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Provident Bankshares Opens New Direct Bank

By Jim Bruene Posted on November 5, 2007
Categories: Deposits, Checking, Savings, CDs, Direct Banking

According to story in Wednesday's American Banker, Provident Bankshares, a $6 billion Baltimore, MD-based bank, has opened a direct bank to help reduce customer defections to other online banks (see screenshot below). In testing now, the new unit is slated for official launch in 2008. And unlike many other regional programs, Provident intends to market the new bank within its home market. It even plans to advertise to select visitors on its main website, <web.provbank.com>.

While the bank risks cannibalizing its own deposit base, it feels that the direct bank, combined with the reputation of the parent, will help stem deposit outflows. The new bank will operate at <provident-direct.com>.

Analysis
I'm not convinced slapping a "direct" on your name and boosting savings rates ten-fold is all that compelling of a strategy (note 1). Sure, FNBO was able to add $1.5 billion in deposits, but only by offering a way-above-market 6% rate until just a month ago (see previous post here).

Dueling websites create channel conflict. Depending on how they are compensated, branch staff will either move everyone into the online-deposit account, or keep it a secret and hope never to be confronted by an angry customer wanting to know why they are earning 75% less in the branch than if they moved their money online.

However, if Provident can keep costs down, operating the unit as more of a "virtual direct bank," with little additional expense other than a small website and a few dedicated sales/support reps, and figure out how to manage channel conflict, it could pencil out. And the bank can also use the unit to test new products and pricing without impacting its larger customer base.

Note:

1. Actually, the high-yield rate at Provident Direct is 15 times higher than its 0.3% standard savings rates. But for higher balances, at least $25,000, the parent bank already offers a 4.0% APY money market account, just a half-percent under the high-yield rate.

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American Express Plum Card Uses "Scarcity Marketing"

By Jim Bruene Posted on November 1, 2007
Categories: Advertising & Promotion, American Express, Credit/Debit Cards

As a financial services junkie, I've long been a fan of American Express (see note 1). During the past 20 years, as credit cards increasingly became a commodity with no annual fees, loss-leader teaser rates, and look-alike marketing, AmEx has done a superb job maintaining a premium image and pricing. I keep my Gold Card in my travel bag and use it once every year or so when I don't want to expose the numbers of my business MasterCard. But I would never cancel it, despite the $75 annual fee, or I'd lose my "member since 1989" status. That, my friends, is what brand loyalty is all about.

The latest product designed for small businesses, those with "6- or 7-figure revenues," is the Plum Card. I learned about it in a 2/3-page full-color burgundy ad in yesterday's Wall Street Journal (Oct. 31, p. A11). An identical ad appears today (Nov. 1, p. A10). Its standard teaser fare tells readers that the "application releases in 5 days" (today, 4). The bottom of the ad contains a special URL, <PlumCard.com> where prospective customers can get more info. The card was originally announced at an INC 5000 event Sep. 7 (see coverage here).

After seeing the print ads, I and another 100,000 people headed to Google to see what was going on. Wisely, the company purchased not only the top spot on Google for "plum card," but also supported the print buy with an additional twist, "Who's getting a Plum Card? Initial release of 10,000 cards." The novelty of a new financial services product with limited availability, a technique AmEx has used for years with Platinum/Black, should attract click-throughs.

The landing page (here) continues the theme of anticipation and exclusivity, with get this, a WAIT LIST, to be one of the first 10,000 to receive the card. A countdown timer in the upper right lets me know exactly how much time I have to wait, in this case 3 days, 11 hours and 6 minutes. If I'm not mistaken, that's Sunday night at midnight Eastern time.

I'm on the wait list, so I'll let you know what I learn on Monday when I receive my application.

Plum Card pricing
There's no argument the marketing is first class, but what about the card itself? Is there anything that AmEx or anyone can do to distinguish themselves in the crowded field of business charge cards?

