Author: Jim Bruene

Third Federal Savings & Loan Lifetime Mortgage Approval

By Jim Bruene Posted on
Categories: Loans & Credit, Mortgage, Refi & Home Equity

Thirdfederal_mtgpassport_cardOhio’s Third Federal Savings & Loan <thirdfederal.com> Mortgage Passport program might be the best relationship program we’ve ever seen. The free program promises a lifetime of preapproved mortgages and/or refinances, subject to a few simple rules:

— Thirdfederal_mtgpassport_logo Owner-occupied housing within the bank’s lending area (all of Ohio and parts of Kentucky and Florida)
— Maximum LTV of 85 percent for loans less than $650,000; 60 percent for loans higher than $650,000
— Have never declared bankruptcy or been foreclosed on

Features

  • Mortgage is preapproved: Members are guaranteed a mortgage loan provided they meet down payment/equity requirements (15 percent for up to $650,000, 40 percent for higher) and have not filed for bankruptcy or been foreclosed on.
  • Lifetime membership: The preapproval is good for the lifetime of the member provided the above criteria are met; future credit score and income does not matter.
  • Reward programs: Members are automatically enrolled in Passport Rewards which promises prizes and "special gifts" throughout the year.
  • No program application required: Membership in the Mortgage Passport is by invitation only (preapproved) based on credit history; users receive an ID in their preapproval package that is entered into the bank’s website (application is still required for a new mortgage/refinance); mortgage site powered by privately held Mortgagebot LLC.
  • No maximum debt-to-income ratio: Provided the above equity measures are met, the bank lets the home buyer determine the house payment they can afford.
  • Downloadable, preapproval letter: Members can download and print a mortgage preapproval letter at any time to use when house shopping; no preplanning is required before hitting the open houses; and members can choose the loan amount to be cited in the letter.

Analysis
In the age of identity theft, layoffs, and mysterious entries on your credit report, it is reassuring to know that once you’ve joined Third Federal’s Mortgage Passport program, you’ll never have to worry about being approved for a mortgage again. This prevents the sad cases where consumers who’ve lost their jobs are stuck in their oversized house or mortgage because they can’t qualify for new, lower-priced financing.

And talk about engendering loyalty. Would you ever move your banking business away from a company that gives you a preapproved mortgage for the rest of your life! That’s better than free bill payment by just about every measure.

Assuming the underwriting is sound, the only downsides are:

  1. Limitations of "by invitation only": While it creates exclusivity and ensures the highest credit quality, what about prime prospects just moving into Ohio or Florida that have not received the bank’s preapproval offer? There should be some application process to receive the coveted "invitation."
  2. Thirdfederal_mtgpassport_homepage Undermarketed on its website: Again, because of the by-invitation-only nature, the program’s promotional material is low-key so as not to disappoint the majority of visitors not previously qualified for the program. The bank provides a homepage link (click on the inset for a closeup), but the tiny, almost unreadable copy says only, "Click here if you’ve received an invitation to participate in our passport program."

—JB

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Interchange Front Shifts to Germany

By Jim Bruene Posted on
Categories: Card Acquiring, Card Issuing, Legal, MasterCard, Payment Cards

Germany’s federal monopolies body, the Bundeskartellamt, received a legal complaint from the German Retail Association, alleging that interchange fee charged MasterCard and VISA, which average 150 basis points, prevents widespread credit card acceptance in Germany.

In a statement, the Association, a lobbying group, said that credit card payment account for only 5 per cent of all retail sales in Germany. The complaint calls on the Bundeskartellamt to cut interchange fees and to increase payment card transparency. It claims these steps will improve competition in the credit card sector. Spain, says the group, has ordered a step-by-step reduction of interchange to between 0.54 per cent and 1.10 per cent by 2008.

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Oracle and SAP Going After Global Core Banking Platform Market

By Jim Bruene Posted on
Categories: Uncategorized

Oracle Corp. is preparing to wage war with its main rival, SAP AG, to sell the next generation of core computer platforms to large banks worldwide.

Little wonder; the potential market is big. Financial Insights, a unit of International Data Corp., estimates 2005 sales in the U.S. alone to have been about $6 billion a year, and expects it’s primed to grow a compounded four percent a year, for the next three years. And the global market is much larger.

Continue reading “Oracle and SAP Going After Global Core Banking Platform Market” →

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Lead Generation Ideas for Finance Companies

By Jim Bruene Posted on
Categories: Advertising & Promotion, Lead Generation

One of the goals of online marketing, especially financial services marketing where consumers may not be comfortable submitting personal data over the Web, is generating leads. According to LeadFusion <leadfusion.com>, the parent of Financenter, the leading financial calculator provider, there are four steps to good online lead generation:

Leadfusion_foursteps_1

 

The last step, ACTIVATE, is the key to identifying sales leads. While most major financial institutions have financial calculators available online, how many of them are used to capture leads? Since most customers will not put up with a registration process BEFORE using the calculator, you must entice users to identify themselves at the end of the calculations.

