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Notes from BAI’s SmartTactics Conference

By Jim Bruene Posted on April 24, 2006
Categories: BAI, Bank of America, Citibank, Yahoo, Zions Bank

Several interesting tidbits surfaced from today's presentations at BAI's SmartTactics conference in Las Vegas:

Citibank online account acquisition
In 2002, 6% of Citibank's new checking accounts were generated online; in 2005, the number was 20%.

Our comments: Keep in mind that Citi's experience is unique. It has a huge brand and relatively small branch network, so many of its new accounts have no choice but to open online, or over the phone. And part of the growth can be attributed to non-checking products, such as its high-yield savings, that REQUIRE a companion checking account.

Bank of America's SiteKey rollout
The rollout of mandatory two-factor authentication is complete, except in Oregon and Washington where it is expected to go live in June. Prior to becoming mandatory, users had a period of time where it was an optional feature; however, only 8% opted in during this phase. When the PassMark-powered system became mandatory, users were served notice during their first two logins that they needed to sign up before it became required on the third login. Only 4% signed up during the first two warnings, and 96% put it off until the third try.

Note: PassMark was acquired by RSA Security today.

Our comments: Taken together, only 12% of users opted for stronger security before it was required, far below the 60% or so that say they want more security in consumer-research studies.

Zions remote deposit-capture results
Zions Bank has grown its remote-deposit client base from 364 in January 2005 to 3,697 in January 2006, and they are adding nearly 100 clients per week. The bank has bagged more than $200 million in incremental deposits and has increased loans and fee income. The Utah bank is now looking for new business worldwide with clients in 49 states and five countries outside the United States. It has clients of all sizes, from the Fortune 500 to small businesses that use it for just one check per month.

Our comments: If you needed ammunition to move this up the priority list, keep your eye on Zions: It said that its main problem now is just keeping up with the all the requests.

Research results from Yahoo Search Marketing
A Forrester study of all U.S. banking customers (not just online bankers), commissioned by Yahoo and OgilvyOne Worldwide, found that 61% of all banking-product research is being done online vs. 5% via phone and 30% in branch. Similarly, 64% of account monitoring is now down online vs. 16% via phone and 13% in-branch. But account opening at branches still dominates at 84% of new account openings, compared to 14% online and 2% via phone.

Yahoo also said they expect 50 million online credit card applications in the United States this year.

Our comments: Wow, time to pull out all the stops in your online account-opening initiatives.

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Payments Processors Not Innovators?

By Jim Bruene Posted on April 24, 2006
Categories: Strategic Planning

No U.S. bank and only one payments processor made a recent listing by Business Week of the world’s 100 most innovative companies.

This was embarrassing to say the least: In a business in which revenues are relatively fixed and operating margins thin, and the best way to make money is to refine operations, you’d expect that any top 100 innovator’s list would be littered with the MasterCards and CheckFrees of the world. But only Capital One Bank (# 37) represented payments processors on the list, and only three banks made it—Australia’s Macquarie Bank (#62), Holland’s ING Bank (#68), and Spain’s BankInter (# 86). No payments vendor appears anywhere, although Woolworth’s made the list at #75.

Adding to the disgrace was the fact that there seemed little reason for it. Boston Consulting, which conducted the research for Business Week, asked 1,700 top executives—including chief information, financial, and operating officers—which companies seemed to them to be most innovative. Since any changes in a supplier’s computer system would have been brought to their attention so they could adjust accordingly, people like that would have been aware of any such events, and that awareness should have affected their judgments.

The fact that no payments processors and only one U.S. bank made the list strongly suggests that the people responding to the list hadn’t heard much from their payments processors in at least a year, the inference being that at a minimum, companies like First Data Corp., Fiserv, or Bank of America aren’t engaged in the same level of continual improvement as the companies that made the list.

Even Boston Consulting was at a loss to explain the apparent lapse: “My guess is it’s a perception issue,” says Jim Andrews, the Boston Consulting senior vice president who was responsible for the research. The list was created by asking those 1,700 senior executives—worldwide—who came to mind when the issue was posed, he says, adding, “I’m not sure their payments processor, or even their credit card company, necessarily comes to mind relative to organizations” such as Google and eBay—list members which near-daily tell customers about upgrades and changes in how they’re doing things.

