Let’s Do a Better Job Handling Rejected Online Loan Applicants

image If you’ve ever worked at a financial institution, you’ve no doubt heard the often-true horror stories from the loan department. You know the ones, where senator so-and-so’s spouse or the CEO’s brother were turned down for a car loan (see note 1).

The problem with automated loan systems is that there is no human doing a reality check on denied applications. Was it really a deadbeat applying or did someone just make a mistake on the application form? You can bet if a senator’s spouse had applied for the loan in person the loan officer would have picked up some clues that maybe this app deserved some extra scrutiny.

But the flip side to human involvement is discrimination, whether intentional or not. A huge benefit to automated loan decisioning is the virtual elimination of certain biases from the process. Computer algorithms only evaluate the factors they’ve been told to look at. Nothing more. Nothing less. 

And because computer analysis has put more science into the underwriting process (notwithstanding the recent housing bubble), most people agree that it’s generally been good for the bank and (most) consumers. But even the best system will generate a certain number of false negatives leading to the occasional embarrassing decline.

So it’s worth considering installing a second-look system in your online process, providing wrongly denied applicants another chance at proving themselves worthy, before they end up embarrassing your CEO at their next family gathering.  

And why might I be thinking these thoughts? Yesterday, I went online to accept the direct mail offer from a major credit card issuer who’s sent me more than 100 solicitations over the past decade (note 2). And I was flat-out rejected. Either I fell victim to a false negative or the issuer’s underwriting is not in sync with their marketing.

The application process = great
The online acceptance process itself was flawless. I typed in my registration code, answered a few questions, and hit enter. It had taken about 3 minutes up to that point. Then wham! Twenty-four seconds later, the application was denied (note 3).

The rejection process = sucks 
And even though I could live without the card (note 4), it’s frustrating and disappointing to be turned down flat with no recourse. Especially after being aggressively solicited for years.

And the company pretty much disowns you after the bad news. The website returns a two-sentence rejection thanking you for your interest, saying that they couldn’t approve the request, and that they’ll followup in writing in a couple weeks explaining their reasoning. And BTW, please don’t apply again for at least 45 days. No apology. No email. No phone (or even email) to contact for more info. No referral to the credit bureaus or other resources. Just a simple, cold brush-off.

So I went back to the direct mail letter and called the number listed there. The bank rep said there was no way to look at the app I’d entered minutes earlier to see why it was denied. All he could do was take another new app, but he warned that the system wouldn’t like seeing multiple apps and would likely reject it again.

Recommendations: You cannot avoid making credit denials, lots of them. And you can’t avoid the occasional false negative. But you can, and should, create a way for online applicants to ask for a second look, and perhaps correct any errors that they might have made. And if you can’t do that, at least be compassionate with the immediate messaging and try to offer some helpful resources.  

My three-step, face-saving, loan-denial process:

1. Thank the applicant and apologize for not meeting their needs. Say this both on the website and in a followup email.

2. Explain that although you’re not perfect, there appears to be circumstances in the application that preclude you from offering credit at this time. Refer them to Credit Karma, Quizzle, or other credit resources to view their credit score and learn more.

3. Provide a second-chance option either through email or telephone for applicants with strong credit to ask for a human review. 

Optional: For customers you must turn down now, but who you think might be good future prospects for loans and/or other products, or who are already profitable existing customers, consider sending a consolation prize: $5 statement credit, a Starbucks card, two-for-one movie certificate, etc. 

Second-look apps would need a higher level of scrutiny to ensure against those trying to game the system. But there will likely be some gems uncovered in the process. 