Some common methods:

  • Etrade_ratewatch_signup_1Subscribe to an information alert: Users sign up to receive email messages when certain events occur, such as rates hitting a certain level; for example, E*Trade's Rate Watch (click on inset to see the sign-up form).
  • Complete an interactive coupon: Even normally wary consumers will hand over a surprising amount of personal data if you provide a tangible benefit, such as a significant discount or valuable freebie. One of our favorite examples, which was used continuously for more than five years, was Salem Five Bank's <salemfive.com> $100-off Mortgage Closing Costs coupon. The coupon, which is no longer used, required users to enter their name, phone number, and email address. Then they could print a personalized coupon that would save them $100 on a mortgage.
  • Fine-tune these calculations: Users wishing to perform deeper analysis will be asked to register first. Registration should be brief: name, email address, and optional phone number. You can also capture inputs to the calculator, but intent to retain this data must be disclosed to the user.
  • Lock in a special offer now: A tried-and-true DM practice, the time-sensitive offer. Tell users that rate/price/discount/premium can be locked in, if they enter their name and email address now.
  • Sweepstakes/contests: It's one of the most cost-effective ways to pull a large volume of leads. The downside is the sheer volume of unqualified prospects that throw their name in the virtual hat for a chance at that iPod NANO. Make sure you include several simple qualifying questions. For examples, see the previous NB articles in the Advertising & Promotion category.
  • Set up an appointment: This may not be selected by many, but you should offer the option of setting up a meeting on the phone or in a banking office to discuss the product further.
  • Apply Now: Most importantly, ask for the order.

For more information:

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E*Trade Bags Millions in Free Publicity

By Jim Bruene Posted on
Categories: E*Trade, Investment Products, Public Relations, Security & Privacy

Etrade_protectionguaranteeWow. It’s not often a press release rates an article in BOTH The Wall Street Journal and The New York Times. But that’s exactly what happened today when E*Trade made the relatively innocuous announcement that it wouldn’t hold its brokerage customers responsible when their accounts were defrauded.

Etrade_securityarea_1Consistent with previous innovations, the online brokerage and banking powerhouse wrapped its new message with impressive graphics and copy (see inset above-left for graphic displayed on its homepage today). Clicking on Learn More leads to an impressive security area where E*Trade touts four main protective measures (click on inset above-right for a closeup)*:

  1. Security tokens
  2. Electronic statements with paper turnoff
  3. Email alerts
  4. Antiviral and firewall software, which can be purchased through a link to Norton (60-day free trial offer); users can also run a real-time scan to check for vulnerabilities

Analysis
It just goes to show you how skittish the public has become about online security. I’d wager that most brokerage customers are sophisticated enough to realize they will eventually get their money back if it’s stolen from their account. So this is a non-event from a financial standpoint. E*Trade even admits that online fraud cost it only $2 million last year, less than the cost of one of their famous Super Bowl ads. The brokerage also said there were "fewer than 50 incidents," implying a fraud loss of approximately $40,000 per incident.

Evidently E*Trade’s marketing department prevailed over its legal counsel and actually put the company’s fraud-protection policies in writing. It’s amazing that makes headlines in 2006 and may say more about the growing need to cover your behind to fend off the class-action bar even if it means scaring off customers.

We hope this prompts other financial institutions to take similar action. One of the main functions of financial institutions is safeguarding assets. Customers, online or otherwise, shouldn’t have to guess whether certain types of fraud are covered. As any good lawyer would say, "Put it in writing."

—JB

*The screenshot displayed here is only the top portion of the security area, to download a screenshot of the entire page, click here.

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Everbank Reinforces Interest Rate Increase with Email

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs, Email Marketing, Everbank

Everbank_emailThere is nothing like a long run of rate increases to make your deposit customers happier. You might as well take some credit; it probably won’t be long before they move in the other direction.

So every time you raise rates, make sure to let customers know with an email message. Of course, this assumes competitive rates. If you are increasing from 0.45 percent to 0.65 percent, you probably want to keep that to yourself.

EverBank raised checking account rates Jan. 1 from 3 percent to 3.5 percent depending on balance levels. On Jan. 3, it sent an email with the subject (click on inset for closeup view):

You’re earning more with EverBank – interest rates rise again!

