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Boeing Employees Credit Union (BECU) Pitches 7.50% APR Savings/Checking Account

By Jim Bruene Posted on April 1, 2007
Categories: BECU, Deposits, Checking, Savings, CDs, Forms & Loan Applications, uMonitor

One of my favorite Sunday pastimes is seeing which bank dropped $25,000+ on a front-section full-page Seattle Times print ad. Over the years, there have been fewer and fewer sightings. And usually, it's BofA, Key Bank, or US Bank making the bold print buys in our market.

But today, Boeing Employees Credit Union, or BECU as they refer to themselves now that they allow anyone in the state to join, bought the entire page A10 and used most of it to say:

Shouldn't you profit from your bank rather than the other way around?

That's an attention-grabbing headline, especially in Seattle with plenty of anti-big-business sentiment. But it won't drive sales unless the CU can back it up with tangible benefits. And it does, with a large reverse-type rate offer for Member Advantage Savings & Checking (bottom section of print ad at right):

7.50% APY on your first $500

Analysis
This is a great approach for going after mainstream consumers. Why?

They bash the banks to gain attention, always a popular strategy…even the banks do it (see here).
They don't waste space, or risk customer confusion, by going into detail about their credit union status; in fact they don't even use the words credit union, other than the CU in their name, instead using the generic "bank" in the headline.
They pay 2%+ more on savings than even the highest-rate online bank…but it's only on the first $500. Now that won't bring in the $25,000 deposits, but it will bring in new checking accounts and relationships.
The extra 6% BECU pays out on the $500 balance, only costs them $30 per year…a small price to pay for a new relationship, which requires an electronic connection, either direct deposit, online bill pay, or electronic statements (of course, the Seattle Times ad drives the acquisition price up considerably).
The same headshot of "Cyrena S." runs in the lower-left of the print ad and in the middle of BECU's homepage (see screenshot below), nicely tying the website to the print-ad strategy.

A few areas could be improved, mostly within the Web portion of the call to action:

The online signup option is buried at the bottom of the Member Advantage landing page (here), and uses a generic link and understated small maroon button, rather than the large red/orange "Apply Now" graphic used by most retail financial institutions.
The online app appears in a small popup window and is an old school all-text version powered by uMonitor. If you want to drive online sales, the application should be more user friendly and graphic-rich. Despite the shortcomings of CashEdge's online application design (see here), its layout is easier to follow.
The go-to rate after the first $500 is just 1.75%; that's a bit less than one would expect from someone spending so much money pitching "earn more" in 48-point type.
Although BECU appears as the top organic result in Google searches involving the credit union's actual name, it doesn't show up on the first page for generic searches for "seattle savings accounts" or even "seattle credit unions." BECU should consider supporting its print buy with search engine advertising.
The 7.50% advertised APY is identical to the 7.50% APR used by US Bank to promote its home equity product a few pages earlier in the same Sunday Seattle Times section. It might help to show a competitive comparison against other savings rates to emphasize that this is a fantastic DEPOSIT rate, not merely a competitive lending rate.

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Future Friday: CD Auctions at Zions Direct

By Jim Bruene Posted on March 30, 2007
Categories: Bank 2.0, Deposits, Checking, Savings, CDs, Ebay, Zions Bank

Several banks, including PNC in the bubble days and WaMu through eBay in early 2004, have tried auctioning certificates of deposit (see Online Banking #104). Those first attempts were aimed at retail depositors, an unlikely audience for a several reasons. First, the demographics of retail CD buyers is decidedly older and they tend to be fiscally conservative, not the right group for a new-fangled way to buy from the bank. On the other hand, CD auctions are a great way to introduce a bit of Web 2.0-style innovation into what is mostly a commodity.

So Zions Bank, through its Zions Direct division, has chosen a different path. Instead of creating an eBay-like environment for retail investors, it is using its non-bank investment division to sell CDs like the Treasury Dept sell t-bills. The certificates are sold at a discount to par, resulting in an acceptable yield for the bidders.

