Open Letter to U.S. Banks Re: Consumer Pricing in the Digital Era

Open Letter to U.S. Banks Re: Consumer Pricing in the Digital Era


August 21, 2015

Dear Ms/Mr CEO:

Congratulations on making it through the most trying time in banking since the 1930s! That was some ride, wasn’t it? And now that you are on the other side, what’s your reward? Alienated customers. Massive new regulations. Escalating costs. Technology obsolescence from deferred development. And now, new competition! Both from less-regulated fintech players with fancy APIs, and aggressive digital marketers at the mega-brands.

So, I can understand your reluctance to avoid anything that smacks of a price increase. Why risk losing another household? And your customers are already testy over interest rates so low they look like a typo. It’s a lot easier to keep checking accounts free of monthly fees and make it up on the back-end with low-balance and OD/NSF fees.

But we all know that’s not sustainable. The $35 dollar overdraft will soon go the way of 1.5% interchange on debit cards. If there is anything we’ve learned in the internet era, it’s that hidden fees are eventually uncovered. And even if you don’t buy that, the CFPB will make you a believer sooner or later, especially if the issue rears its head in the 2016 election cycle.

I know this is going to hurt, but I’d like you to seriously consider getting rid of consumer OD/NSF fees altogether. Or at least roll them back to the $10 range where they’d be much more defensible. I know this is not going to be good for the short-term stock price and/or compensation. But it’s a logical consequence of becoming too reliant on fees that hit hardest to those with lower balances.

But weaning off of OD/NSF revenues doesn’t have to decimate your P&L. And it could even prove better in the long run. Here’s my (admittedly over simplified) 4-point plan to make up the fee income shortfall:

1. Move customers into subscription-based “overdraft protection”

The best thing that ever happened to me, in terms of my own banking usage, is when I found US Bank’s overdraft protection, a line of credit with automatic, unlimited and fee-free overdraft transfers to checking. I never had to worry about my checking balance as cash flow ebbed and flowed over the course of the month. I paid a $35 annual fee for the credit line, but I gladly would have paid much more ($7 to $10/mo?) for the peace of mind. In addition, I happily paid 12% APR on my credit balances each year. That varied, but I’m sure I racked up at least $100 in finance charges every year. It was a huge win for the bank, and I was very happy. Sadly, the bank no longer offers fee-free transfers, but I hope they bring it back.

2. Introduce subscription fees for premium services

If you offer a good product, you have to be upfront and charge for it. And it doesn’t have to be an across-the-board fee increase. Let customers self-select into higher-priced options. Want to talk to CSR at 2:00 a.m.? That comes with our $5/mo gold package. Like more security? Yep, we’ll guarantee you’ll never lose a dime with our $7/mo Fort Knox upgrade.

3. Charge for faster access to remote deposits

Region Bank’s pricing for remote deposits is one of the smartest moves I’ve seen in my 25 years in banking. Unless they hold a patent on this, I don’t understand why everyone hasn’t adopted it. Granted, there’s some technical, service and operational issues, but there’s also the startup InGo Money, who can do much of the heavy lifting and even take on the risk exposure if that’s an issue. InGo Money is already powering mobile deposits for a pile of prepaid issuers including BB&T Bank and Moven.

4. Get into the insurance business

This may seem like a random suggestion, but think how much better it would be for your brand to replace negative penalty fees with products that increase peace of mind. There are many ways to enter the insurance business, but one of the fastest ways to jump-start an online program is through the Insuritas white-label program (see last year’s Finovate demo).

I apologize for sending this letter just when you were enjoying the end-of-summer holidays. But with the 2016 planning season just around the corner, there is no better time to diversify your fee-income stream.


Jim Bruene

Mobile Fees: BillGuard Goes Freemium with Integrated Credit Monitoring

Mobile Fees: BillGuard Goes Freemium with Integrated Credit Monitoring


billguard choices

We are always on the lookout for digital fee-income opportunities. And if I got a nickel for every one of them I’ve ever found … I’d have about a buck at this point. Fees in U.S. online banking are rarer than the (not-so) mythical fintech unicorn. And mobile banking fees are pretty much non-existent outside a few remote deposit fees (see previous post).

billguard_main_newBut last week BillGuard demonstrated a promising new avenue for incremental fee income: Integrated mobile identity-theft alerts, resolution and insurance (see inset). Actual credit report access is not included, but BillGuard says that it is coming soon. The service is mobile only, and the company currently has no plans to add it to the desktop version.