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Notes:
1. My favorite personal story of botched celebrity banking happened at First Interstate Bank of Washington where I worked in the late 1980s. Bill Gates, whose mom was on our board, supposedly used what was then our “state-of-the-art” telephone bill-payment service. Apparently, we didn’t send off his mortgage payment and the late fee we ate was more revenue than the entire bill-pay program generated in a month. It happened a few months before I started working there, so I can’t vouch 100% for its accuracy. But I can tell you it was a popular story within the bank with a “failed tech” angle and a juicy tidbit about the outlandish size of the mortgage on the Gates property.    
2. This is a rare situation where I’m not naming the company in a public blogpost because a credit denial is such an individual thing. It doesn’t seem fair to single them out for one incident which is most likely not indicative of the normal experience there. However, I will disclose the name on an individual basis if you email me and promise not to post it publicly.  
3. I’m not sure what went wrong with the application. I have several decades of excellent credit, zero inquiries in the past 6 months, reasonable debt-to-income, and a decent level of household income. And I checked all three bureaus recently and everything was fine. However, the bureaus do have inconsistent, and partially incorrect, info about my employment history. But the application did not ask for employer name, so I don’t see how that could have sunk it.  
4. I actually planned to use the card frequently; it had better terms than the one I was hoping to replace.

Part 2: Chase Apologizes for Outage in Customer Email but is Light on Details

image Over the weekend, Chase Bank sent a short email apology to its online customers. Overall, the message was fine and now the bank can check that off its to-do list.

I’m glad the bank didn’t waste a hundred million dollars giving everyone a $5 credit. A simple apology is the best approach, preferably during the actual outage. This message, six days after the initial downtime, is a bit sub-par for a company with the resources of Chase (for a review of its initial communications, see our previous post and today’s review at The Financial Brand).

Analysis of the Chase email (screenshot below): Overall, the email message was adequate. The title was good, “Please accept our apologies.” And that was all most people needed to hear. But I’m a little surprised by the lack of detail provided within the message. Especially, considering the much better note posted to Chase.com over the weekend, then apparently taken down (see note 1 below).

In Sunday’s email, Chase reassured customers that “(your) account information was not compromised.” That’s great, but the bank could have scored extra points by saying exactly what went wrong, how they fixed it, and what they are doing to prevent a recurrence (this info could be delivered via a link to more detail on the website.) 

The bank should also have made the apology unconditional. Chase’s exact words (italics mine), “we apologize if this created difficulties” and “please accept our apology for any inconvenience this may have caused.” Forget the conditions. Assume it inconvenienced everyone and just straight-up say you are sorry.

Another no-small thing. A note of apology should be from an actual person (like the bank’s website message, note 1). The lack of a signer imparts a nagging impression that no one at the bank has stepped up to own the problem. An email address or phone number for additional info would also make it seem more sincere.

Finally, according to the info posted on the site over the weekend, the bank is covering late fees caused by the outage (see note 1). Perhaps that email went only to bill-pay customers (which I am not). But still, why not mention it?  

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PS  One last question and then we’ll move on, promise. Why was the online apology taken down after just a few days? Many customers affected by the outage will never see the all-important public apology on the bank’s homepage (see screenshot at The Financial Brand).

Chase Bank apology email (19 Sep 2010, 2PM Pacific)

  Chase Bank apology email (19 Sep 2010)

Note:
1. According to the New York CBS affiliate, the following appeared on the Chase website on Friday, 17 Sep (link):

We are sorry for the difficulties that recently affected chase.com and we apologize for not communicating better with you about this issue. As you may know, we experienced a significant service interruption and Online Bill Payments that were scheduled to be sent on September 13, 14, or 15, 2010, were sent by the morning of September 16, 2010.

If you scheduled a payment to be sent during those dates, but do not see it reflected in your payment activity by September 16, 2010, please contact us.

We are working hard to make sure that any late fees you may have incurred as a result of this processing delay are being refunded:

  • If your payment was to another Chase account (for example, Chase Credit Card Services), we are automatically refunding any late fees.
  • If your payment was to anyone other than Chase (for example, your telephone service, utilities or another financial institution), we are contacting many payees to prevent late fees from being charged.
  • However, if your payee charged you a late fee, please call us at one of the numbers below or visit your nearest Chase branch. We will refund the late fee to you.

We recommend that you keep this letter in case you need to provide information to your payee.

Please be assured that Chase’s online security has not been compromised as a result of this service interruption. Your accounts and confidential information remain safe and secure.

Giving you 24-hour access to your banking is of the utmost importance to us. This was not the level of service we know you expect, and we will work hard to serve and communicate with you better in the future.

