and influencing people but the approach differs.

This is important because I think a lot of financial services marketers and executives are turned off when they hear guerrilla marketing.  For some, it’s too aggressive, too bold, perhaps too risky.  Because of this, I think many non-traditional marketing efforts are left at the drawing board in favor of traditional and safe marketing efforts like print and radio advertising.

As the American Banker article points out, grassroots marketing doesn’t necessarily mean doing something crazy.  As an example, the article highlights Intermountain Community Bancorp (Sandpoint, ID), an institution that started a grassroots stimulus plan called Powered by Community where executives meet “with local leaders to identify opportunities to finance new businesses, commercial real estate projects and even worker training programs, all with the intention of stimulating growth in the communities it serves.” 

The Powered by Community initiative’s online component is similar to what we’ve seen with Helping AZ from Arizona State Credit Union and From Woe to Whoa from First Independent Bank of Nevada.  I’m sure we’ll see more along these lines from other institutions in the coming weeks.

The article also uses the examples of blog posts and town hall meetings as examples of grassroots tactics.  The idea really just expands on the issue of having conversations with your customers (a topic we discussed previously  here and here) – to include prospective customers/members and the community as a whole.  And in reality, these initiaitves aren’t earth shattering or new.  Nonethless they are important. 

One of the keys here is identifying the local leaders; the centers of influence; the movers and shakers in the community.  This is where community-based institutions may have an advantage over larger regional or national players.  Targeting these people directly, as opposed to trying to reach them (and everyone else) through mass media, allows  institutions to:

• Engage in two-way conversation:  Consumer uncertainty can be lessened when consumers have answers to their questions.  Find ways to invite questions, listen, and offer direct feedback.
• Build credibility:  We have all become skeptical of advertisements.  Engaging people in conversation can serve to build creditilbity – once again, it promotes a direct connection.
• Generate visbility:  People pay attention to the unexpected.  Remember, it doesn’t have to be crazy.

And, perhaps most importantly:

• Connect with people who have the ability to spread the word and influence others

It’s kind of like politics.  Not surprisingly, the term grassroots started in the political arena.

I say all this because I think marketers will have more success proposing grassroots marketing efforts to the executive team than proposing guerrilla marketing efforts.  Marketers need to be looking to leverage the unexpected and the unconventional.  And in today’s marketplace, where effective marketing is critical, a grassroots approach to marketing is one way banks and credit unions can introduce non-traditional initiatives into the mix…without being too crazy or over-the-top.

What is Guerrilla Marketing?

While many community banks are cutting back their marketing efforts,  or focusing on promoting messages of safety and soundness, I was surprised to see the cover story in this month’s ABA Bank Marketing Magazine: “30 Guerrilla Marketing Tactics – That Work.” 

Thinking about some of the more memorable guerrilla marketing efforts at financial institutions I’ve seen in recent years  – Umpqua Bank’s ice cream truck; Bank of America’s Giant Sofa in Grand Central Station to promote Keep the Change; and HSBC’s Bank Cab come to mind – I was disappointed to see that most of the tactics offered in the article weren’t in-line with my idea of guerrilla marketing.

The definition of guerrilla marketing found on Wikipedia is:

Guerrilla marketing is an unconventional system of promotions that relies on time, energy and imagination rather than a big marketing budget. Typically, guerrilla marketing tactics are unexpected and unconventional; consumers are targeted in unexpected places, which can make the idea that’s being marketed memorable, generate buzz, and even spread virally.

In my mind, the key characteristics here are: unexpected and unconventional.  And as the definition suggests, guerrilla marketing doesn’t need to be expensive – which is something that can benefit any of today’s financial institutions as they look to reduce spending across the board.

Working under this definition, some of the suggested guerrilla marketing tactics suggested in the article simply don’t fit; the more notable include:

• Daily small-space newspaper ads:  Newspaper ads are neither unexpected nor unconventional.  And running daily newspaper advertisements is bound to be more expensive than running an occasional advertisement.
• Unique bank calendar:  Calendars are expensive.  If you’ve historically offered calendars to customers, they’re expected – regardless of what kinds of photographs are used.
• Corporate Standardization:  While establishing corporate brand standards is an excellent recommendation – and one that any institution should work to establish – it simply is not guerrilla marketing.
• Unique CD offer: While offering a $500 CD at 10% will get attention, and could be considered unexpected and unconventional, it’s easy to see how this could get expensive.

My point here is not that these tactics couldn’t be effective; it’s that these tactics aren’t guerrilla marketing.  And because there was no definition of guerrilla marketing offered in the article (or mention beyond the title) , I was left a little confused after reading the article.