Time will tell, but it has a unique cash flow and discount plan that could be very appealing to business customers. Users that pay their bill within 10 days receive the industry standard "net less 2%" discount (see note 1). Alternatively, users can pay just 10% of the total due and defer the balance for two months interest free. At that time, the balance is due in full. There is no information in the terms and conditions about an annual fee, but I'd expect one.

Notes:

If my wife would have been willing to move to NYC, I'd have tried very hard to get a job there after completing my obligatory MBA.
The 2% discount applies on spending of $5,000 or more; otherwise, the net-10 discount is 1%.

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FNBO Direct Brings in $1.5 Billion in Deposits

By Jim Bruene Posted on October 31, 2007
Categories: Deposits, Checking, Savings, CDs, Direct Banking, First National Bank

First National Bank of Omaha has attracted $1.5 billion in deposits through its Internet subsidiary, FNBO Direct, launched in February (previous coverage here).

The numbers were chronicled in a NY Times article earlier this month (here) about the so-called rate chasers, depositors that move money around online seeking the absolute highest rate, even if it means moving the money many times each year.

Total deposits: $1.5 billion

Total accounts: 36,000

Average per account: $42,000

Number of mega-depositors (with $400,000+): several thousand

Deposits of the mega-depositors: approx $1 billion

Deposit of everyone else: $500 million in 33,000 to 34,000 accounts

Average per "normal" account: $14,000 to $15,000

Now that the 6% APY has dropped to 5.05% (effective Sep. 28), it will be interesting to see how many deposits the bank retains.

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The Five Habits of Inefficient Delivery: Are Bank Branches Really Big, Expensive Security Blankets?

By Jim Bruene Posted on October 31, 2007
Categories: Branch Banking, Strategies

Ron Shevlin, the Forrester alum who blogs at Marketing ROI and occasionally at NetBanker (posts here), has been on a roll recently with a number of thought-provoking posts that take on the conventional wisdom we hear in meetings, press releases, and other soundbites picked up by the press.

Earlier this month, Ron challenged some of the statements made in the press implying that the downfall of NetBank was caused by its online delivery strategies (here). That initial post led to an interesting discussion culminating in this gem (here) where he takes on the whole notion that banks MUST have branches to acquire new accounts, concluding (words in parenthesis are my additions to show context):

"The inability of the Internet to supplant the branch as the acquisition channel of choice (so far) has very little to do with the inherent superiority of the branch, and everything to do with the (current) inferiority of the online channel."

And my favorite, this zinger:

In effect, bank branches are just big, expensive security blankets.

Inspired by his post, I've come up with what I'll call the "5 Habits of Inefficient Delivery" (see note 1).

Habit #1: Customers go to branches to solve service problems.

Expensive solution: Build more multi-million dollar branches to house expensive service reps to sooth frustrated customers.

Better solutions: (A) Improve the product/service so there are fewer problems; (B) Solve customer problems online in near real-time, not "within 24 to 48 hours"; (C) Empower online support reps to solve problems without forcing the customer to make an hour-long trek to a branch.

Habit #2: Customers go to branches to apply for new accounts.

Expensive solution: Build more multi-million dollar branches and staff them with well-compensated sales agents to transcribe applications hand-delivered by customers.

Better solutions: (A) Develop a killer online sales process that helps customers choose the right option; (B) Provide a user-friendly application with 24/7 online support and solid guarantees.

Habit #3: Customers feel more comfortable with a bank that has a large branch presence.

Expensive solution: Build more multi-million dollar branches or what Ron calls, "big, expensive security blankets."

Better solutions: (A) Trust your customers and treat them right at every opportunity, and they'll remain loyal no matter how many branches you operate; (B) Keep prices competitive, i.e., no more 10 basis points of interest for a savings account (see here).

Habit #4: Customers like to use the branch to deposit paper checks.

Expensive solution: Build more multimillion-dollar branches that serve as human-powered ATMs.

Better solution: Until paper checks disappear, use remote-deposit capture, envelope-free (image) ATMs, and instant credit for mailed deposits such as Pennsylvania School Employees Credit Union's (PSECU) Upost@Home (previous coverage here) (see note 2).

Habit #5: Customers go to branches because they are there.