Analysis
While PNC and WaMu's efforts were clearly just market tests that were shuttered after a few months, the Zions auction platform is full-featured. It appears to have staying power provided the bank is comfortable with the prices its paying.

Clearly, this is not a retail playground. There were 20 bidders making a total of 28 bids with a median bid dollar amount of just $10,000. However, there were three huge bidders, all playing with $2 million in cash, that set the final prices. Most likely it was someone in a large company treasury department looking to increase its yield on excess cash by a basis point or two.

But even though the big money sets the rates, the small depositors can still win since everyone received the same "market-clearing" rate. For example, four of the 14 winning bidders in the March 27 auction were small CDs of less than $5,000:

Winning bidders by size of deposit:

4 had $1,000 to $4,000
5 had $8,000 to $20,000
2 had $90,000 to $100,000
1 had $200,000
1 had $536,000 (partial fill of $2 million bid)
1 had $1 million (they also had non-winning $2 million bid)

It makes sense to set rates for large deposits this way. It mimics the way the capital markets already function. And it allows motivated smaller depositors to join the "action," receiving what they are likely to perceive as a fair price since it was set on the open market. Some day, the majority of CD dollars will be sold this way.

Finally, an added bonus for the first-mover, it positions Zions as innovative, fair, and looking out for its customers. The word of mouth and press attention should quickly pay back the investment Zions made in the platform.

More information:

Press release here
American Banker article here
Online Banking Report #104 here

——————————————————————————————————————-

Zions March 27 CD Auction Results
(see screenshot right or view archived page here)

Product: $2,000,000 in 5-month CDs

Bidders: 28 bids from 21 bidders

Final Price: 5.506% rate

Start date: 20 Mar 2007

End date: 27 Mar 2007 (6 PM EDT)

Discussion: Two $2 million bidders tied at the market-clearing rate, one ended up with a partial funding of $537,000 and one ended with zero, so had Zions made more money available, it could received total deposits of $3.6 million at 5.506% rate.

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Wells Fargo Continues its Social Media Innovation with a MySpace Page

By Jim Bruene Posted on March 29, 2007
Categories: Bank 2.0, Blogs, MySpace, Second Life, Wells Fargo

Wells Fargo marked the one-year anniversary of its first blog, Guided by History, with a Q&A today with the bank's Social Media VP, Ed Terpening. The post appeared in the the bank's Student LoanDown blog (post here), which just made it past the six-month mark. I've already weighed in on its blogging strategy (see previous coverage here), so I won't repeat myself.

The bank is experimenting with a number of social media outlets to extend its brand and see what works and what doesn't. Not all of these will pan out. The MySpace presence seems like a long shot, but then again, the cost is negligible so it’s worth a try. Wells Fargo has wisely not posted a pure "banking" presence, but instead used one a character from its StageCoach Island game (see screenshot below).

Bottom line: The bank's willingness to try new things has created an impressive lists of "firsts:"

First U.S. bank with a blog (though Verity Credit Union beat them to it by more than a year)
First bank with a student loan blog
First bank with a business banking blog
First bank in the world with a Second Life presence
First bank on MySpace at <www.myspace.com/stagecoachisland>, really more an extension of its StageCoach Island game which also has its own blog here (see below; though several credit unions beat them to it)
First bank with 2, 3, and 4 blogs
First bank with an avatar persona on MySpace
First bank with a VP Social Media (who appears to be proactively reaching out to the blogging community)

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Orbitz Alert Ticker Could be Used in Online Banking

By Jim Bruene Posted on March 28, 2007
Categories: Alerts & Messaging, Bank 2.0, Website Usability & Design

I've been an Expedia regular for 10 years, so I only check Orbitz on occasion. But I was there today and was impressed with what they are doing in mobile alerts. You'll have to read the next Online Banking Report for all the details (note 1), but I wanted to pass on one idea that could be used by banks and credit unions today.