Again, please accept our apology for this disruption and thank you for your patience. If you have any questions, please stop by your nearest Chase branch or call:

  • 1-800-935-9935 for Personal accounts
  • 1-877-CHASEPC (1-877-242-7372) for Business accounts
  • 1-800-848-9136 for Home Lending and Auto accounts
  • For credit card accounts, please call the number on the back of your card

Sincerely,

Patricia O. Baker
Senior Vice President
Chase Executive Office

UW Credit Union Adds Free Credit Scores to Online Banking Dashboard and Links to Credit Karma

image I’ve long been impressed with the work done by Eric Bangerter (Director of Internet Services) and the UW Credit Union in the online channel. Nearly every one of its new features gets starred in my blog reader. And since its early-2008 launch, I’ve cited Eric’s blog, UW SourceCode, as the best example of how to communicate to your power users and online banking fans (see blog feed within the online banking dashboard in the first screenshot).

But the latest innovation might be my favorite. The Madison, WI-based CU has integrated credit scores, powered by TransUnion, directly into the online banking interface (see first screenshot). This is exactly where it should be, so that users can keep tabs of their credit health, without needing to go through the tedious and oftentimes expensive process of authenticating yourself at a third-party site.

image Even if that’s all they did, I’d give them an A+. But there’s more. UW CU has become the first financial institution to offer a private-branded version of Credit Karma’s credit report portal. The credit union pays a license fee to Credit Karma in order to offer the private-branded, ad-free version (see second screenshot). Sears also offers a similar service for its store card (see previous post).

UW CU members (120,000 active online bankers, see note 2) appear receptive to the info. In the first few days, more than 5,000 had clicked on the link, with more than 2,800 completing the registration process. That is a huge win for the members, the credit union, and Credit Karma.

Bottomline: Most of the time (98%/99%), end-users need see their credit score only for reassurance that nothing horrible has happened to their credit file. But the problem with posting ONLY the credit score is that those 1% to 2% who want more info often need it fast. And if you don’t offer a deeper dive complete with explanations of what’s going on, you are going to end up with confused and/or irate customers and a bunch of phone calls.

So, there needs to be a mechanism available for drilling down into the full report. And the Credit Karma portal is a relatively low-cost way to do that. Alternatively, you can upsell the full credit report for a fee in the $5 to $10 range or sell an annual subscription for unlimited access (see note 1).  

UW Credit Union online banking homepage showing credit score and Credit Karma linkage (16 Sep 2010)

UW Credit Union online banking homepage homepage showing credit score and Credit Karma linkage (16 Sep 2010)

UW Credit Union co-branded credit portal powered by Credit Karma

UW Credit Union co-branded credit portal powered by Credit Karma

Notes:
1. For more information, see our Online Banking Report: Credit Monitoring Services (published in 2007).
2. UW CU has 150,000 members in total; 120,000, or 80%, have used online banking in the past 90 days; 80,000 (53%) used it in the past 30 days.

Lessons from Chase’s Online Banking Outage

image For much of Tuesday (see note 1), Chase Bank had a message in the upper left corner of its website saying that the website was temporarily unavailable “due to scheduled system maintenance” (screenshot here). Later in the day, the bank finally took that excuse down and merely said that the site is “temporarily unavailable” (see screenshot below and inset).

The outage appears to have afflicted iPhone app users as well. I tried several times and was not able to connect. But, unfortunately, and here’s a new downside for an app compared to a website, there is no way for the bank to warn users within the app that there’s a back-end problem. So users just tried and tried to connect. 

Interestingly, text banking seemed to continue working, at least on the card side. During the outage I was able to retrieve the current balance and available credit via a text message to the bank’s shortcode. That could be an interesting side benefit to text banking, “works if the website is down.”

Lessons for Netbankers: There’s no way to avoid the occasional tech glitch. The important thing is how you handle it. Today’s salient lessons reveal how to communicate during downtime, scheduled or otherwise.

1. Homepage warning: The message on the website is crucial, and Chase does an okay job prominently posting a concise warning on the homepage. Sure, the bank could have been more specific, but when you are in the middle of an IT crisis, there often isn’t a whole lot more that can be said. Still, they were tardy in pulling the “scheduled maintenance” excuse down.

