We are beginning to hear intriguing whispers that, post-IPO, MasterCard will begin authorizing non-banks to be card issuers.
Cash and Cards Are Both Endangered Species
Right around the corner is a world with neither cash nor payment cards. Contactless payments mechanisms—built into cell phones or even jewelry—are helping create this world, and the result will help change banking, thinks Theodore Iacobuzio, managing director of Tower Group’s executive research office.
The reality is that companies that once fed the banks’ payment networks—merchants, for instance—will be future competitors. But banks shouldn’t panic about this, any more than when, not so long ago, the Internet was supposed to be extinguishing banks. And banks won’t be disappearing now, either, thinks Iacobuzio: the anxiety over banking’s future, so prevalent in boardrooms around the country, is overdone.
Continue reading “Cash and Cards Are Both Endangered Species”
Paying for Email Delivery
It appears the pay-for-delivery email model could be gaining traction with announcements by Yahoo and AOL that they plan to start levying fees of $2.50 to $10 per thousand for guaranteed delivery. According to emarketing guru Anne Holland, who believes that these fees are inevitable, the cost to send email will roughly double for most large mailers.
Her advice:
- Make sure email addresses are accurate
- Prune inactive addresses from your list
- Segment your list into finer increments
- Look into RSS feeds for some of your messaging
We’d add:
- If you allow users to designate more than one email address, consider a nominal annual fee for the extra messages
- Along the same lines, you may want to reconsider the policy of unlimited free email alerts; changing it to a two-tiered approach with a couple free each month or unlimited for $3-$5/month
More information:
- Postage is Due for Companies Sending E-Mail, by Saul Hansell, New York Times, Feb. 5, 2006
- Report on Alerts and Emessaging (Online Banking Report #93/94)
- Report on Pricing (Online Banking Report #109)
—JB
Credit Card Portfolios: More Pressure, Less Profitability.
People have grown wary of credit cards. They’re paying them off faster; generally, debit cards are edging them out as payment vehicles. And at least for now, home equity loans are increasingly more popular than credit cards among consumers (click on inset for more details and see tables below).
The result? Credit card portfolios are losing profitability, even though net losses and delinquencies are down, and serious questions about the industry’s future are surfacing. So are questions about how wise banks were when they snapped up most of the monoline credit card operations last year. The business model needs an overhaul, says observers, but so far, issuers are just changing the oil. And there may be no way out.
Continue reading “Credit Card Portfolios: More Pressure, Less Profitability.”
P2P Lending Rates a NYT Article
While person-to-person (P2P) lending will never create the buzz or user base of eBay’s PayPal or Google’s GBuy, it passed a milestone yesterday with a favorable article in The New York Times. The short article looked at UK-based Zopa <zopa.com>, a recent OBR Best of the Web winner (NetBanker Dec. 1) and a similar service being hatched in Silicon Valley, Prosper <prosper.com> (formerly CircleOne).
Prosper, like many Internet startups before it, bears watching not only because of its relatively minuscule user base–currently, just 12 transactions are pending–but also because of its VC backers, Benchmark Capital, Accel Partners, Benchmark Capital, Fidelity Ventures, and Omidyar Network, along with its famous founder Chris Larsen, who launched E-Loan nearly a decade ago. The company has raised $20 million according to its website. Click on the screenshot, right, for a closeup of its homepage.
We’ll look at both companies in more detail in the next Online Banking Report (Number 127), due out at the end of the month.
—JB
Niche Lending Online: Health Care
Ten years after the first loan was originated online, there is still a surprising lack of effort at mining various lending niches. Mainstream categories, such as mortgages and credit cards, are rife with great marketing efforts. Home equity and car loans are also marketed effectively by a number of players.
But when it comes to smaller niche markets, such as small business or personal loans, the big players have for the most part stayed away.
One exception is Capital One, which recently added a new category to its main navigation bar, "Healthcare Finance (click on inset for closeup).
Healthcare Finance offers personal loans to consumers seeking to pay for the following categories:
- Dental
- Orthodontics
- Cosmetic
- Fertility
- Vision
The website features a 1.9% banner ad, but the fine print says that the rate will vary from 1.9 percent to 23.9 percent, quite a range. Loan sizes vary from $300 to $25,000.
Capital One is using Google Adwords to support its efforts. For example, searching for "loans for dental work" displays this ad (click on inset).
Action Item
Compared to other loan terms, the health care-related terms are relatively sparsely sponsored. You should consider adding these terms to your search-engine marketing plan. To make it pay off, you should build a landing page that speaks to the benefits of using your personal loan or line of credit for such expenditures.
More info: We’ll take a closer look at Capital One’s Healthcare Finance options in the next Online Banking Report to be published at the end of February (OBR 127).
—JB
New Financial Products from Mastercard and others
New product announcements from The Clearing House LLC, MasterCard, VISA, and more.