I call it an alert ticker. What it does it track the number of OrbitzTLC alerts sent to customers (see it in action here). The odometer-like counter rolls over about once per second and currently reads 87,794,309 (see inset). ING Direct has done the same thing for many years with the total interest earned by its savings customers.

Below the ticker is another feature that financial institutions supporting voice-mail alerts should consider, a quick trial entry form. Users can type in any phone number, landline or mobile, to receive a sample voice message alert (note 2). Those entering a mobile number can also receive a sample text message by checking the lower box (note 3).

Notes:

1. Online Banking Report #140 will be available in early April.

2. They didn't ask for mobile phone carrier, so Orbitz must send a message to all the major carriers, e.g., yourphone#@cingular.com, yourphone#@verizon.net, and so on figuring the right one will get through eventually.

3. It's been three hours and I've received neither a voice message or text message.

4. Banks should also take a page from Southwest Airline's Ding service (see coverage here and here).

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ING Direct Adds 220,000 Accounts in Fourth Quarter

By Jim Bruene Posted on March 27, 2007
Categories: Deposits, Checking, Savings, CDs, Direct Banking, ING Direct, Market Research & Metrics

The FDIC database has been updated with Q4 numbers, allowing all the data miners to slap on their hard hats and get to work. Since reporting on the tepid third quarter of ING Direct (U.S.) (here), we've been looking forward to the year-end data.

The biggest surprise is that the bank not only reversed the Q3 account run-off, it managed to add 220,000 new accounts, its best fourth quarter ever. However, things weren't so rosy in terms of deposit balances, which increased just $800 million, the lowest Q4 increase since 2001 when the bank had less than $3 billion in total deposits.

For the full year, ING added $7.2 billion in deposit for an 18% increase, the first time the bank had less than 40% year-over-year growth. And almost the entire increase came in first quarter. The bank essentially had no deposit growth in the final nine months of the year (see table below).

It will be interesting to see what impact its new high-rate Electric Orange checking account will have on deposit and account growth. The account was growing rapidly during the final stretch of the invitation-only launch period, growing from $1 billion on deposit Dec. 31, to $2.2 billion by mid-February (see coverage here).

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Wachovia, SunTrust, and Regions Bank Team with AT&T Wireless and Firethorn for Mobile Banking

By Jim Bruene Posted on March 26, 2007
Categories: Cingular, Firethorn, Mobile Banking, SunTrust, Wachovia

Once Citibank and Bank of America started making mobile banking noises, we didn't expect it to be long before others jumped into the market (note 1). So it came as no surprise today that SunTrust, Regions, and Wachovia announced full-service downloadable mobile banking apps (see press release here). No firm dates were released, but according to the Washington Post (here), AT&T will include the Firethorn software in handsets beginning in mid-year and support the launch with a multi-million dollar ad campaign.

It's a huge win for the Atlanta-based startup Firethorn Mobile, who in a single day picked up contracts with the fourth, eighth, and fifteenth largest U.S. consumer banks (see chart below). Just four months after its coming out party at BAI's Retail Delivery Conference, Firethorn boasts a partnership with one of the biggest consumer spenders on the planet and three of the largest banks the U.S. Not a bad quarter.

In addition, Firethorn's beta partner, BancorpSouth officially launched the production version today (press release here). The free service works only at AT&T/Cingular and only with the following five phone models: Motorola V3 Razr, V551, V557, L7 SLVR, or the LG CU500. See previous coverage here.

The BancorpSouth website today had a promotional link for mobile banking in its online banking area (see banner above) and a brief webpage and signup form (click on screenshot right for closeup).

Update: American Banker's Steve Bills reported that Wachovia is planning an October rollout and SunTrust is looking at a "test" of up to 100,000 customers later this year, with full rollout in 2008 (full article here).