Chase website grade = B-

2. Referrals to other channels: Some of the press reports quoted a Chase spokesperson referring users to the toll-free number as well as ATMs and branches where the systems were apparently working fine. The bank’s website message should also have made those recommendations. Even if live operator support was hopelessly backed up, the bank should admit that and encourage customers to call the toll-free number to check balances and other activity. 

Chase website grade = F

3. Apologize and reassure: From crisis management 101: apologize first, then reassure customers and tell them what you are doing to fix the problem. Chase was doing little of that from what I can see. There was no apology. There was no real explanation. And there was no reassurance that your money was safe. The information void was left to be filled with tweets and blog-post speculation. (15 Sep update: When I logged in today for the first time since the outage, there was no mention of the problem. And oddly, my last login showed as having happened during the middle of the outage. I’m trying to figure out how that could be; perhaps from my attempted iPhone app login?)

Chase website grade = Incomplete (I’m sure it’s coming, but it should have been visible today.)

4. Communications to mobile customers: If the mobile app is also down, you need to proactively send a message to app users explaining the situation. Conversely, if the mobile app or text messaging is working, refer Web customers to those channels.

Chase mobile grade = F (didn’t see that message)

All in all, a bad day for Chase online banking. But a good learning opportunity for everyone else.

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Chase Bank homepage with “unavailable” message (14 Sep 2010, 3:41 PM Pacific)

Chase Bank homepage with new

Online banking main page with unavailable message (14 Sep 2010, 3:41 PM Pacific)

Chase Bank online banking main page with unavailable message

Note:
1. According to various Twitter messages, Chase online banking went down at about 10 PM Eastern time on Monday, 13 Sep and came back online a few minutes ago (1:45 AM Eastern, 15 Sep, Wed.), a little under 28 hours.

BankSimple May be First Invite-Only Retail Bank Launch

The Bank nightclub, Las VegasI’m not sure what BankSimple told investors, but it worked. The non-bank bank startup grabbed $3 million in VC money last week. The company is positioning itself as a tech company rather than a financial services provider, a smart move for valuations.

imageI finally caught up with co-founder Joshua Reich a few days ago. I came away from that conversation even more impressed. These guys are really trying to reshape the banking experience. They talk more like a credit union than a bank, meaning they are maximizing the customer experience instead of the shareholder one (see note 1).

Granted it hasn’t launched yet, but so far the “better experience” strategy is working wonderfully. The startup has a 20,000-person wait list for an account. Think about that, a waiting list…to join a bank. I never thought I’d write that sentence. If 75% convert to actual customers, BankSimple will have already hit its first-year goal. A nice problem to have.

Graphic from BankSimple website

And the beauty of so-called scarcity marketing is that you can use invite codes as a sort of virtual currency to reward existing customers and other influencers. BankSimple plans to use invite codes to encourage certain unspecified behaviors from existing customers. It’s a page out of the Silicon Valley playbook. Google kept Gmail invite-only for several years. There was a even a time where people paid real money on eBay for a Gmail invite. The same could happen at BankSimple.

Other things I learned:

  • 42% of its prospect base already uses Mint, so BankSimple is content to let someone else handle the heavy lifting in the aggregation space. At launch anyway, they will show activity only with direct BankSimple partners.
  • As previously reported, the bank is committed to mobile remote deposit. They’ve spent considerable time working the kinks out of that. They even looked at extending the concept to bill payment, allowing users to simply scan bills and have them automatically paid; however, too many tech problems surfaced, so the effort has been shelved.
  • Focused on real-time everything. They may be the first bank (at least in the United States) to have everything they do occur in real time. They think that will greatly reduce customer service headaches and expense.

Notes:
1. But clearly BankSimple is no nonprofit. The VCs are there because they smell a 10x return, not because they don’t like banking fees.
2. Photo credit: The Bank nightclub in Las Vegas.
3. Previous posts on BankSimple here.