What’s causing this sorry state of affairs? Perception, agrees George Thomas, executive vice president of the Clearing House Payments Company LLC. “People don’t even know who we are— we’re the plumbing,” he says. “We’re in a dull business. It’s exciting to us—it’s held my interest for 25 years—but it’s not to anybody else. Most people take payments for granted.”

Thomas says the main reason for the lapse is money. Primary payments channels—the ACH or ATM networks, for instance—are so entrenched that replacing them would not only be a tremendous headache, but also hugely expensive.

A good example, he suggests, is the $10 billion bill the European Central Bank has sent to Europe’s banks as their contribution to the Single Euro Payments Area (SEPA). And in fact, creating an entirely new payments channel—especially since the current avenues work perfectly well—could hardly pass some cost-benefit analyses. The exception: Some sort of government mandate to spend the money in the name of a higher good. This was the case with the estimated $600 million spent by all parties to create the Continuous-Linked Settlements Bank, which clears and settles most of the world’s currency transactions.

“All the innovation is in the user interface. The core processing doesn’t change, because it’s too hard to make the changes,” says Thomas. “All the constituencies that would have to be involved to make that change have to participate and spend the money, so what companies like PayPal are doing is trying to innovate on top of the existing payments systems.”

Even his own company’s innovations, which he concedes build upon the existing payments infrastructure, take long times for adoption, he says, because the constituencies resist change. Corporations, he notes, still rely on checks for most payments, despite some inroads made for the ACH network by companies like his.

True enough, says Dan Schatt, a senior analyst at Celent Communications. He agrees that many of the issues arise from perception, but says there’s also a fair amount of inconvenient truth to the list. “Most of what payments companies do is a matter of saying ‘me too,’” he says.

Another problem: Protecting the status quo, says Schatt. “Look at how Visa is rolling out its mobile platform,” he says. “They’re so concentrated in ensuring that there’s complete control over the payments stream, from the issuer’s perspective, that they kill it.”

The real problem for payment companies, though, is that however inconvenient or expensive it may be to innovate in the payments space, it’s still necessary; otherwise, over time, the alternative is to go out of business.

“What this (list) tells me is that companies like First Data are really dinosaurs,” he says. “They are being disrupted. They are not fast enough to go into this new space, nor do they have an innovative culture.”

The full Business Week list can be found at www.businessweek.com/magazine/content/06_17/b3981413.htm (Contact: Boston Consulting, Jim Andrews, 617-973-1382; The Clearing House Payments Company, George Thomas, 212-612-9200; Celent Communications, Dan Schatt, 650-627-8897)

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JPMorgan Chase Launches New Corporate Payments Vehicle

By Jim Bruene Posted on April 24, 2006
Categories: JP Morgan Chase, Order-to-Pay Systems, Payment Cards

Last week, JPMorgan Chase & Co. launched ExacTrac, a new card-based corporate payments vehicle designed to be integrated into a company’s purchasing systems.

The product issues users a unique credit card number, complete with spending limits, for particular events. The system automatically reconciles the transactions connected to that event and includes that special account number on all bills and payments connected to it, and populated within company books.

Bryan Clancey, chief financial officer of Embryon Inc., has been using ExacTrac for a year to control spending on his pharmaceutical marketing firm’s conferences and roundtables. Clancey says he likes the system because it allows him to closely track his expenses—and because it’s free.

“I like it because I have no administration,” he says. “When that record comes in, it goes right into my system. We send out a request for a unique card, and when that transaction is passed back to us and the transaction has occurred, Morgan passes the same meeting ID back to me, so I can automatically load it into my system.” Clancey describes that system as a financial supply-chain logistics program that was developed in-house seven years ago. Using the product, he adds, meant writing a lot of customized security software to protect the interface with the bank.

Clancey also likes the JPMorgan Chase product because of its perks. “I get rebates (when using ExacTrac),” he says. “I pay face value on the bills, and get 100 to 145 basis points back on total annual value spent.” Embryon was one of ExacTrac’s beta sites; it’s been using it since last July. Another, unidentified company has been testing the product for about 18 months. The product which JPMorgan Chase issues under both Visa and MasterCard branding is part of its PaymentNet core payments processing system.