Note:

1. See our full forecast in Online Banking Report 138/139.

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Mobile Payment Metrics: NTT DoCoMo

By Jim Bruene Posted on March 26, 2007
Categories: DoCoMo, Metrics & Market Research, Mobile Banking, Mobile Payments

In today's special Technology Report in Wall Street Journal, the lead article was "What's New in Wireless," by Amol Sharma. The article's main focus is mobile video and advertising, but there are several paragraphs about mobile payments, mentioning the Cingular/AT&T/Citibank cellphone payment trial through MasterCard's PayPass. The only statistical backup provided was the 1.3 million Japanese mobile users signed up for NTT DoCoMo's year-old mobile credit-card service (note 1).

That number seemed low based on what I've been hearing about the popularity of all things mobile in Asia. It turns out the 1+ million number is just DoCoMo's credit-card slice of the mobile payments pie.

In Japan, per capita credit card usage is just one-seventh that of United States (note 2) and stored value is much more popular. DoCoMo has 20 million stored-value mobile wallets in place, 15x the number of credit users. The mobile wallet penetration is approximately 40% of DoCoMo's 52 million wireless subscribers (note 3).

That's a healthy uptake rate for a product that was introduced less than three years ago. Even the year-old mobile credit card adoption is dramatic given the country has just 130 million credit cards outstanding. DoCoMo's market share is already higher than 1% of total cards outstanding, the equivalent of 8 million accounts in the United Sates (note 4).

Interestingly, part of the reason for the popularity of cash replacements in Japan is that the lowest paper-money denomination is 1,000 Yen, or about $8.80, making coins more common and somewhat less convenient for low-value payments compared to the U.S. and its ubiquitous $1 bill. However, the stored-value mobile wallet is expected to eventually become popular in the U.S. once merchant acceptance grows, especially in the youth and underbanked segments with less access to traditional bank cards; but it won't likely reach current levels of Japanese penetration for another five to seven years (note 5).

Notes:

1. According to a Feb. 1 article in the Motley Fool, DoCoMo has 1.5 million users who've applied for and activated the credit card function in their phone. The number of outlets accepting DoCoMo mobile payments was expected to top 150,000 this month. DoCoMo allows other credit card issuers to use its ID platform to delivery card services to its customers. DoCoMo also began issuing its own mobile credit card under the DCMX brand last year. For more information, watch the DoCoMo's video about its mobile wallet (here). The wallet discussion begins at about the 4.5-minute mark of the 16 minute video. DoCoMo's ID credit-card platform and its own DCMX credit card discussion begins at the 6-minute mark and ends a little before the 10-minute mark. The rest of the video discusses i-Mode's international growth and is not directly related to payments.

2. According the Federal Reserve Bank of Philadelphia, in 2004 American's made 84 credit card purchases annually per capita, vs. 11 in Japan (see report here). According to the online CIA Sourcebook, in mid-July 2006 the population of Japan was 127 million compared to 298 million in the United States.

3. According to the company, DoCoMo has a 55% share of the Japanese cellphone market.

4. The U.S. has about 800 million credit cards outstanding (according to FRB Philadelphia, see #2.

5. See our forecast in Online Banking Report 138/139 published three weeks ago.

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Future Friday: Forrester is Bullish on Online Banking Household Growth

By Jim Bruene Posted on March 23, 2007
Categories: Metrics & Market Research

Forrester Research is known for making conservative technology forecasts, doing a great job of not getting caught up in the early hype. For example, five years ago (May 2002), Forrester predicted there would be 38 million U.S. households banking online by 2006, about double the 20 million at the time. That prediction turned out to be about 10% to 15% shy of the actual total (see note 1).

But in Forrester's latest online banking forecast (here), VP and Bank of America/Wells Fargo veteran Cathy Graebner, is uncharacteristically aggressive. In her report she says the U.S. market will grow to 72 million online banking households in less than 5 years, a 55% increase from Forrester's current estimate of 46 million. If that happens, penetration would be 63% of all households, or 76% of online households (note 2).