ActivePath Named OBR Best of the Web for Email Banking System

obr_bestofweb In our most recent report, Email Banking: Revitalizing the Channel, ActivePath was named the third OBR Best of the Web winner in 2010. The company was cited for its unique plugin software that turns the user’s email inbox into a mini online-banking center.

We believe that the future of banking information delivery is outside the website. Increasingly, users will rely on information pushed to them through Facebook, Twitter or RSS feeds, to mobile phone apps, and to the email inbox. ActivePath’s solution plays into that trend.

The just-launched Israeli startup becomes the 78th company to win the designation since we began awarding it in 1997. The other two winners this year:

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Note: OBR Best of the Web awards are given periodically to companies that pioneer new online or mobile banking features. It is not an endorsement of the company or product, just recognition for what we believe is an important industry development. Recent winners are profiled in the Netbanker archives.

Wal-Mart Sells Paper-Check Fraud Protection for Just $1.95 per Box

imageNaturally, we use online payments as much as possible both at home and in our business. But even so, we still go through a box or two of old-school paper checks every year.

Running low on business checks, I today logged in to my bank to order a box. Unfortunately, it does not support online reordering of business checks, only personal ones. I was referred to a toll-free number. But rather than go through an unknown phone ordering process, I went back to WalmartChecks.com (note 1), a service from Wal-Mart that I had tested many years ago.

imageThe reordering process was drop-dead simple: Just click Quick Reorder on the homepage, type the bank’s routing number, account number, and beginning check number, then make a few selections from the menus, and press reorder. It takes all of about 60 to 90 seconds. You don’t even have to input payment info, because the total is simply deducted from your checking account.

But the reason for this post is to highlight the interesting cross-sale made during the reordering process. For $1.95 per box, Wal-Mart offers a check-fraud protection service called EZ Shield from a company of the same name, a recent spin-off from printed-check marketer, Custom Direct (CDI). I was pitched the product through a yellow-highlighted box in the middle of the order-confirmation screen (see first screenshot below).

I wasn’t sure what it was, so I clicked on More Details to learn that EZ Shield reimburses users for fraudulent use of the checks in the box (see second screenshot). The service provides coverage of up to $25,000 total if one or more of the 200 checks is altered, stolen from the payee and deposited, or used with a forged signature. The EZ Shield logo is printed on the checks to remind users that they are protected.

Bottom line: While paper-check fraud is not a major concern to me, I still value the small improvement in peace of mind I get for just $1.95. And for Wal-Mart, the $1.95 was a 28% revenue lift to a $6.96 box of checks. More importantly, the value-add makes it more likely I’ll be a repeat customer even when my bank eventually enables online check reordering.

WalmartChecks.com shopping card with EZ Shield cross sales (9 Sep 2010)

image

Popup explanation of EZ Shield (link)

image

Note:
1. According to Compete, the check-ordering site gets about 150,000 unique visitors per month and traffic has been relatively flat the past year.

The 49% Text Banking Gap

image Quick. What comes to mind when you envision mobile banking? I’m guessing most of you pictured a mobile website or shiny new app running on a recent iPhone, Blackberry, Android or other smartphone.

And if mobile banking was used only by techies, that would be about right. But banking is used by just about everyone, and everyone still doesn’t have a smartphone and Internet data plan.

According to the latest study out of Pew Internet (note 1), 82% of U.S. adults have a cell phone (and another 6% of the total live in a household where someone else owns one). And 72% of those cell phone owners use text messaging while only 38% access the Internet through their phone.

And only 60% of the mobile-Internet users, or 23% of all cell phone users, are frequent users, accessing the Internet 3 or more times per week (note 2). 

So the text-banking gap is 49% (72 less 23) or half of all cell phone users. Those are the people that use text messaging but do not regularly access the Internet through their phones. Another way to think of it, the non-Internet-using segment is more than twice the size of the mobile-Internet-using group. Or more simply, text users outnumber (frequent) mobile Internet users 3 to 1. 

Bottom line: Don’t overlook the mainstream text-message group for both alerts and balance inquiries. And make sure your marketing and educational material speaks to the sizable segment that could care less about your new iPhone app and just wants to know how to txt for their bal. 