The credit and fraud monitoring is powered by CSIdentity (CSID), an Austin-based firm that says it powers 80% of the retail identity-theft-protection industry. The company, founded in 2006, has raised $36 million in equity (mostly in 2010) and $6 million in debt.

What it costs
The service is value-priced, at $2.99/mo for the single bureau Pro version or $6.99/mo for the 3-bureau Ultimate. In comparison, most ID-protection services are in the $15 to $20/mo range (Experian charges $15.95/mo for a private-labeled version called ProtectMyID with BillGuard). Founder Yaron Samid says BillGuard provides essentially the same third-party monitoring as the $30/mo offering from Lifelock for one-fourth the cost. And with BillGuard, users get credit/debit card transaction monitoring (powered by Yodlee) for free.

BillGuard premium benefits:

  • Credit bureau monitoring (3 bureaus in Ultimate service, 1 in Pro service)
  • Identity restoration services (via call center help)
  • 24/7 call center support
  • Lost wallet recovery
  • Social Security Number fraud alerts (Ultimate service only)
  • Black market alerts (Ultimate only)
  • $1 million insurance (Ultimate only)

Cardholders are already looking to their smartphones to stay informed of problems in real-time (case in point, BofA just integrated fraud alerts into its mobile app). So it makes sense to deliver extra protections services in-app. Although there is stiff competition from free ad-supported versions such as Credit Karma, we believe integrated protection services are a logical fee-based upgrade for mobile banking customers.



BillGuard iOS app homescreen includes a pitch for its premium ID protection (17 June 2015)


An actual fraud alert I received after signup for BillGuard Ultimate (19 June 2015)
Note: It was from a breach in November 2013. I assume I received the alert this week since I was a new customer.


2015 Digital Banking Strategic Planning (Part 1)

imageI was on a call today with the digital strategy committee of a large U.S. bank. It was clear from their line of questioning that they are grappling with how to prioritize among the many major opportunities on the digital side.

I won’t list any of the specific topics here, but you could guess most of them (though one would surprise you I think). But the conversation got me thinking about what I’d recommend for next year if I was working in a bank, credit union or consumer fintech company.

In semi-prioritized fashion, here are my first three recommendations for 2015. More will follow.


1. Insurance

How are you going to replace NSF fee income once the CFPB gets around to capping it? (Timing hint: There’s a big election in 27 months.) One place to look: Insurance. It’s one of the last frontiers for retail banks, especially in the United States. FinovateSpring 2014 alum Insuritas (demo here) says it can launch your very own insurance store within 90 days. So if you move fast enough, you could have this running by end of year.


2. Lifetime transaction archives

I believe digital services will increase bank loyalty two or three-fold. So instead of accounts turning over every 7 years or so, it will be 15 or 20 years for digital-first households. Why? Once banks come to their senses and start archiving all your transactions like Google does for email, it will be much more of a pain to move.


3. Subscription fees

Back to the Gmail example. How much could Google charge me now that I have 100,000 messages archived there? $100/year easy. Probably more. Banks should be thinking the same way. Get #2 done, then charge $4.95/mo for a Peace of Mind package that includes lifetime archives, mobile document/receipt capture, priority customer service, and so on.  


To be continued………..

Winning Checking/Deposits from Established Small Businesses

imageI was asked recently what it would take for me to move my business deposit relationship. My immediate answer: “There is nothing you could do to get me to move.”

We have changed banks only once in our 20-year history, moving to Washington Mutual (now Chase) in 2007 in order to get a better line of credit (which ironically, was never granted, as WaMu was about to go into a death spiral).

We’ve been happy with Chase for the most part, and now have so many services and payees connected to it, that I can’t imagine going through the headache of changing. Even if another bank or CU offered a fee-free account that matched Chase feature for feature, it’s just not worth the considerable investment in time and energy to switch.  