In comparison, we are projecting 54 million households, a 30% growth from our estimated 42 million online banking households at year-end 2006. Even our high-end forecast calls for only 62 million, still 10 million shy of Forrester's number.

Analysis
Normally, Forrester and Online Banking Report track pretty closely. I have a call in to Cathy to see where our assumptions differ (note 3). In many ways, I hope she's right. But I believe there is currently a ceiling for most ecommerce activities at about a 50% penetration rate (of all households), and I just don't see how online banking can move significantly past that within five years. Perhaps mobile access will bump the growth rate 3 or 4 years out, but I still don't think that's enough to get past 60 million households.

Look at it this way. An estimated 10% to 15% of households don't even have a bank account. If you subtract those from the total, Forrester is saying that more than 70% of U.S. households with bank accounts will be using online banking less than five years from now. That would be great for our industry, but I just don't think it will happen for at least another decade (note 4).

Read it yourself and let me know which forecast you believe is closer.

Notes:

1. Our parent publication, Online Banking Report, had similar view at the time, predicting in December 2002 that 43 million U.S. households would be banking online by 2006 (see Online Banking Report #89, published Dec. 10, 2002). Online Banking Report is published by the same company as this blog. According to our latest forecast (Online Banking Report #137), 42 million U.S. households were banking online at year-end 2006.

2. Penetration figure calculated by taking Forrester's 2011 online banking forecast and dividing by our 2011 total U.S. household forecast.

3. I have not read the full report, only the abstract on the Forrester website.

4. The furthest out we project is 2016, where our total still trails Forrester's 2011 prediction (see OBR 137).

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Wells Fargo Adds Value to Mobile Bill Payments, But Not in the Way You Are Thinking

By Jim Bruene Posted on March 22, 2007
Categories: Bill payment, Credit/Debit Cards, Wells Fargo

If you've been reading this blog for long, you know I'm going through a "mobile" phase. There's two reasons for that:

1. It's an interesting and important extension to online banking, our core area of expertise.

2. I am in the process of writing two extensive reports on the subject, the first was published a few weeks ago on mobile banking (link here) and the second is due out by the end of the month on mobile payments.

So I had to laugh when I opened by Wells Fargo credit card bill today, not at the size of the bill which was not at all funny, but at the insert that fell out pitching, "cellular phone protection at no cost" (see front of insert right, back of insert below).

This is a different type of "mobile payment" than what I've been thinking about lately. But, this Wells Fargo program is brilliant, and has a much better business case, at least in the short term.

Here's what Wells Fargo is proposing:

1. Put your mobile phone bill on automatic payment via your Wells credit card.

2. In the event your phone is damaged or stolen, you will be reimbursed for up to $100 in damages, after a $50 deductible (see note 1).

Analysis
The business case for this program looks fabulous. Assuming an average mobile phone bill of $60/mo x 12 months x 1.5% ROA = about $10 per year in revenue. While the cost should be just a few pennies per year in insurance payouts, given the difficulty in filing a claim.

Even though the bank will pay out benefits to cardholders who had their cellphone charged to Wells even without the incentive, the bank should earn 10x to 20x the cost of the program each year. Maybe Wells can put some of that windfall into a new mobile access to online banking and credit card info.

Note:

1. To keep costs down, the maximum number of claims is two per 12-month period, $200 in total. And the claim procedure is cumbersome, especially for a maximum payout of $100. You'll need copy of receipts, statements, other insurance coverage, police reports, and so on. The full details of the fine print are online here.

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First Peek: CommunityLend, Canada’s P2P Lending Startup

By Jim Bruene Posted on March 21, 2007
Categories: CommunityLend, Loans & Credit, P2P Lending, Prosper

Since publishing the first third-party research on so-called person-to-person, or social, lending, last year (link to report here), we've heard from entrepreneurs around the globe looking to replicate the model in their country. Most are still operating in stealth mode, but one has recently lifted the veil just a bit, with a placeholder website and email announcement list (see screenshot below). It's called CommunityLend, <communitylend.com> and it's targeting the Canadian market.