Clancey says he pays for thousands of meetings in restaurants every year, and to have a major credit card issuer like Morgan Chase forgo a lucrative revenue stream like that may sound unusual. But Frank Dombroski, a Morgan Chase vice president of commercial card solutions, says one of the reasons for launching ExacTrac was to reinforce Morgan Chase’s card business. He also confirms the rebates.

Because it would be a poor CFO indeed who carried an interest-earning credit card balance, clients would typically use it only as a transaction account, meaning that Morgan Chase earns only between 55 and 100 basis points per transaction—not much more than the program’s administration costs.

“We do make money on it,” says Dombroski. “The margins are thin in this business, much more so than four or five years ago, but for us, it’s a numbers game and (allows for) efficiency of processing and automation.”

That may be true, says Christine Barry, a research director at Aite Group, but it’s hardly the only reason Morgan Chase chose to promote a card system like this: It’s mostly a matter of shifting priorities, and of meeting the competition wherever it happens to be.

“There’s been a lot more investment by banks, recently, on the corporate side, instead of the retail side of their business,” she says. Barry estimates that until now, about 60 percent of bank technology expenditures have been on the retail side of the bank.

“They’re shifting focus, and a lot of the new investments they’ve been making don’t necessarily result in cost savings for the bank, or even new revenues being generated,” she adds. “It’s been a big focus on providing more service and convenience to customers. It’s the customers that are getting the benefits, and not the banks, except on paper.” (Contact: Embryon Inc., Brian Clancey, 908-231-6000; JPMorgan Chase & Co., Frank Dombroski, 212-270-7013; Aite Group, Christine Barry, 917-546-9180)

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Bank of America’s SiteKey a Model for Successful Authentication Systems

By Jim Bruene Posted on April 23, 2006
Categories: Bank of America, PassMark Security Inc.

Most banks around the country are busily complying with the Federal Financial Institution Examination Council’s (FFIEC) mandate that they switch their online banking sites to two-factor authentication this year. Playing out against the past year’s flood of identity thefts and data breaches, it’s a necessary and welcome step that will help banks recapture customer trust in the online channel.

Rolling out a new feature is typically as important as choosing one, though, since a clumsy, error-rich rollout can be about the worst marketing tool going. What to do? Take a page from Bank of America’s rollout of its SiteKey authentication system, says TowerGroup senior analyst George Tubin.

“The industry should look to this rollout as a model for implementing consumer-facing technologies,” says Tubin. ”BofA, being who they are, is very adept at implementing them, and they parlayed that into this rollout.”

The key to BofA’s success with SiteKey—launched in collaboration with PassMark Security Inc.(acquired this week by RSA Security Inc.)—was flexibility, says Tubin. “Whenever you implement anything for consumers, you have to focus on the lowest common denominator,” he says. “Some consumers are very adept at picking things up quickly, but there’s always going to be a segment that doesn’t get it, and when you design these things, you really have to focus on that bottom ten percent of your customer base. The main thing is to recognize that not every idea is easy to understand.”

The bank had already quantified how much they had to lose by doing nothing, and decided to act before security concerns caused attrition, or an actual exodus, among its 15 million online customers. But instead of deciding what was best for their customers and acting by fiat, BofA began conducting focus groups in 2004, focusing on finding an approach that worked, but that was easy for customers to use. It was conducted like a sort of police lineup, with focus group members given various authentication systems to try, but little bank input.

This gave the bank a good handle on what made a system that would be easy to use and well received. One of the results of this exercise: The bank-designed “watermark” that shows up on user’s screens when they log on to the bank’s website. The watermark got high marks for, among other things, letting customers know the bank cared about security without asking too much of them.

The bank realized that a good authentication system needed to be as invisible as possible, a perception that led them to use risk-based authentication. Risk-based authentication combines identifiers like ISP, computer type and operating system with the customer’s PIN number and other identifiers and thereby quantifies the probability that the customer is who they say they are. The registration and subsequent log-on process create a hedgerow of challenge questions, secure cookies, and other security factors, chosen in collaboration with the customer, that reinforce both the real—and apparent—site and customer security.

The bank was willing to build its own risk-based system—in late 2004 there were only a handful of companies that could deliver a practical system—but chose PassMark after the RFP process. PassMark had already installed a system with the Stanford Credit Union, and that gave it more experience than its competitors.

Then came the December, 2004 rollout, which was incremental, highly publicized, and built for speed. Sanjay Gupta, BofA’s e-commerce executive, wanted the rollout to be finished in half the time such massive projects usually take. The bank got there by taking a “test and learn” approach, initially using bank employees for a voluntary test drive in April 2005.