But a few minutes later I changed my mind. Yes, there is one thing that would make me move my entire business account. And it’s so basic that it seems ridiculous that I’d even have to ask for it.

It’s the one thing that Chase, or any bank that I know of, isn’t currently delivering to small business owners:

Guaranteed safety of our funds against all fraud/theft

Chase has state-of-the-art security as far as I can tell (e.g., two-factor authentication for all the risky moves). And we’ve never had a problem. However, every time I read about some nonprofit or small business having their account drained after a successful key-logging attack, I get that queasy feeling.

And I’m not even asking for the fraud guarantee to be free. I’d be more than willing to pay for it. How about $25/month for the first $100,000 covered, then $10 to $15 per $100,000 thereafter? That should be enough to make it a decent profit center for the bank and I could sleep better (note 1). A win-win.


1. Two years ago, I was encouraged by the new offering from EFTGuard (see post). They were offering coverage of $100,000 per account up to $500,000 total per customer. Insured customers were required to use fraud-monitoring software from Trusteer, Iron Key or Webroot. The price was $25/mo to the end-user with $10 of that pocketed by the bank distribution partner. But I haven’t run across any banks currently offering it.

Create Subscription-Based Banking Services for Frequent Travelers

image Having just returned from an all-too-short vacation, I continue to believe that banks are missing a lucrative opportunity to help customers reduce their financial anxiety while away from home. Following are the financial travel services I’d love to buy as a package priced at under $10/mo (not including insurance which would likely be sold on as-needed basis).

Travel services not only could be a solid source of fee income, but also put the bank in a great position to sell add-on insurance and credit services to road warriors and frequent travelers. 


1. Easy-to-set travel flags
Most travelers have been trained to inform their bank about international travel plans to avoid unnecessary declines. It’s a perfect feature for mobile banking, but many (most) banks still require a tedious phone call to the call center. I’ve written about this before (here and here) and I’m seeing some improvements, though I still had trouble earlier this month with my bank of 20+ years (see note 1 for details). I’d also like to receive an “all clear” notice upon expiration of the flag.


2. Financial management services

While spending like crazy on holiday, it would be nice to have the option of seeing a running total of all travel expenses (at least those that weren’t prepaid). That would help us pace ourselves to keep from overspending and/or running out of cash before before we get home. Ideally, it would be nice to set up the “vacation ticker” at the same time we set the travel flag (see #1). The info should also be emailed/texted to travelers at the start of each day.


3. Personal trip journal
There are already some great services for managing reimbursable expenses on the road such as Expensify. But I want the same thing for personal travel. Sure, my perfect self would keep a neat journal of all the cool places where we visited and dined. But realistically, that’s just not going to happen. But I’d love my card app to help me keep a “spending journal” that would be a good substitute. As each expense occurred, the app would prompt me to snap a photo and/or jot down a few words to annotate each expense as they happened. And the bank would store these “travel journals” within secure online/mobile banking for the life of the account, thereby creating a powerful retention tool. 


4. Special travel service reps (concierge)

Normal customer service reps aren’t always that savvy on the nuances of card usage while on the road, especially overseas trips (case in point, see #1). Provide a special email/text/phone number to “financial travel specialists” to get questions answered and problems resolved.


5. Convenient travel insurance that covers financial transaction

Not all the opportunities are around spending. There are important avenues of risk reduction available to savvy FIs. Due to a previous bad experience, I’m always a bit concerned about the safety of my personal belongings on the road. So, I’d like to buy travel insurance that covers:
— My personal belongings at the hotel or on my person (includes lost luggage)
— Details re: fraudulent use of my card 
— Rental cars’ damage (not covered by my existing auto policy)

And the whole area of travel interruption is another possible avenue (see previous post).


BONUS: Chip-and-PIN prepaid cards for USA cardholders traveling abroad

Last week, I was that guy at the A9 toll booth making everyone back up to get over to the cash lane since none of my U.S. cards would work in the card reader (though they had worked earlier in the day). This included my fancy new BofA chip-and-signature card. We had more trouble than ever with U.S. credit cards in our latest trip across the Atlantic. So, please U.S. card issuers, sell me a prepaid card that really works in Europe. I’d pay a $100 fee (at least) just to avoid another toll-booth incident.