Notes
1. Adult data compiled via telephone interviews in May 2010. N = 2,252. Teen data is from a year ago in a telephone survey of 800 teens (age 12-17) fielded June through Sept. 2009.
image2. In comparison, text-message usage is crazy high (see eMarketer graph of the Pew Internet data inset). According to the Pew data, adult (18+) text-message users send/receive almost 40 text messages a day. Of course, that’s nothing compared to the thumb-weary, under-18 crowd who send/receive an average of 110 messages per day. Side note: The wording on the question asks for the number of messages sent AND received, so one exchange, text out and reply back, should only count as one message. But I’m guessing respondents are thinking of this more as “sent OR received” so that each exchange counts as two messages. I also suspect the kids are over-estimating their usage quite a bit, wanting to wow the researchers with their uber-connectedness. But the bottom line is the same: Teens have embraced texting, and adults have caught the bug as well.   
3. For more info on mobile banking, see our mobile banking series in Online Banking Report.

Friday Musings: Amazon.com Should Buy Barnes & Noble and Partner with a Direct Bank

image One of the best things to happen in 20 years of living in northeast Seattle was the opening of Barnes & Noble in our local shopping center, replacing the tired old department store, Lamonts

For this family of readers, the massive, two-store B&N has continued to be a cherished destination for more than a decade. When the boys were young, it was Tuesday night story time (with free fresh-baked chocolate-chip cookies). Later, it was a place to spend their birthday money on new books, music and DVDs. And I’ve personally bought at least a couple hundred items there over the years. 

But I’m also an Amazon.com fanatic and buy most everything I can there nowadays. My wife and I (though not the boys yet) are ebook addicts, reading on our iThings via the Kindle app (note 1).  So, I’m more than a little concerned about our neighborhood Barnes & Noble. Printed books and other media, along with CDs/DVDs, are on their way out, so is there any hope of keeping the neighborhood B&N in business?  

Musing 1: B&N Rescued by Amazon.com
Here’s my dream: Amazon buys Barnes & Noble, perhaps partnering with a major financial services brand (note 2), and turns it into a fully online/mobile channel-integrated super store. Amazon’s major online departments could be recreated within the massive B&N footprint: the book store, of course, electronics, music, movies/TV, toys, home and garden, shoes, and so on.

High-volume goods would be stocked and available for purchase. Consumers could also pick up goods ordered via online/mobile enabling same-day delivery for many items. But the main focus of the store would be self-service online shopping. Shoppers in the shoe department, for example, could see and hold various styles, but would place an order through a mobile app or online kiosk, to get their specific size delivered to the store or their home. The concept would be to showcase a wide variety of items without incurring the costs of holding massive inventory within the store.

Musing 2: Amazon Financial Centers Installed within the Super Stores
Though I’m not a huge fan of branches, they still have their place. Amazon could turn a corner of the store into a financial services center. The center would feature deposit-taking ATMs to handle those pesky checks and would have a financial specialist or two on hand to help customers with mortgages and other high-touch financial needs (no transaction activity, however).

Financial center staffers could also be incented to help drive users to co-branded Amazon loyalty programs with online and in-store sales diverted from credit cards to ACH/debit, saving the company tens of millions in annual interchange. Financing big-ticket items could also create a massive new revenue stream for the retailer.   

While the financial operations could be private-branded under the Amazon name (e.g., Sears), it would probably make more sense to partner with a major direct financial services company such as ING Direct, Citibank, or Schwab, or an international giant such as Standard Chartered, Barclays, or OCBC which would gain a major footprint in the United States with 700+ strategically located mini-branches (notes 3, 4).

It’s not going to happen, Amazon is a Wall St. darling as a pure-play ecommerce company, but for the sake of the neighborhood, I wish it would.

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Notes on the the business case (see huge caveat, note 5): 
In this simplistic proposal, I’m ignoring a zillion issues which are beyond the scope of this blog. For example, would existing B&N leases even support Amazon’s product mix? But to an outsider, it looks enticing for the following reasons.