Expensive solution: Build more multimillion-dollar branches to stay within a few minutes' drive or walk for most of your customers

Better solution: Make the online and telephone customer experience so phenomenal and complete that no one misses the branches as they close and consolidate

Notes:

1. For more information, see Online Banking Report, "The Demise of the Branch"

2. On a related note, see PSECU's "Go Branchless" campaign (here)

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Online Financial Services Scorecard: September 2007

By Jim Bruene Posted on October 30, 2007
Categories: Compete, Metrics & Market Research

In April, we introduced the Financial Services Monthly Performance scorecard produced by Compete. It summarizes the overall performance of 23 large U.S. financial institutions and lead-generation sites. Refer here for the detailed methodology as well as companies tracked.

Commentary
In September, leads for home equity, mortgage purchase and refinance continued to decline. Regular savings accounts also dropped significantly, although the high-yield version savings booked an 8% increase.

Other highlights in September:

Within the deposit category, checking accounts and regular savings declined; however, the high-yield category showed good growth with 137,000 online applications from two million shoppers, 11,000 more than last month.
While there were 8% more online credit card shoppers this month, lower conversion rates resulted in a 3% decline in submitted applications.
On the loan side, both home equity and purchase mortgage categories experienced more shopping activity. But once again, a decline in conversion rates resulted in fewer submitted leads/applications.
Refinance mortgages continued to slide in both online shopping activity (down 14%) and submitted leads/applications (down 8%). Several lenders saw double-digit percentage declines.

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Advanta Creates Social Network Around Small Business Innovation: Ideablob

By Jim Bruene Posted on October 25, 2007
Categories: Advanta, Advertising & Promotion, Credit/Debit Cards, Small Business, Social Media

I don't know how I missed this one, but Advanta, a major credit card issuer with 1.2 million small business customers, launched a new Web 2.0 microsite on Sept. 24 at the high-tech DEMOfall conference (press release here). Just being there amongst the digerati was a coup for the card issuer, but they did much better, managing to come home with a coveted DemoGod Peoples Choice trophy at the conference.

The Web 2.0-laden site is called ideablob, and it's a place where entrepreneurs, inventors, and anyone else can post their business idea and compete for the monthly $10,000 prizes (contest rules here).

One month after launch, the site is generating a fair amount of activity. The eight October finalists showcased on the homepage (see below) have received the following:

691 total votes (must be registered to vote, can vote on more than one idea)
216 total comments (must be registered to comment)
10,300 total views (anyone can view the idea)

Traffic to the site should grow rapidly once word of the $10k prize circulates. That's a large incentive for the millions of Internet users who think they have a better idea.

Advanta, which uses fairly subdued branding on the site (see small "inspired by Advanta" under the main ideablob logo), is positioned to gain in three ways:

By associating its brand with innovation, social networks, and a Web 2.0 attitude
Assuming a good viral kick, and $10k/mo should do it, the site could generate leads more cost effectively than through other channels
Publicity in blogs and traditional media

Bank of America launched a good business networking site recently, but without the fun of the $10,000 in prize money (see previous coverage here).

Advanta's ideablob main page (25 Oct 2007)

An idea page

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Experian Upsells ChildSecure, Credit Monitoring for Your Kids

By Jim Bruene Posted on October 25, 2007
Categories: Credit Reports & ID Theft Protection, Email Samples, Experian

Coincidently, the same day I received my first alert from Experian's FreeCreditReport credit-monitoring service (see yesterday's post here), the company revamped its website's account-management area. The thing you notice right away is the focus on upselling subscribers to the new ChildSecure family plan (see first screenshot below).

The cost is an extra $6.95/mo, which seems like a good value, considering that you can cover all your kids with a single fee. But the total monthly fee on my plan rises to an eye-popping $18.95/mo or $227 annually. That's a significant investment and hard to justify unless you've previously been burned by fraud (for more on the price/value equation, see our Online Banking Report on the subject published in August).

Screenshots (24 Oct. 2007)
Logging in yesterday, I was greeted with this popup in front of the grayed-out main page.