The data from that test drive was followed by a series of mini-rollouts around the country. This gave the bank time to discover and correct problems when they were still small, avoiding the possibility that unnoticed glitches could become big headaches in a mass rollout. The idea worked: BofA now runs three SiteKey sectors—for California, the Northwest, and the rest of the country.

The bank’s success probably helped the FFIEC bite the bullet on mandating two-factor authentication for all banks, thinks Tubin, who cautions newcomers to be prepared for spikes in call center activity related to implementation when rolling out a two-factor authentication system. He recommends banks take advantage of that phenomenon to harvest feedback from users, allowing the bank to adjust their rollout accordingly. That might mean some training for call center personnel, but the training bill is likely to be significantly cheaper than correcting mistakes before they get big.

BofA also discovered that some customers just don’t take the registration process seriously—leading to forgotten challenge questions, for instance—and that they benefited from employing some fuzzy logic in accepting the answers, since customers don’t always remember the exact form of a challenge answer.

As a result of their experience, says Tubin, BofA incorporated two new security features in 2006: A BofA-licensed version of Earthlink’s ScamBlocker on their toolbar, which alerts users when they’re accessing dangerous or fraudulent sites; and a program of fraud alerts that allow customers to be proactive in protecting themselves and their accounts. Aside from allowing customers to do this without logging on to the BofA site, there’s obvious marketing value to letting a customer know the bank is watching their back. The bank also monitors potential fraud across all delivery channels.

Taken together, BofA obviously didn’t wait to be told what to do, and reaped the benefits, just like it reaped the benefit of offering its customers free online bill payment. At the time the bank did that, giving a billable service away was considered a bit odd, at a minimum; now, it’s considered the gold standard of customer retention. It was somewhat a matter of protecting BofA’s flanks, of course—think what it would have cost if its 27 million customers began flocking to branches for ordinary transactions—but it lit a candle in the darkness.

Why haven’t more banks come as far as BofA? “It’s a hard decision for most banks, because they have a lot of options, and they have to think about which solution is appropriate for them,” says Tubin. Luckily, most third-party providers have made it easy for them, by cutting deals with companies like PassMark; but there’s a lot of work to be done. Lucky, these systems are cheap: Between $0.15 and a dollar per user. (Contact: TowerGroup, George Tubin, 781-292-5213)

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Brokers Push Margin Loans

By Jim Bruene Posted on April 20, 2006
Categories: E*Trade, Fidelity, Investment Products, Loans & Credit

Flipping through the latest issue of SmartMoney magazine, it came as no surprise to see a full-page advertisement from Fidelity. But what caught my eye was the subject matter. Margin loans.

And this was no soft-sell pitch with smiling 50-somethings sipping Chardonnay on their deck. It was all business, showing how Fidelity's margin-lending rates fared against those of its major competitors. The hard-hitting approach isn't carried through to its website though, which opts not to show any comparative data.

E*Trade, one of the best financial marketers, is said to be offering teaser rates as low as 3.99% to encourage investment clients to transfer higher-rate debt to their margin accounts (WSJ, 4/20/06). However, its published rates vary from 6.74% to 9.74%. The retail banking sweet spot, loans of $50,000 to $250,000, are priced at 8.74%.

Fidelity doesn't go quite that low. Rates vary considerably depending on the balance, but under $500,000, borrowers pay 8.5% to 10.5%. Only those borrowing more than $500,000 pay an ultra-low rate of 5.5% (see inset for current rates).

Analysis
What's going on here? Brokerage firms are finding that customers are willing to borrow against their securities to finance all types of non-investment purchases. UBS AG's wealth management unit says that 75% of its $10 billion in margin-loan outstanding has been used to purchase things other than securities.

Expect more competition from brokerage firms as empty nesters and younger retirees finance portions of their lifestyles with loans against their investments. Deferring tax liability on portfolio gains is a big part of the decision to borrow. But there's also the psychological aversion to seeing investment balances decline.

Financial institution loan officers should be well versed on the risks of margin loans, and instead offer home-equity loans and cash-out refinances with similar rates and no risk of a potentially disastrous margin call.