Analysis
EverBank’s message is straightforward. Here’s what they did right:

  • Included security graphic/link in upper-right corner
  • Kept copy concise and to the point
  • Included a chart showing rate by balance level; subtle encouragement to add funds
  • Reinforced free online banking and bill pay (underneath chart)
  • Cross-sold its Yield Pledge Money Market and CD for those looking for better rates; Yield Pledge products are guaranteed to offer a rate in the top 5 percent at BankRate.com
  • Included toll-free phone number
  • Signed by real person with real signature; in this case, Frank Trotter, president

And a shorter list of improvements:

  • Personalization helps make a message look genuine, but there’s no personalization in the salutation: "Greetings EverBanker!"
  • Clicking through the security graphic leads to a generic page full of links to terms and conditions; the bank should create a page that specifically addresses users’ security concerns, especially regarding phishing emails
  • The bank should improve its unsubscribe function; currently, it’s an all-or-nothing choice triggered by sending a blank email with UNSUBSCRIBE in the subject line; that’s easy for users, but the bank’s just lost an opportunity to query the customer in more detail about what they do and don’t want to receive via email
  • Weak P.S.: "The FreeNet Checking Account gives you the yields and the service you deserve. Bank on it!"

Grade
Overall, we’ll give it an A-

—JB

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$28 Billion in U.S. Banking Deposits Up for Grabs Online

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs, Market Research & Metrics

Forrester’s Ron Shevlin weighs in Jan 10 with an estimate of the amount of deposit balances chasing higher rates online. Using recent (Q4 2005) survey data gathered from 4700 online households, he concludes that 30 percent of online consumers have $10,000 or more in liquid assets. Furthermore, three out of four of those households (24 percent of all online households) are interested in increasing the rate paid on their savings accounts. But one in four of those wouldn’t move until they could get 3.5 percent or more in additional interest, an unlikely scenario for most consumers. That leaves 18 percent of online households (24 percent x 74 percent) ready, willing, and able to make sizable deposit moves online.

Analysis
To quantify the amount of deposits in play, a number of assumptions must be made: the amount of liquid assets held in checking accounts; the amount that would be available to move to another account; and the willingness to move balances for various rate differentials (see the Forrester report for complete details). Forrester’s conservative analysis assumed that only those willing to move for 1 percent or less in rate differential (6 percent of all online households) would take action, potentially moving $28 billion from low-interest checking accounts to high-interest savings accounts.

Taking a less conservative approach, one could also argue that with many direct banks paying 3 percent more than typical interest-bearing checking accounts, the potential deposit switchers are much more prevalent, closer to the 18 percent we derived in the first paragraph. Under these less conservative assumptions, much more would be at stake, as much as $60 billion or more. Furthermore, the Forrester estimate considers money being held only in checking accounts and does not include other liquid assets in savings accounts, CDs, and money-market funds.

Whether $28 billion or $60 billion, the total deposits at play are a small percentage (0.5 percent to 1.0 percent) of the $6 trillion in insured deposits in the United States.

Action Item
We highly recommend the report for anyone looking to reprice deposits for online customers, or even if you just want to understand what’s at stake. The report is available free-of-charge for Forrester clients, or $249 pay-per-view from its website.

—JB

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Economic Outlook 2006

By Jim Bruene Posted on
Categories: Metrics & Market Research, Outlook

If 2005 turned out to be a lot more eventful than anyone expected—the virtual disappearance of monoline banks and the frontal assault on interchange are only two examples—then there’s no reason to expect 2006 to be boring.

The M&A outlook alone promises to give this newsletter plenty to write about: The vast amount of private equity money now looking for a home almost guarantees it, even if the recently inverted interest rate and interest swap curves may promise some sort of recession.

Continue reading “Economic Outlook 2006” →

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Payment Cards Watershed – MasterCard IPO

By Jim Bruene Posted on
Categories: Credit/Debit Cards, MasterCard, Payment Cards

This should be a watershed year for payments cards. The approaching MasterCard IPO, and Visa’s likely response, will likely reform the sector’s fundamental business structure. Meanwhile, First Data Corp. is undergoing profound changes, and it’s unlikely that either Discover or American Express will be twiddling their thumbs while the future of the card associations is decided.

The MasterCard IPO will likely have the greatest impact on the space, thinks David Evans, founder of Market Platform Dynamics. "It will force them to become a much more entrepreneurial and different organization than it’s been in the past, partly because of changes in the marketplace, but also because of organizational changes that will change the dynamic of that entity," because of the need to satisfy its new investors, he says.

Continue reading “Payment Cards Watershed – MasterCard IPO” →

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FFIEC Will Cause Financial Network Security Confusion

By Jim Bruene Posted on
Categories: Legal

This year we can expect the computer security arms race to keep scaring the daylights out of anybody who understands what’s going on. Also: Look for confusion in the financial community about complying with the Federal Financial Institutions Examination Council’s (FFIEC) mandate to install two-factor authentication by year-end.

The main story on the hacking front is the upward spiral of money and resources on the black hat side, and the vigorous defense mounted by the white hats, now that real criminals are on the scene, says Kawika Daugio, director of Northeastern University’s information assurance program. “We’ve seen more and more professionals involved,” he says. “It’s the standard trend because, as the difficulty [to successfully attack a protected network] increases, the scale required and the sophistication required to make it pay, go up.”

Continue reading “FFIEC Will Cause Financial Network Security Confusion” →

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