Continue reading “New Financial Products from Mastercard and others”
Final Bank Marketing Score: Steelers 2, Seahawks 1
As we analyzed PNC Bank’s identity protection services (see previous article), we happened to notice this timely photo of its hometown Pittsburgh Steelers, scheduled to compete Sunday in the Super Bowl against the Seattle Seahawks (click on inset for closeup). PNC is the official bank of the Steelers.
We were curious as to how many banks were leveraging Super Bowl fever in the states of Washington and Pennsylvania. Using Yahoo’s directory, we found only one of 27 Washington Banks (see below), and two of 68 Pennsylvania banks with homepage references to their home teams.
And only First Mutual Bank <firstmutual.com> in Bellevue, Wash., has a promotion tied to the big game: a 4.05 percent "Championship Rate" on its High-Yield Money Market Deposit Account (click on inset for closeup).
The two Pennsylvania football tie-ins were simple eye-catching graphics on the homepage from Fidelity Bank (click on inset right for closeup) and PNC Bank (see above).
—JB
Editor’s Note: Since the Steelers won 21-10, we are wondering whether bank website appearance may be a leading indicator of Super Bowl performance. We’ll see next year.
PNC Bank Bundles ID Theft Insurance with Checking
How do you make your checking account stand out from the one across the street, around the corner, or two clicks away in Internet Explorer? It’s not easy if you want to maintain or increase profitability.
Several banks, including Washington Mutual (NetBanker Nov. 8, 2005) and PNC Bank, use a relatively new technique that is inexpensive and plays to the current hysteria surrounding online security: identity theft insurance. 
In PNC’s case, three of its core checking account options come bundled with $2500 to $5000 in insurance: Premium Plan, Choice Plan, and of course Digital Checking (click on inset right for more details). Free Checking does not include ID theft insurance.
Action Items
Before giving away identity theft insurance, look instead at creating a profit center around fraud protection services. As we discussed in a previous Online Banking Report (OBR 83/84), identity theft protection and related credit bureau-monitoring services are among the few relatively easy fee-income opportunities online.
In fact, PNC Bank sells a full suite of credit bureau services housed under Identity Theft Safeguards in the Personal Finance area. The options range from a $29.95, one-time, three-bureau report to relatively pricey $120/yr and $180/yr subscription plans powered by TransUnion’s TrueCredit, an OBR Best of the Web winner in 2002 (click on inset for closeup).
—JB
Data Security Standards Set by Major Financial Institutions
A consortium of six major banks and the country’s largest accounting firms said Wednesday that they were setting uniform computer-security standards, designed to ensure that the third-party computer providers they do business with are adequately protecting both their computer systems and the information those financial firms send them.
“This is good news,” says Avivah Litan, vice president and research director of Gartner Inc. “I don’t think it goes far enough, but it’s smart for them [the institutions] to do it in steps, if that’s what they’re doing. But they need to do it beyond the service providers. They need to do it themselves”
Continue reading “Data Security Standards Set by Major Financial Institutions”
No More Western Union Telegrams
Last Thursday, the day First Data Corp. announced its reorganization, Western Union announced it was out of the telegram business.
We understand the logic. Who sends telegrams in a world of emails and instant messaging? And though the company doesn’t say so, it’s hardly likely that the telegram business, on which the company was founded in 1851–as the Mississippi Valley Printing Telegraph Company–was a profit center. Dropping the business just made sense for a global payments company that makes $4 billion a year.
Still, it’s a melancholy milestone, in observation of which we share with you our favorite Western Union story:
Life Magazine was doing a story about Cary Grant in the 1950s and, not knowing his age, sent him a telegram reading “How old Cary Grant?” Grant replied “Old Cary Grant fine. How you?” (Contact: Western Union, 303-967-6416)
Looking for ARM conversions
The Wall Street Journal’s Ruth Simon writes today about how lenders are using the rise in short-term mortgage rates to convince borrowers to swap their adjustable-rate mortgage (ARM) for a fixed-rate one. She told how CitiMortgage, Wells Fargo, and others are targeting borrowers through direct mail, statement inserts, and telemarketing campaigns.
To see if these tactics had spilled over to the online world, we tried a few Google searches to see who was advertising "ARM to fixed-rate conversions." The only highly targeted ad was by DiTech, <ditech.com> the online lending unit of GMAC.
Under our search, "trade ARM for fixed mortgage," their AdWords promotion used the headline, "Dump Your Adjustable & Get a Fixed Rate Loan from Ditech.com" (click on screenshot above for a closer look), exactly what we were looking for. Unfortunately, DiTech has not created a landing page that speaks to this niche. We were dumped on their busy homepage (click on screenshot below for a closer look) and left to our own devices to figure out how to accomplish this intricate task.
Analysis
It’s simple to see what went wrong here:
Great search engine marketing
+ horrible website execution
= wasted $$$$$
The old advertising cliche about the fastest way to kill a bad product is with great advertising is doubly true with search engine marketing. Great search engine marketing increases click-throughs, driving costs through the roof, while poor website execution pulls conversions down, making the whole effort appear terribly cost ineffective.
So before launching any clever search engine campaigns, make sure you are able to cash in on the traffic.
—JB