  • B&N is currently valued at less than $900 million and change after a recent run-up after it announced that it was for sale (note 6). In comparison, Amazon’s is worth $62 billion today. As a matter of fact, its market cap has grown $7 bil since I started this post a couple weeks ago, enough to buy seven Barnes & Nobles. Clearly, Amazon could afford it, though whether shareholders would support it is another matter.
  • Merging with B&N would take out one of Amazon’s major competitors, theoretically allowing the company to boost prices. With $25 billion in revenues, a quarter-percent (25-basis point) price increase at Amazon would add $60 million to the bottom line.
  • In-store pickups could help reduce Amazon’s massive shipping expense. 
  • And while B&N isn’t currently generating a profit, it was operating cash-flow positive during the past 12 months (+$120 million).
  • Amazon could partner with other direct commerce companies to spread the risk. The financial services mini-stores alone could bring in $100 million annually assuming a $10,000 per month rent/rev share per location (note 3). And other retailers might also be interested in mini-stores within the big Amazon box: Microsoft, Dell, Sony, HP, Drugstore.com, and so on.   

Other notes:
1. While I consume almost all fiction digitally, I still like to buy printed business books to keep on the reference shelf. I find it easier to remember they exist that way. Even my semi-Luddite brother has jumped on the Kindle bandwagon at the new $139 price point.  
2. I mostly added this to justify posting it here. Ironically, this strategy is almost the polar opposite of our Online Banking Report: Creating the Amazon.com of Financial Services originally published in 1998 then updated in 2000 (more recent summary here). 
3. I’m not including another 600+ B&N locations on college campuses, because many of those would not be a good fit for financial services and/or the schools would not allow a competing financial provider on campus.
4. Adding financial stores to Barnes & Noble retail locations could be problematic if the leases prohibit banking operations due to exclusive deals with other banks in the shopping center.
5. Caveat: Although I do have an MBA, my balance-sheet reading skills are quite rusty. And I don’t have an ounce of retailing experience (outside banking), so please realize this is primarily conjecture on my part. 
6. There’s also another billion in long-term debt and other obligations.

Gmail’s New Priority Inbox Should Inspire Banks to Do the Same with Electronic Statements

image I’ve been on a bit of a campaign this summer (writing in Online Banking Report here and here), about the need to move beyond the static online “data dump” model to a more measured approach in delivering precise financial info when and where the customer needs it. 

We mostly looked at outbound messaging and streaming systems: email, text, RSS and third-parties such as Blippy and Swipely. But the same logic can be used to improve the financial home base, the online statement.

Google’s new email option, Priority Inbox (aka Magic Inbox), introduced to Gmail users this week (note 1), is a great example of how this could work. Instead of always displaying email (or transactions) in chronologic or reverse-chronologic order, use algorithms to show items in order of importance (see screenshot below).

The bank-transaction importance-ranking would obviously include the size of the item. But it would also position unusual payments of any size at the top of the list so that users could more quickly identify fraud or errors. And, as with Gmail, users should be able to label and flag transactions for future reference (note 2).

A service like this would have saved me hundreds of dollars this year, by alerting me immediately that my cell phone bill had mushroomed, and that I needed to switch to an unlimited-minutes plan.

Gmail Priority Inbox (1 Sep 2010)
Note: There are no messages in the top priority area called “Important and unread” because I’d read them all. Google provides a little note of congratulations for clearing out that portion of the inbox.

Gmail priority inbox is a good model for online banking and credit card statements

Notes:
1. Google has offered similar algorithm-based ordering in its RSS reader for some time. I’ve been using it for almost a year and am a big fan. It really helps lift the best posts to the top of the 600 or so I get each day. I will use Twitter a lot more when it offers the same type of functionality (Does anyone know of a Twitter client that arranges tweets by importance?)  
2. And like Google, banking users should be able to store their transactions for as long as they are customers. See our Online Banking Report on Lifetime Statements for more info.

Rearranging the Deck Chairs on the Titanic Branch

imageToday’s Financial Brand post by Jeffry Pilcher is the best article I’ve ever read on branch design. If you are building or remodeling mega-branches, it’s an absolute must-read.