—JB

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Making the “Back” Button a Bank Profit Center

By Jim Bruene Posted on April 18, 2006
Categories: Forms & Loan Applications, GetSmart, Website Usability & Design

Nothing frustrates a Web user more than clicking the browser's back button during the middle of an online form, only to be hit with a browser-error message, followed by losing all the data previously entered.

There are a number of website-design techniques to reduce this problem, such as disabling the browser navigation, but those solutions can impact overall usability.

We like GetSmart's approach (click on inset for closeup). Rather than hiding the back button, the LendingTree unit (owned by IAC/InterActive), delivers a pop-up message with two choices:

Continue: Users that inadvertently used the browser's back button are provided instructions on how to use the navigation tools within the webpage.
Exit: Those truly wishing to leave the application are transported to the About Us page in case they need reassurances about the authenticity of the company.
Search: Users not opting for doors one or two can go directly back to searching the Web through an Ask.com search box. GetSmart earns a few pennies on the transaction and keeps their name in front of prospects with a co-branded search screen at sister company Ask.com.

Action Items
Financial institutions could use a similar strategy on their forms. Any customer abandoning a form, either on purpose or by accident, should be greeted by a pop-up screen containing several of the following choices:

Talk to a specialist via phone, chat, or email
Go back to read more about the product's features and benefits
Save the form to complete later
Review other product options
Go to a special landing page designed to encourage completing the application
Search the bank's website for more info

Finally, one of the most important functions of the popup, something missing from GetSmart's, is snagging the customer's email address and permission for follow-up communications.

—JB

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Wachovia’s “Free Checking” Marketing

By Jim Bruene Posted on April 17, 2006
Categories: Deposits, Checking, Savings, CDs, Search Engine Marketing, Wachovia

Everyone wants free checking. So it's no surprise to see Wachovia the top bidder on the term at Google (click on screenshot right). The bank also managed to snag the top organic listing (directly below the paid ads), a coup for its search-engine-optimization consultant.

As much as Internet users love a good deal, they are skeptical when they see "free," especially when a company is spending money to advertise on the term. Wachovia wisely meets the skepticism head-on with a landing page entitled (click on inset for closeup):

Free checking. No catch.

The page also includes six bullet points, three of which relate to online banking. And there are two "Apply Now" buttons, at the bottom of the bank and the upper right.

Analysis
While this landing page won't win any Webbys, it's fundamentally sound. The first three bullet points meet the likely customer objections by affirming that there is no minimum balance, no monthly fee, and no direct deposit requirement.

Clicking on the Apply Now button leads to a page explaining the process and what's needed to apply. Unfortunately, the user is forced through three screens of disclosures, the last one a record-setting 69-screen monster before the application begins. With such a tedious first phase, the bank is losing most of its prospects before they've even entered so much as an email address.

To avoid massive application abandonment, you must get customers engaged in the application before the trip down disclosure lane. Wachovia also stumbles by offering too much product choice. The customer that started at Google looking for free checking is forced to choose from 12 checking account options on that same 69-screen testament to the power of a large bank's compliance department.

Grades:
A for search-engine marketing
B for landing page design
C- for application design

—JB

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Verifone Acquires Lipman—and the Future

By Jim Bruene Posted on April 17, 2006
Categories: ATMs, Mergers & Acquisitions, Verifone Holdings Inc.

Verifone Holdings Inc. bought Israel’s Lipman Electronic Engineering Ltd. last week for a total of $793 million, giving Verifone pole position against its nearest rival in the point-of-sale terminal business, Hypercom Corp.

The deal, expected to close following regulatory and shareholder approvals in the fourth quarter, is engineered around a complex combination of cash and stock. It includes a special dividend that the companies would only say would likely exceed $23 million. An unspecified cap on the deal, based on undisclosed conditions, makes it almost impossible to fully value the transaction. Verifone is borrowing most of the money for the deal from an unidentified lending syndicate, and refinancing its existing debt, for a total of $540 million.

The stock market liked the deal: Verifone’s shares spiked more than 10 percent on the news before trending back to the $30 range at which they had been trading before the news.

One good reason for that approval is the fact that Lipman’s business is strongest in relatively untapped markets like India, China, Eastern Europe and Brazil, all of which have relatively under-developed point-of-sale terminal markets. Lipman's product line is strong in advanced point-of-sale terminals, including contactless and Internet-protocol devices, and advanced ATMs.