1. I called my bank from the airport departure lounge to inform them I’d be using their ATM/debit card in Europe. The CSR insisted that I had to provide the last 4-digits of my checking account number before she could place a travel notice on my account. Since I was sitting at the airport without that info, we were at a standstill. Only after I asked for a supervisor did she come back and agree to do it for me.

4 Amazon Fire Smartphone Features that Should Be Used in Mobile Banking

imageSeattle was abuzz today with the launch of Amazon’s long-rumored smartphone, dubbed Fire. Naturally, I look at everything through a digital banking lens. So here are its innovations that could be leveraged or imitated for mobile banking.


1. Tilt to scroll

imageDescription: Fire users can tilt or swivel the phone to navigate through an app. For example, on the Kindle app, users can advance the page by tilting the phone so they don’t have touch the screen every time you get to the end of the page.

Mobile banking use: Tilting would make a convenient way to page through transaction records. It could also be used to open additional functions such as tagging transactions or initiating a payment (e.g., Starbucks “shake to pay”).

Verdict: Until I get my hands on the phone, it’s a little hard to know how useful this feature will be. But it sounds like a nicely useful UI improvement (note 1).


2. Mayday button

image Description: Like the Kindle Fire, the Fire smartphone has one-button access to 24/7 video customer service with response time measured in seconds. Amazon calls it the “mayday” button. 

image Mobile banking use: Most mobile banking applications include telephone integration for a voice call to the call center. Instant video conferencing could be a good premium feature for high-value and/or fee-paying customers.

Verdict: While video customer support is not a killer feature, it has a nice ring to it when listed on your feature/benefit list. Certainly, banks should work on quicker response times for various types of products and/or customers.


3. Unlimited cloud storage

image Description: Amazon raised the bar for photograph storage, promising unlimited storage for all the pictures snapped from your Fire’s camera.

Mobile banking use: Unlimited cloud storage for all transactions and statements.

Verdict: I know your compliance team gets queasy when discussing long-term data storage. But it’s time to rise above all that and invoke one of the best customer-retention tools imaginable, unlimited secure storage of all banking records (see note 2).


4. One year of Amazon Prime membership

image Description: Fire smartphone buyers get one year of Amazon Prime membership free of charge. This savings of $100 covers half the cost of the 32GB phone ($199 with 2-year contract).

Mobile banking use: Premium channel

Verdict: Digital banking channels need an identifiable revenue stream to help pay for needed innovations and specialized services. A $4 to $5/mo “bank prime” membership program would go a long way in making digital a profit center (see previous post, note 2).


1. For more info, see our latest OBR Report on advanced mobile features (published June 2014, subscription). 
2. For info on fee-based financial services, see Online Banking Report (subscription) on fee-based online services (May 2011); paperless banking and online storage (late 2010); and lifetime statement archives (2005).

Is it Time for Digital Banking Subscription Fees?

image Now that we are 30 years into the online banking era (and nearly 20 years of web banking), it’s time to start making the channel pay its way (or at least contribute something). Even though your customers might think otherwise, there is no rule that says all your online and mobile banking must be free of charge.

Yet, across 10,000 U.S. banks and credit unions, only a handful are still charging for digital value-adds (other than expedited and/or P2P payments). The biggest outliers (all previously covered):

  • Regions Bank’s variable mobile deposit fee dependent on speed of funds availability (post)
  • MyVirtualStrongbox (from DigitalMailer) deployed at 11 credit unions including Belvoir Credit Union; generally free, with optional fees for extra storage (post)
  • US Bank’s per-item $0.50 charge for remote deposits (post)
  • Mercantile Bank’s $4/mo consumer positive-pay service (post)

Please tweet new examples to @netbanker.


Make Digital Banking a Profit Center

Most digital innovations of the past 15 years have been justified with a combination of soft dollar benefits (aka intangibles) such as retention, customer satisfaction, competitive pressure, etc. Those are vitally important. But without profits/revenues, customer satisfaction is moot. 

So let’s put an end to the “100% digital banking subsidy” and start charging something to those most likely to pay — your digital power users.  If that segment coughed up an optional $3.95/mo for your Digital Gold account, you’d be earning a half-million dollars annually per 10,000 subscribers. That’s money that’ll come in real handy when the CFPB caps ODs at $15 each.  