In doing a Google search for ‘bank guerrilla marketing’ in hopes of finding some additional examples, one of the search results I found was actually another ABA Bank Marketing article called When Should You Try Guerrilla Marketing?  from March, 2005.  In contrast to this month’s article, the 2005 article offered some good background information about guerrilla marketing:

“Guerrilla marketing includes any activity that uses a means other than traditional media to communicate your bank’s name and positioning to your prospects.  Also called ‘extreme marketing’, ‘grassroots marketing’, or even ‘feet-on-the-street marketing’, a guerrilla campaign has no preset rules or boundaries.  As such, guerrilla marketing can work for banks of all sizes.  If executed properly, a guerrilla campaign can be a low-cost, high-impact way to connect with your prospects, introduce your name or remind your customers you’re still here.”

Another important point to consider is that effective guerrilla marketing needs to be market-specific.  When considering the addition of guerrilla marketing to your strategy, think about the places where you could have the kind of low-cost/high-impact described above.  Where is your town’s Grand Central Station?  What will people notice in your community? 

While the examples offered above come from regional and national players, community banks in smaller towns can be effective in using guerrilla marketing tactics as well.  As an example, in an effort to generate awareness about it’s newest checking account, Incommons Bank (Mexia, TX) had a representative at a popular local restaurant one day paying for customers’ lunches – compliments of the Bank.  The event was completely unexpected and unconventional; and it generated the kind of buzz that a newspaper ad could never generate.

As traditional marketing media like advertisements blend into the background and go unnoticed, financial institutions need to at least consider non-traditional marketing marketing efforts like guerrilla marketing as means to effectively market their organizations.

Note: in fairness to Tom Hershberger, the author of the article discussed here, it sounds like the decision about the Guerrilla Marketing title was made by the editors at Bank Marketing Magazine.

Trouble for Some, Opportunity for Others

Last month, the Chicago Tribune ran an article with the headline: MB Financial chief Mitchell Feiger says it’s ‘very possible’ 25-30 Chicago banks could fail.

 

It’s a similar story in markets across the country.  Feiger discusses the national trend in the article:

“Say if 10 percent of banks in the country fail, which I think is a very possible number, and proportionally 10 percent of the banks in Chicago area fail, which I think is a very possible number, then 25 to 30 banks in the Chicago area will fail.”

 Feiger goes on to say “There will be more opportunities like this one”, as MB Financial was the acquiring institution of failed Heritage Community Bank.

 

Every week we hear about the latest banks to join the list of 20+ failed institutions since the beginning of the year.  And while the headline suggests trouble for some, it could present a series of opportunities for others.  

 

The challenge lies in the ability for executives and marketers to recognize and take advantage of local market opportunities.   While economic shifts impact markets differently, we are seeing opportunities for financial institutions to:

 

·             Reconnect with your customers

           How long has it been since you reached out directly to your current customers?  We’ve seen a lot of newspaper advertisements emphasizing safety and soundness, and we’ve seen some institutions post a message from the president on their homepage – but these offer indirect one-way communication.  Instead, write a letter, pick up the phone, or have an in-person conversation; connect with your customers, answer their questions, and work to deepen the customer relationship.

 

·             Deepen customer relationships

Many people hear the phrase ‘deepen the relationship’ and immediately think of cross-selling.  But consumers don’t want to be sold anything right now.  The opportunity here is not necessarily in selling more products, but in moving beyond product and working to create an emotional connection with your customers.  As your competition tries to attract your customers with advertisements and product promotions, you have the advantage of an established relationship – use it to your advantage.

 

·             Reestablish your competitive position

As players change in your markets, you have the opportunity to emphasize the points that make your institution different from the competition.  Tell people about your differences, demonstrate those differences and let them experience it first hand.  Now is the time to help people make the decision to bank with you – or help them decide that you’re institution isn’t right for them.  Either way, you have the opportunity now to differentiate from the competition.

 

·             Take advantage of customer churn

We know the players are changing and consumer uncertainty is high.  You may have the opportunity to take advantage of any customer churn happening in your markets as a result.  While advertisements and promotions may work to generate some awareness about your institution, you’re likely to have better success focusing first on deepening relationships with your current customers and reestablishing your competitive position in your markets.  Give your current customers a reason to talk about your institution.   Help people see the differences between your institution and the competition.  Your ads can support each of these efforts.

 

·             Expand your branch network

As financial institutions find themselves in trouble, opportunities arise for other institutions to expand their branch networks through acquisition of troubled bank branches.  The challenge here is making a decision to acquire based on the potential upside a branch location will offer your institution – and not simply because the opportunity is a good deal.  Think strategically and be proactive.  Define a series of parameters that will allow your team to make confident decisions about branch acquisition should the opportunity arise.