“Arguably, the growth of this industry is in the emerging markets,” says Sam Ditzion, president of Tremont Capital Group. “Look at China. The percentage of consumers that have credit or debit cards today, versus five or ten years form now, is going to be absolutely extraordinary.”

That phenomenon is also in operation in the other markets Lipman has been active in, says Ditzion, and should greatly help Verifone’s future growth, assuming Verifone can preserve and extend Lipman’s footprint in those markets.

The deal will also reinforce Verifone’s bottom line. Verifone’s 2005 net income was $33.2 million on revenues of $485.3 million, and Lipman’s were $20 million on revenues of $235.4 million. Hypercom, by contrast, reported a 2005 net loss of $33.3 million on revenues of $245.2 million.

What the deal will not do is bring Verifone into the ranks of corporate point-of-sale vendors, a space currently dominated by IBM and NCR Corp. Aside from the sheer size disparity—NCR’s 2005 net income was $529 million on net revenues of $6 billion—Verifone and Lipman both sell to smaller operations than the large retail chains that typically use IBM and NCR systems.

This fact hasn’t diminished investor enthusiasm for Verifone. Since it went public last May, Verifone’s stock has risen over 300 percent; shares originally priced at $10.50 now trade in the $30 range.

The general approbation on Wall Street wasn’t universal, however; Standard & Poor’s, for instance, lowered its outlook on the announcement to negative from stable, mainly because of execution concerns. S&P left its credit rating of Verifone at BB-.

“It does seem that this acquisition cements Verifone’s lead [in its niche],” says Lucy Patricola, the S&P analyst who covers Verifone. ”Our concerns were really that they have yet to do an acquisition this substantial. From what I know, management has done very well running Verifone, so they certainly bring something to the table, but this acquisition is of a size and a scope in which they’re untested.”

The problem for Verifone is that it is already composed of several product lines from previous acquisitions, and it’s acquiring quite advanced systems from Lipman, including terminals in which Verifone has little experience manufacturing or supporting.

That combination—unabsorbed product lines combined with new, advanced products—will be a challenge for Verifone executives, despite their good track record, and is an issue that’s tripped up acquisitions before.

This is especially true because acquisitions typically result in a certain exodus of top executives and important technical staff of the acquired company, stripping the buyer of the talent and internal knowledge it needs to hit the ground running with its new products. Considering the fact that so many of Lipman’s recent sales have been in relatively underdeveloped markets—markets that lack the sort of readily available, technical support infrastructure that’s a commonplace in the United States—those facts may result in unexpected problems for Verifone, in turn creating sudden expenditures.

“Those are some of our concerns,” says Patricola. “There’s also the concern that the increase in leverage might be worse than they’re projecting because of some issue [related to integration matters] that might lead them to spend more money than they’re planning to.” Integration costs, she adds, “are always the issue.” (Contacts: Tremont Capital Group, Sam Ditzion, 617-482-8866; Standard & Poor’s, Lucy Patricola, 212-438-3006)

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Money Laundering Creates Problems for Stored-value Cards

By Jim Bruene Posted on April 16, 2006
Categories: ATMs, Bank Secrecy Act, Money Laundering, MoneyGram, Stored Value Cards, Wells Fargo, Western Union

The U.S. Treasury’s U.S. Money Laundering Threat Assessment, published last December, says that many types of stored-value cards have the potential to become major avenues for money laundering, suggesting—although not saying explicitly—that stringent anti-money laundering regulations are in the offing for the card products.

Industry groups are preparing what amount to pre-emptive negotiations to keep the issue off the floor of Congress, hopefully minimizing potential regulations that could, in the view of many in the industry, cripple the business case for what bankers and other payments executives consider several promising new revenue streams. But prepaid-card executives are declining to speak publicly about the issue, hoping to keep public discussion about stored-valued cards “positive.”

Continue reading “Money Laundering Creates Problems for Stored-value Cards” →

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Do the World Bank’s Remittance Estimates Add Up?

By Jim Bruene Posted on April 16, 2006
Categories: Market Research & Metrics

Venture capitalists have reason to love the remittance business: Official estimates of overseas money-flows from the United States range upwards of $30 billion a year and are growing. The World Bank's estimate of overall remittances to developing countries is $167 billion for 2005, up 73 percent since 2001.