What type of services might be included in this “gold/platinum/VIP/premium” account? It depends on your brand and market, but these could be relatively cost effective:

  • Priority service (4-hour turnaround time)
  • Dedicated email/text message address
  • Expanded “Help” hours/availability
  • Expedited funds availability
  • Higher limits
  • Additional security assurances/alerts/monitoring
  • Lengthier statement/image archives
  • Free intra-family transfers
  • Special edition (different skin) mobile banking app
  • Random membership perks (local deals, 2-for-1 dining, etc.) 

Check out more ideas in the Netbanker archives or refer to our annual planning report (subscription).


Note: I run a variation of this topic every year or so, along with the occasional full report.

Billpay: After 20 Years as a Loss Leader, Check/PageOnce Shows Path to Profitability


In the United States, banks have squandered $10+ billion providing free billpay during the past 12 years. But that’s about to change, if the model from Palo Alto-based Check (formerly PageOnce) takes hold.

First, a history lesson for anyone born after 1980.

For the first few years of the online era (mid-1990s), “electronic bill payment” was offered by banks and credit unions with monthly fees of $5 or $6. That made it roughly breakeven, at least if you didn’t count the sometimes heavy burden on customer service to solve problems caused by the very analog back-end of the so-called “electronic” service.

But then in 2002, Bank of America ruined even that by offering free billpay and advertising it widely on television (note 1). It even released internal data purporting to prove that what the bank gave up in fee income was more than compensated by intangibles such as higher deposit totals and lower customer churn (note 2). I like to think that if Bank of America had read their OBR more closely, it would be booking an extra $300 million per year in fee income (note 3), but I digress.

Back to present day: American consumers have grown accustomed to free billpay, and I don’t think that will change. But that’s what makes Silicon Valley’s mobile-billpay upstart so intriguing.

Let me introduce you to Palo Alto-based Check (still better known as PageOnce) which originally launched as a personal scheduler (hence, the original name). It quickly morphed into the first native mobile PFM, landing on the scene in 2008, just a year after Mint launched.

But given the difficulty of monetizing budget-and-spending PFM, Check has tried several ways to earn revenue including offers, credit bureau monitoring, subscription billpay, and now transaction-fee-based billpay. Apparently, the last has the most promise, so the company rebranded as Check (with URL, a big risk given the prominence of its PageOnce brand.


How it works

1. Choose biller from previous entries or add a new bill (see screenshot #1)

2. Enter account number with biller OR enter username and password and a check will download for you (screenshot #2)

3. Choose amount (screenshot #3)

4. Choose speed of payment (screen #4):
– Scheduled
– Send now: Standard
– Send now: Expedited

5. Choose payment type: Credit card, debit card or bank account (screen #5)
(Note: credit card option is not available for paying other credit cards, which is a Visa/MasterCard rule according to the company).

6. Confirm and pay (screenshot #6)

And now for the twist. Were you imagining this service displayed across your spacious desktop browser? No way. This is mobile-only and works like a charm, though the fees are a little confusing (see below).

The mobile interface is great, using state-of-the-art technology tricks to cut down on data entry:

  • Mobile camera used to import card details, powered by (see screenshot #8)
  • Account aggregation to gather billing info (note 4)
  • Comfortable mobile layout for selecting payment options



Check has free billpay of course. Just enter your bank account details, schedule the payment at least a week in advance, and you are good to go. However, for those not quite as organized, or who don’t like revealing their checking account number, users can choose to pay a 4% fee (min. $4.99) to pay via credit/debit card within two to three days. Or for $6.99 (flat), the payment can be made the next day.  

Here’s the freemium pricing model:

   3-to-5 day ACH >> Free for any size payment (subject to account-specific maximums)
   2-3 day debit/credit card >> 4% service fee (minimum $4.99)
   Next-day debit/credit card >> $6.99 flat-rate service fee (note 5)



Check’s billpay system is designed for the mobile channel. For the most part, it works. Allowing users to easily choose payment source and delivery date (including next day) is critical to making billpay valuable. Banks would be wise to use a similar design (or license from Check), to increase fee revenues. I think it’s entirely possible that billpay becomes a stand-alone profit center under this model (note 6).