They also sell it in a huge banner across the top of the main page and a tab for the ChildSecure option.

Finally, here's the page you see after clicking on ChildSecure tab.

Here's the email sent yesterday announcing the website redesign:

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Credit Monitoring Needs More Integration with Online Banking

By Jim Bruene Posted on October 24, 2007
Categories: Alerts & Messaging, C-SAM Inc., Credit Reports & ID Theft Protection, Email Samples, Experian

Today I received my first alert (see screenshot below) since subscribing to Experian's credit-monitoring service about 4 weeks ago. While I appreciate the heads up, the user experience is not at all what I want.

Here are the problems:

1. Cries wolf. All the alert tells me is that there was a "key change" posted to my file. Is it a routine credit inquiry (which I was expecting) or did someone just open an account at Best Buy in my name? The only way to find out is to log in to my FreeCreditReport account, which took three minutes since I couldn't remember the username/password. Please provide more info in the alert so I can better gauge the severity of the situation.

2. Not phish proof: While Experian does use my first and last name in the salutation, thereby improving believability, additional personalization is needed to help users know it's genuine, especially when the company's log-in process requires input of a social security number confirmation after login.

3. Not enough trust: I've worked with Experian for more than a decade so I know and trust them. However, the average Joe/Jo doesn't really know whether FreeCreditReport is a trustworthy company or not. Credit monitoring alerts are too easy to miss if they don't come from a recognizable and trusted name. It would be much better if they came from the user's financial institution or card issuer, someone with whom they do business on a monthly basis, so the emails don't end up in some spam filter.

4. Not integrated with online banking: I really don't want to remember yet another username and password, nor do I want to spend five minutes of my day logging into another website to verify there are no criminals using my credit files. Credit monitoring and credit scores should be integrated into online banking so I can keep track while doing my normal banking.

5. Doesn't tell me what to do: In this particular case, I knew about the inquiry, but what if I didn't recognize it. The website doesn't provide any info on what to do if I did not authorize the inquiry, which could be the first sign of serious identity takeover (see screenshot below).

For more information, see our recent Online Banking Report on Credit Monitoring Services here.

Email alert from Experian's FreeCreditReport service (24 Oct. 2007)

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New Direct Bank: NewBank from Stockman’s

By Jim Bruene Posted on October 24, 2007
Categories: Deposits, Checking, Savings, CDs, Direct Banking

I'm not sure how new it is, but Bank Deals Blog had its first posting yesterday (here). NewBank from Elk Grove, CA-based Stockmans Bank coincidentally was purchased by PremierWest Bancorp while I was writing this blog post yesterday.

It looks like another deposit play, offering higher rates through the online brand to help it keep rates at the parent relatively low (see comparison below). The direct bank is also offering a $50 bonus for new checking accounts opened with at least $2,500 (see screenshot below).

Here are the rates for a $20,000 balance:

Stockmans NewBank Advantage

Interest checking >>> 0.50% 3.50% 7x

Savings >>>>>>>>>>>> 1.35% 4.00% 3x

Money market >>>>>> 2.30% n/a 1.5x (vs savings)

6-month CD >>>>>>>> 4.30% 5.25% +22%

First National Bank of Omaha used this approach to bag $1.5 billion in deposits at its Internet subsidiary, FNBO Direct, since its February launch (see previous coverage here).

Thanks to Bank Deals Blog for the tip (here).

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Mint Lands More Press Coverage

By Jim Bruene Posted on October 23, 2007
Categories: Mint, Personal Financial Management

Mint has certainly caught the attention of the nation's press. Over the weekend, I watched CEO Aaron Patzer interviewed on San Francisco's channel 5 (video here). Today, the Wall Street Journal ran a Q&A with Patzer in the Lee Gomes Talking Tech column under the headline, Financial Software Moves to the Web (p. B3, see note 1). The WSJ article itself is a throwback to the late 1990s, talking about the advantages of Web-based apps vs. desktop apps.