As a result, investment capital has been feeding innovative companies using modern technology, all planning to take market share away from industry leaders Western Union and MoneyGram International. There’s only one problem: According to a recent study by the Government Accountability Office (GAO), those estimates are at best optimistic, and at worst, wildly inaccurate—perhaps by two-thirds.

Continue reading “Do the World Bank’s Remittance Estimates Add Up?” →

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PassMark Security Passes 20 Million Mark

By Jim Bruene Posted on April 12, 2006
Categories: Bank of America, Security & Privacy

As we predicted almost a year ago (OBR 119), PassMark Security's two-factor authentication system is proving popular. We've heard the usability arguments, we've read the security blogs pointing out the weaknesses, and we even had doubts ourselves after using the system on our Bank of America account.

But the overriding fact of the matter is, if it's good enough for Bank of America and its 15 million users, it's good enough for anyone. While no other major U.S. bank has signed on, the announcement today that Fiserv would make the system available to its 5,000 clients, coming on the heels of the Feb. 28 endorsement from S1 Corporation with 1,000 clients, means the system may win the small and midsize markets.

As further evidence, the company recently announced several new clients including North Island Credit Union <myisland.com> (125,000 members) and Schools Financial Credit Union <schools.org> (100,000 members), who touted their pioneer status with this PR-quote-of-the-year candidate:

"…Schools Financial Credit Union will be one of the first financial institutions in the country to act on Federal Financial Institutions Examination Council guidance that strongly recommends banks and credit unions implement multi-factor authentication by the end of 2006."

Finally, the company made a splash on the other side of the Atlantic by aligning with Alliance & Leicester <alliance-leicester.co.uk>, a major financial institution in the United Kingdom with five million customers. It's a company we've previously singled out for its flashy website and marketing prowess (NetBanker Feb. 23, 2005).

With the launch of the Alliance program last month (see screenshot right), Passmark is now in front of 20 million users worldwide, demonstrating a spectacular first year for the Silicon Valley startup.

—JB

Previous articles:
Online Banking Report: June 30, 2005, Marketing Security
NetBanker Oct. 12, 2005: Scottrade to use Passmark
NetBanker May 26, 2005: Bank of America unveils multi-factor security for consumer accounts

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ING Direct’s “Unmortgage”

By Jim Bruene Posted on April 11, 2006
Categories: Advertising & Promotion, ING Direct, Mortgage, Refi & Home Equity

When everyone is swimming upstream, sometimes the best strategy is to head down. In the soft drink world, 7-Up's "uncola" campaign is legendary. The J Walter Thompson campaign launched in 1967 ranked 61st on Advertising Age's Top-100 All-Time Advertising Campaigns (compiled in 1999). In that spirit, ING Direct Canada's "unmortgage" campaign is bound to grab attention <ingdirect.ca>, even without the fizzy water.

How often have you seen "the best mortgage is no mortgage" at a lending site? The direct banking pioneer doesn't even use the word mortgage on its homepage, instead posting an "unmortgage toolkit" along the bottom navigation (click on inset for a closeup). To further reinforce the unmarketing strategy, an unmortgage sweepstakes promises $20,000 to two customers to assist in paying down their mortgage balance (see screenshot below).

Analysis
Unfortunately, the bank does not make good on its homepage promise. Clicking on the Unmortgage Tool Kit, simply drops users into a relatively standard mortgage page with information on new mortgages, refis, and home equity (see screenshot below). Where's the "help me unmortgage my home" button, or the "five steps to eliminating your mortgage" worksheet, or even a "talk to one of our unmortgage officers today" graphic.

After a great tease, the company leaves users hanging. Hopefully, they'll remodel their mortgage page with ways for prospective customers to follow through on the unmortgage promise. Since ING trademarked it, you may not be able to use that clever name. But anyone can follow the powerful strategy of working to get your customers out of debt and back into the savings habit.

In the United States, as baby boomers head into retirement often loaded with mortgage debt, "mortgage retirement" is likely to become a major focus in the personal-finance press for decades. Now is a good time to make your mark as the unmortgage expert in your area. While it may not land you on Ad Age's Top-100 list, it could keep your mortgage officers busy for years to come.

—JB

Marketing Database –

If you're in need of inspiration for financial marketing ideas, check out the Interactive Financial Marketing Database from our sister publication, the Online Banking Report.

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