That said, with three or more payment sources combined with three payment speeds, scheduling new payments can get confusing, especially trying to determine tradeoffs between speed, source and price. When I originally set up the account, it seemed relatively straightforward. But when I went back the next month, it was hard to re-engage.

The company also needs to help users choose the payment method providing the best bank for the buck (optimizing price, speed and convenience). The company recently added a pop-up box (screenshot 7) that helps. And the applicable service fee is clearly shown at every step of the process, albeit in fairly small type (screenshot 6). I understand the company needs expedited and/or card-based payments to make a profit (similar to how PayPal defaults users to bank transfers instead of credit card payments). But users need to fully understand their options throughout the process (note 7).

Long-term, the Check service is more valuable if its users become accustomed to paying all their bills from the site, even if most are free bank transfers. That way Check becomes the go-to spot for billpay, and are more likely to be remembered when users need expedited payments or a credit card charge when funds are low.  



#1 (left) Bills due list
#2 (right) Add a biller form

image           image 

#3 (left) Choose amount
#4 (right) Choose payment speed

  image          image

#5 (left): Choose payment source/type
#6 (right) Confirm payment screen (with fee disclosed)

image          image

#7 (left) Clicking on “?” on screen 6 launches a box with the fee schedule
#8 (right) Add credit and debit cards via scan

 image          image


1. For more details of the history of billpay pricing, see our post from 2004 and OBR #109, Pricing Online Services (subscription, Aug 2004).   
2. I have read dozens of these case studies, and I still don’t believe that anyone has proven that billpay CAUSES those results. Everything I’ve ever seen proved CORRELATION. Yes, billpay customers are more profitable and more loyal. But they would have been anyway without without subsidizing them with a costly, trouble-prone service. I still maintain that lifetime statement archives would be a better retention device, and far less expensive than free billpay (see OBR 118, Lifetime Statement Archives (subscription, June 2005).   
3. Assume Bank of America would have 5 million active billpay customers paying $5 per month x 12 months = $300 mil 
4. Hopefully, it’s only a matter of time (and a licensing deal with Mitek), before Check imports the billing statement directly into its app.
5. Due to its various payment-provider contracts, Check’s expedited payment pricing doesn’t always seem logical. For example, the company charges a flat fee of $6.99 for next-day delivery of any size payment. But for 2- to 3-day service, the charge varies by payment size (4%) with a minimum of $4.99. So, for any payment above $175, it’s cheaper to send overnight than via the slower 2- to 3-day service. On a $500 payment, that’s a savings of $13 to send overnight. To pay my current statement balance, it cost $90 to send via 2- to 3-day service or $6.99 overnight, a whopping $83 savings. And Check does not mention this when you cue up a $2,000 payment.    
6. Besides fees based on transaction speed and payment source, we also believe there are significant potential revenues from credit lines used to cover payment-account shortfalls and the newest fee-income opportunity, expedited mobile check deposits (see IngoMoney, believed to be powering Regions Bank among others).
7. In the month I’ve spent testing the service, Check has made the service fee much more transparent, so I believe they are moving in the right direction. 

Bank Opportunity #307: Online/Mobile Gift Cards

imageRegardless of the form factor, a favorite holiday gift is money. Some people like to give crisp 20s, the hand-written check still has a certain charm (as long as the recipient has mobile deposit capture), but the biggest growth area has been the plastic gift card (note 1).

Banks should have owned this trend, at least in the United States. Those 100,000 branches would have been good distribution points (note 2), a place that you trust far more than the express checkout lane at Safeway. But alas, that ship has sailed.