 

While many community banks and credit unions are focused on the immediate challenges brought about by the recent dramatic shifts in the economy, others recognize the opportunities embedded in those challenges to position themselves for long-term sustainable growth. 

 

Now is the time to take advantage of these opportunities.

People Helping People: Arizona State Credit Union Helping Arizona

Today’s economy certainly presents an opportunity for credit unions to emphasize the ‘people helping people’ philosophy.  But while many fail to gain traction by simply communicating the people helping people message,  Arizona State Credit Union has put the philosophy into action with its new initiative, appropriately named ‘Helping AZ’. 

At the center of Helping AZ is a website that leverages social media to create an online community where people can ask questions, find answers, and help others dealing with everything from unemployment benefits to money saving tips.  

Where some companies have posted an FAQ section to their website to answer questions, the Helping AZ site is worth looking at because:

• The site is all about you, the visitor.  It’s not about Arizona State Credit Union.  On a website that is intended to offer real help to visitors, it’s refreshing to not see sales messages or product promotions.  In fact, you’d be hard-pressed to find a link to the Credit Union’s website on the page.
• Rather than using an existing social media platform (e.g. Facebook), ASCU has found a way to incorporate social media in way that’s relevant in today’s marketplace and meaningful to today’s consumer.
• The site is dynamic.  It offers people the opportunity to post questions about today’s challenges and share ideas with real people.
• The site gives visitors the opportunity to submit comments and questions as a Guest, or to register with an email address to receive email updates to their posts.  This also works to give ASCU a database of users.
• The site asks for feedback and suggestions right on the homepage.  Using this kind of feedback can only make the site better with time.

On another note, the tagline for Helping AZ is “Your Voice. One Community.”  This certainly captures what the site is all about; it will be interesting to see if ASCU incorporates this with the Credit Union’s complimentary tagline “One State of Mind.”  Coincidence?  I doubt it.

Helping AZ is the most timely and relevant example of people helping people that I’ve seen in recent months.  It’s also one of the better examples I’ve seen of a financial institution finding a relevant way of incorporating social media into its efforts.  It will be interesting to see what kind of response this site gets, and how the concept may be applied in other markets.

Bank vs. Credit Union

With so much attention paid to the issue of banks vs. credit unions in recent months by bankers, news reporters and bloggers alike, you might think that consumers and writers would recognize that there is in fact a difference between banks and credit unions. But this week, I’ve come across two newspaper articles that got me thinking about whether or not people really do understand that there is a difference – or care enough to make the distinction:

‘Bank Opens in Midway’ from the Coastal Courier in Hinesville, GA, and ‘Bank Breaks Ground‘ from the Brewton Standard in Brewton, AL. Both headlines reference ‘banks’ – but the articles discuss new credit union branches being built.

Regardless of your position, we need to remember that some consumers think of financial institutions as a collective – whether it’s big banks, small banks or credit unions. And while there are certainly people out there emphasizing the differences between different types of financial institutions, there are others that continue to blur the lines between them at the same time.

_____

April 30, 2009 – ‘Local Bank Opens New Branch’: A story about Polish National Credit Union opening a new branch in Southampton, MA

Talk to your customers 2

Two days ago Advertising Age ran a story with the headline Bank Marketing Fails to Reassure Wary and Befuddled Customers.  The story quotes Douglas Berlon, global practice leader for financial services at Gallup saying “Bankers are just so generally conservative, so inward looking and so worried about taking hits for spending money on advertising.  But there is an absolute opportunity here.”  Mr. Berlon’s comment reminded me of what we often tell our clients: Everything you do and everything you say may either strengthen or diminish your brand.  That also goes for what you aren’t doing or saying.  If you aren’t managing perceptions of your brand, someone else is. 

 

That is certainly true these days with the entire industry under such intense scrutiny.  Look at how the media has fueled public perceptions about banks who participate in the TARP program.  TCF Financial announced plans yesterday to return the government’s money.  “Participation in TARP has created a competitive disadvantage for TCF” said TCF CEO William Cooper.  Northern Trust, who was called out in the press for its entertainment spending, also said it would return the money “as quickly as prudently possible.”   I wonder if they would have had to make these choices if they’d been more proactive in talking to their customers about their involvement in the first place.

 

Not every bank has been quiet.  A spokesperson from PNC was quoted in the Advertising Age article as saying “This environment calls for us to articulate what it is we’re doing, and that is that we’ve never stopped lending.”  Are you articulating what you’re doing?  What are your words and actions communicating to your customer?