But as I read it, I couldn’t help thinking about that old saying about the deck chairs on the Titanic. Sure, IF valuable customers continue to visit branches, and IF those customers are willing to be pitched products as they rush through their errands, and IF you train/compensate your staff to effectively sell, and IF you can still afford the half-mil or more it costs to run each one, then by all means build U-shaped branches to maximize sales interactions, hire world-class greeters, and install engaging merchandising displays along the snaking path to the teller windows in the back.

imageBut no matter how many design awards your branch receives, it won’t change the megatrend: the future of financial services is outside the branch. Nearly every profitable business line is already sold direct: credit cards, prepaid cards, insurance, mutual funds/investments, car loans, mortgages, commercial loans, and, more recently, even savings/CDs and checking accounts.

And now that ATMs, PC scanners and mobile phones handle deposit-taking better than the friendliest teller (note 1), the traditional branch has no business case. Sure, spacious and attractive branches in high-traffic areas are great imagemarketing tools. They reinforce your brand, show your stability, and I’ll have to admit, they are mighty convenient for dropping off paper checks and getting free cookies.

But that model is too expensive. I agree with Mr. Pilcher that branches are far from dead. But the future branch is likely to look more like an Edward Jones or Allstate office, not the thing of beauty shown here. There may even be more of them (Edward Jones tallies more than 10,000), but they won’t look like these pictures. 

The bank/CU branch will morph into small storefronts sprinkled throughout the community staffed with a few people heavily incented to produce revenue. Routine transactions will be handled by (mostly) self-service ATM/kiosks. Unlike the Titanic, the sinking of the mega-branch model will be slow. And the ultimate brick-and-mortar mix will be much more complicated than my simplistic take on it here. But branches will shrink, tellers will be phased out, and the online/email/mobile channels will handle just about everything. Just ask USAA

Notes:
1. Remote/ATM deposit capture is superior to most teller-assisted deposits because you not only save a trip to the branch, but also get immediate real-time confirmation that the deposit has been properly recorded. You can make the deposit earlier (as soon as you receive the check), you get a copy of the image to store indefinitely, and in the case of remote capture, you can even hold on to the original check as proof of deposit.
2. We wrote about the Demise of the Branch in 2006 (OBR subscription required).  
3. Photo credits: EHS Design.

USAA is Amazing

imageHow did USAA become the most innovative bank in America? I guess its big-bank competitors have been kind of preoccupied with other matters the past few years. And because USAA serves most of its 5 million banking customers remotely, it stands to profit from pushing the envelope in online/mobile delivery. 

The latest proof that the bank is both innovative and adored? Posting user reviews right in the middle of the homepage, an inventive and unique approach. And with an average score of 4.7 out of 5 for both checking and auto insurance, the reviews serve as a transparent and effective mass endorsement.

Here’s the breakdown of scores received on 6,350 total reviews for USAA’s free checking account (as of 12 Aug 2010):

     5 stars (excellent) >>> 5,550  (87% of total)
     4 stars (good) >>>>>>    329  (5%)
     3 stars (average) >>>>   154   (2%)
     2 stars (fair) >>>>>>>    110   (2%)
     1 star (poor) >>>>>>>     214  (3%)

Relevance for Netbankers: Frankly, I never thought I’d see user reviews posted anywhere on a bank site, let alone the homepage (note 1). If your customers love you, I mean really love you, customer reviews posted directly to an in-house site is a great way to prove it (note 2).

USAA homepage (12 August 2010)
Note: Ad on top for its new Auto Circle car-buying service, complete with its own iPhone app.

 

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Notes
1. Bank of America also posted user reviews on its site, but the feature appears to have been discontinued a while ago. The last reference I could find on Google about the reviews was in Jan. 2008.
2. This would not be an easy project and would require a significant investment in ongoing monitoring and maintenance. More importantly, it requires a thick skin; your organization would have to be comfortable with a certain amount of complaints being posted. As good as USAA’s overall score is, there are still 314 poor reviews posted, 3% of the total. But allowing customers a salient vent-fest on your website may keep them from doing so in more public venues such as Twitter. It also gives you a chance to respond to and resolve posted problems.