The good news? Financial institutions still have an opportunity to be major players in digital gift car distribution, especially mobile. Here’s why:

  • Purchase time is reduced to seconds, since you already know the customer
  • Customers trust you to deliver a valid gift card, and if there is a problem, it’s relatively easy to find someone to help them
  • Buyers are already logged in to your site; it’s super easy to get a promo in front of them
  • Funding the card has almost zero cost with “on-us” funds transfers
  • You can sell a mix of real and/or electronic (see note 3) store cards, prepaid/reloadable Visa/MasterCard/Amex
  • You can save previous info (recipient name, address, birthday, etc.) so customers can purchase again and again with a single click
  • Knowing the user’s location and spending patterns, you could deliver targeted card offers
  • Electronic cards can be stored in the bank’s mobile wallet and used at the POS

A gift card program is not without costs and risks. But you can choose to outsource most of that by working with third-parties such as the Blackhawk Network (see 2012 Finovate demo; Gift Card Mall screenshot below), CardLab (screenshot below), or others.

Bonus #1: For extra credit, you could get into the gift card exchange game, facilitating the buying and selling of preloaded cards. While a unique and potentially valuable service, it has more customer education, service, and fraud issues. See CardPool screenshot below. 

Bonus #2: Distribute thin gift cards through ATMs, see Better ATM Services (FinovateSpring 2013 demo).


CardLab offers hundreds of gift card choices at (13 Dec 2013)
Note: “Design your own” option mid-page





Cardpool gift card exchange for buying and selling



1. See our July OBR report on prepaid card opportunities (subscription) for more info.
2. Though labor costs would have killed profitability, unless branches invested in POS technology to automate the checkout process    
3. offers the option of printing out a facsimile of an e-card to wrap up for a real-world gift.
4. See our September OBR report (subscription) for another 499 bank opportunities.

New Online Banking Report Published: Opportunities with Prepaid & Gift Cards

image Many pundits like to talk about how banks have dropped the ball in digital (online/mobile). We take a different view. Banks, especially in the United States, have lost essentially zero market share to Internet-based incumbents (note 1). It’s a hyper-competitive market and banks have pushed forward to defend their turf from other big traditional brands. Way to go capitalism.

Of course, it’s easy to find things that could have been done better. That keeps us in business. But if you compare the pre- and post-Internet market share in banking to almost any other industry, it’s amazing just how well the big brands have fared, at least against web-based upstarts (note 2). 

But there are certain product areas where traditional financial institutions have lagged. And one of the most obvious is prepaid/gift cards. Banks have understandably clung to the checking/debit card model with its river of fees, penalty and otherwise. But new regulations are severely restricting the revenue flow, so it’s time to look elsewhere. 

There is a multi-hundred billion market for prepaid and gift cards globally, and banks have just scratched the surface. Partly, it’s because Safeway and other large bricks-and-mortar retailers have more foot traffic to sell the plastic. But it’s also because banks just aren’t geared to sell things that don’t require a 30-minute session at the new-accounts desk.

But as prepaid card sales, distribution and account management moves to mobile, banks can put themselves back into the picture in a big way. We encourage you to download our latest report to help you make the case to boost your investment in prepaid. Good luck!


About the report

New Opportunities with Prepaid & Gift Cards (link)
How banks can best tap into this massive market

Author: Ray Graber, Graber Associates

Editor: Jim Bruene, Editor & Founder

Published: 8 Aug 2013

Length: 28 pages, 9,000 words, 15 tables

Cost: No extra charge to OBR subscribers, US$395 for others (here)

Companies mentioned: American Express, BlackHawk Network, Chase Bank, Chemical Bank, GoBank (Green Dot), MasterCard, Navy Federal, Credit Union, netSpend (TSYS), State Credit Union, U.S. Bank, Visa, WalMart


1. ING Direct is the one exception on the deposit side. Before being acquired last year by Capital One, they’d built an impressive franchise through the online channel. However, they were also an offshoot of a very traditional European bank, so you can’t really call ING Direct an upstart.
2. Crowdfunding/P2P lending may well be an area that finally begins to impact traditional banking revenues. But that’s still a ways away. See our May 2013 report for more info (subscription).

Bank Opportunity: Online/Mobile Travel Insurance Sales

imageWhen your core business has been around for hundreds of years, it’s harder to find new sources of revenue. One area ripe for expansion at many banks is insurance. Wells Fargo, for example, put more emphasis on the area by separating insurance from investments in its June 8, 2013, homepage remodel. See our full insurance report for more info on the market size and opportunities for banks.