The Mint press coverage reminds me of the 2000/2001 period when Yodlee and Vertical One burst on the scene with "account aggregation" services. Mint wisely steers clear of that out-of-fashion term and focuses on the benefits it provides, namely saving users from themselves by pointing out the sometimes substantial money to be earned putting spare cash to work in a higher-yield account.

We will continue to watch Mint closely, not because its services are unique: Yodlee, Wesabe, Jwaala, Geezeo, Digital Insight (Intuit) and many others provide essentially the same thing. But Mint is the hot new kid on the block and seems to have struck a nerve, at least with the early-adopter financial junkies, which includes the personal finance press. It will be interesting to see how the company builds on its momentum and what implications, if any, its early success has on the broader banking marketplace.

Note:

1. Thanks, Mom, for the WSJ tip. And no, the "developers conference" mentioned in the article was not our FINOVATE, it was TechCrunch 40 held two weeks earlier. Mint won awards at both.

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Using Mint (part 1): First Impressions

By Jim Bruene Posted on October 19, 2007
Categories: Mint, Personal Financial Management, Website Usability & Design

Ever since receiving a private beta-invite a month ago, I've been meaning to run new personal finance site Mint through its paces. Then, after it won Best of Show at TechCrunch40 and our FINOVATE conference, I really wanted to see if the product could possibly live up to the expectations created while watching CEO Aaron Patzer give a demo (see previous coverage here, see note 1 below).

But it takes time to really analyze a website, and I hadn't got around to it until today, when I was inspired by Ron Lieber and his team at the new Dow Jones/IAC site FiLife (press release here) as they reported on their individual results using the Mint's online personal finance tools (see coverage here).

I will file a series of reports as I use the program over the coming weeks. Today, we begin with the first impressions.

First Impressions
Homepage: One thing you notice when you visit Mint.com is that it looks nothing like a banking site (see first screenshot below). That can be good or bad. It's good because it sets the site apart from a normal financial services site. But that can also be a problem because the first, second, and third things users care about at a new financial site is whether it's secure or not. And a bankish "look and feel" can increase consumer trust.

But Mint does an admirable job walking the fine line of creating an engaging look while still reassuring visitors that it fiercely protects their data and privacy. The three large benefit statements in the middle create interest in the product, while the bank logos and the TRUSTe at the bottom provide visual clues that Mint is a serious player.

And the graphic design, leveraging the clever "Mint" name, combined with the light green color scheme, create an inviting site that should do well converting lookers into registered users (active users is another matter, more on that later).

Copy is concise, just 60 words above the fold (see note 2), and completely benefit oriented. Learn more button allows users to drill deeper, and you can't miss the call to action, Sign Up Now in the middle of the page.

Features page: Navigating to the feature page is simple, either click on the "Learn More" blue button in the middle of the page or use the "Features" tab at the top. The page does a great job laying out the key benefits with good use of headers and concise, bulleted lists supplemented with clear, attractive screen-captures of key points (see second screenshot below). Also note the prominent placement of big-name financial brands, Chase, Discover, and E*Trade, to increase trust.

While the page does a good job highlighting features, it doesn't provide any interactive way of learning about the tool before signing up. Video and audio help goes a long way in demonstrating the features (see Jwaala/Amplify CU Money Tracker video here).

Mint.edu: A nice touch. Instead of calling it "education" or "blog" or something else no one would ever click on, Mint uses the clever Mint.edu (see third screenshot below). That's a URL that will resonate with its younger members and anyone familiar with higher education domain names. And once at the .edu site, engaging blog entries allow users to dig deeper into what is going on with the company and read about personal finance topics in general. RSS and email subscription options are clearly presented in the right-hand column.

Grade: A+

Mint Homepage (19 Oct 2007)

Mint Features page (also accessible via "Learn More" button on homepage)

Mint.edu page (19 Oct 2007)

Notes:

1. The video of Aaron Patzer's FINOVATE demo will be online within the next week at FINOVATE.com. In the meantime, you can see him on the Channel 5 SF news here.

2. Red line in screenshots 1 and 2 indicates the bottom of the screen using 1024 x 768 display on 13.3-inch laptop screen.

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