There's not much detail on CommunityLend site, but the startup already has 50+ Google links, many stemming from a brief mention in a March 9 Finextra article (here). The Founder and President is Michel Garrity, previously VP Marketing & Sales at ePost. Others on the team, at least in advisory roles, are ex-Bank of Montreal exec and BankWatch blogger Colin Henderson and John Philip Green (profile here), currently Director of Engineering at Affinity Labs and Co-Founder of of Savvica and Rapleaf. Development efforts are spearheaded by a Toronto-based Ruby on Rails shop, Unspace.

It looks like an innovative group and it will be interesting to see how they approach the social lending market. We'll keep you posted as the company moves towards its fall 2007 launch goal.

Contact: info@communitylend.com

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Citibank Mobile Getting Closer: FAQs Posted

By Jim Bruene Posted on March 20, 2007
Categories: Citibank, mFoundry, Mobile Banking

Citibank recently posted a short FAQ (click here or view screenshot below) on its website that confirms what we had suspected about its upcoming launch of mFoundry-powered Citi Mobile (see previous coverage here and here).

Here's what we now know:

1. The service will be FREE of charge

2. It will be a downloadable app (unlike the SMS-based service in India shown above)

3. It will work on approximately 100 cellphone handsets

4. It will work across multiple wireless carriers

5. It will include bill payments and funds transfer

6. A direct link to customer service is provided

What we still don't know:

1. Will is support SMS/text messaging?

2. What login/security process will be used?

3. Will it work with all Citi checking accounts or only certain products?

4. Will it work across all major carriers?

5. Will it require a full data plan at the carriers?

As you can see from the Citibank India graphic at the top of the page, major banks offer mobile access in much of the world. But in the U.S., the Citibank launch is a major milestone as the first downloadable application that can be used on common handsets. For more information, see our latest Online Banking Report, Mobile Banking & Payments 2.0 (OBR 138/139).

Click on the screenshot right, to see the Citibank FAQ on mobile banking. Or go directly to its website here.

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Citibank’s Instant-Win Billpay Sweeps

By Jim Bruene Posted on March 20, 2007
Categories: Advertising & Promotion, Bill payment, Citibank

Earlier this year, we wrote about how easy it is to run an online instant prize contest using ePrize (see post here). Today, we see that Citibank is using the company to power an instant-win game and billpay usage sweepstakes. They share the same creative and both run March 1 through April 30, but otherwise have little to do with each other.

The instant-win game can be played by anyone and finishes with an ad for Citi's e-Savings account. The sweepstakes rewards Citi billpay customers with automatic sweepstakes entries tied to billpay usage. Here are the specifics:

1. Instant win: Anyone who registers with an email address and date of birth may spin the wheel up to three times each day to win won of 300 prizes awarded randomly between March 1 and April 30, 2007. The total prize pool is $15,000 with one-hundred $100 winners and two-hundred $25 prizes. At the end of each play, Citi pitches its e-Savings account with 4.75% APY and $25 signing bonus, which is slightly different than its website promotion of 4.65% and $50 bonus (see screenshots below).

2. Usage sweepstakes: Citibank billpay customers are also entered into a sweepstakes with a single grand prize of $25,000. Each bill payment of more than $5, after the first four during the 60-day run, receives one automatic entry into the sweeps.

The promotion is advertised on its main Banking page with a small banner (see screenshot below). A larger promotion (see inset above) appears on the Online Banking page (see note 1).

Screenshots: Citibank signup page, "spin" the wheel to play, loser's page with cross-sell of 4.75% savings account (click to enlarge)

Citibank main "banking" page with sweepstakes promo

Note:

1. Tested from a Seattle, WA IP address at 10 AM PDT. Cookies are enabled and will show multiple visits to Citibank, but no evidence of any Citibank accounts.

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