While auto, life, health and home are the biggest in terms of overall premiums, they are also highly competitive with hundreds of thousands of established sales agents in the U.S. alone. But dozens of niche insurance-markets exist that might make it easier to find a foothold.

Take travel insurance.

You’ve seen these policies pitched when you are checking out at Expedia or other travel sites. While it’s tough to compete with the convenience of buying during the travel-booking process, financial institutions still have an advantage that Expedia doesn’t: Trust.

I’ve been using Expedia for 15 years and have booked 100+ trips there with few problems. So I trust them with travel arrangements. But does that trust extend to insuring my travel? Not so much. It’s hard to understand exactly what is included/excluded in their insurance upsells. And the one-size-fits-all approach rarely covers what I’m looking for in travel insurance (which is “no questions asked” cancellation). And often I’m exhausted after making complicated travel arrangements and have no energy left to figure out whether their insurance makes sense.

I’d much rather purchase a policy from a trusted source where I can get answers to specific questions, review policies after the fact, and be able to come back year after year for consistent choices. And since I don’t have a direct relationship with an insurance carrier (everything is bought through a small broker), I would be very interested in buying from my bank.

imageI’m not sure how many U.S. financial institutions offer travel insurance, but I suspect it’s a small number. But there is one major player with a comprehensive travel insurance offering, BB&T (see screenshots below).

Getting a quote is easy. You simply tell the bank how many travelers you have, their age, travel date and cost. Within seconds, three options are presented (screenshot #1) covering basic trip interruption to one that covers medical evacuation and much more (screenshot #2, note 2). It even allows you to upgrade to “cancel for any reason” for a reasonable additional fee ($63 per person for my hypothetical $3,000 per person trip).

Actually buying the insurance requires a few more fields to be completed (see screenshot #3). But at that point, I already know that it’s worth my while and am not put off by additional data entry. And if I was already logged in, these fields should mostly be prefilled.

Bottom line: With a captive audience of authenticated online and mobile users, banks and credit unions could be the biggest providers of travel insurance. And with the added advantage of seeing travel-reservation charges appearing on debit and credit cards, you can cross-sell the service while the trip-reservation process is still fresh in the customers’ mind. 


1. BB&T produces three options for travelers (24 June 2013)
1. Live Chat option in lower right
2. Total cost shown for two travelers going on a $3,000 trip that begins 60 days from now



2. Detailed coverage of BB&T Deluxe Protection Plan


3. Complete application for each traveler


4. BB&T is one of a few financial institutions to include “insurance” as a primary navigation item


1. See our full Online Banking Report on “Banks in Insurance” here (Dec 2011, subscription)
2. To earn my business, I’d want to mix and match some of these benefits. The policy I want is basic interruption, but with the ability to cancel for any reason and with a deductible to bring the premium down.   
3. Picture credit: 1938 vintage travel poster at eBay

Op Ed: MRI Study Finds Consumer Interest in Fee-Based Bundles

by Dr. Dan Geller

Dr. Geller is EVP of Market Rates Insight, which provides competitive research and analytics to financial institutions. He can be reached at


imageOne of the most significant findings from our  latest study on banking fee-revenue optimization (see note 1 below) is that the majority of consumers say they will pay monthly subscription fees for value-added financial services (see chart below and list right).

The average monthly fee that more than half (55%) of consumers are willing to pay ranges from $2.17 to $5.06 per month for each service. Of course, these stated amounts are an indication of relative perceived value rather than a pricing guide.

Furthermore, we found that consumers are willing to pay a higher overall monthly fee for the bundle than they would for each of the services individually. For example, study respondents indicated they are willing to pay $3.07 per month for a credit score report, $2.43 for account alerts and $4.27 for prepaid card for a total of $9.77. However, when the three were offered as a bundle, respondents valued them at $10.51, an 8% premium.

Bottom line: We believe there is a path for financial institutions to move customers "from free to fee" by bundling services in the optimal way.  


Chart: Consumer Interest in Value-Added Banking Services

Source: Market Rates Insight, June 2013


1. For more info on these finding, MRI is offering a free webinar on Tuesday June 18 from 2:00 PM to 3:00 PM Eastern Time. Click here to reserve your space. The full report will be available for purchase beginning June 21 at <>.