Debit Card Overdraft Protection: 2 Steps Forward, 1.9 Back

image So far, I’m underwhelmed with the industry’s online marketing response to the new opt-in debit card OD protection regulations. I expected to see new pricing models transforming small overdrafts into a value-add for debit card users, rather than the onerous penalty they had become over the past few years.

On the positive side, the elimination of OD charges for small transactions is a good first step. Three of the five FIs in our mini-survey have dropped fees on ODs of less than $5 (PNC and GTE Federal) or $10 (U.S. Bank). And Wells even makes a bit of a game out of it: Customers who cover the OD during the same day incur no fee.

And Bank of America has just thrown in the towel on the whole notion, running full-page ads (p. A11 in today’s WSJ; Overdraft Control landing page) saying they’ll just deny any attempt to overdraw via debit card. The retail giant joins Citibank and ING Direct, which already followed the same approach.

But financial institutions are missing an opportunity here. Take Wells Fargo, for example. When I ran across the bank’s new homepage ad for debit card OD protection (see first screenshot), I expected to click through and find a novel take on the new federally mandated opt-in requirement (see second screenshot).

Wells does a good job explaining how the new rules benefit customers (the two steps forward): 

  • The bank’s website copy is understandable and nicely outlines the lower-cost credit line, and savings account transfer options are offered
  • The toll-free number to sign up is prominent, although where’s the online signup option? 
  • Great to see online and mobile balance-tracking tools offered up to help avoid overdrafts in the first place
  • My favorite: Customers are allowed to cover the overdraft during the same day and avoid the charge

But much of that uptick in consumer goodwill is negated when you get to the pricing:

  • Debit card overdrafts are $35 each, with a maximum of 4 per day, or a $140 daily penalty if you opt in and make a mistake coffee-shop (or more likely bar-) hopping some weekend.

In a spot check of other financial institutions, it’s clear that Wells Fargo is far from alone in the $30 per item price range:

  • US Bank will charge $10 per overdraft of $20 or less and $33 for all others; it will charge for up to 3 ODs and 3 returned items for up to 6 per day; there’s a $25 fee if you don’t pay back within a week, but no charge for any item that results in less than $10 in total negative balance.
  • Fifth Third Bank will charge $25 for the first overdraft each year, $33 for the next three, then $37 each after that; maximum of 10 per day; $8 per day after the third day it’s not paid back; no OD charge if negative balance is $5 or less.
  • PNC Bank charges $36 per item up to 4 per day, plus $7/day the account is overdrawn for a maximum of 14 days.
  • GTE Federal Credit Union is charging $29 each, with no charge on under-$5 items (blog post, Facebook post)

I just don’t see customers being too pleased with the price/value here. Wouldn’t customers, and shareholders, be better served with a value-based pricing strategy? How about $5 each for an under-$100 mistake? Or follow the telecom model and sell debit card overdraft protection as a $4.95/mo subscription.

By my simple math, a million customers paying $5/mo is a whole lot more revenue than a few thousand paying $35 a pop. Then there are all the side benefits: customer goodwill, reduced customer service headaches, positive word-of-mouth, and the PR/marketing value of making debit overdrafts into a real service.

Debit card OD link on Wells Fargo homepage (13 July 2010)

Wells Fargo homepage showing debit card OD ad

Landing page (link)
Click to enlarge

Wells Fargo debit overdraft landing page

image Note: Upper-right graphic from Horizons North Credit Union, which is charging $25 per item, with no limit on the number. The opt-in ad is a huge part of its current homepage (inset, click to enlarge).

Wells Fargo Bank Offers $25,000 to Go to Paperless Statements

image Full disclosure: I’ve always liked sweepstakes. Even though I’m a Diet Coke addict fan, I’ll gladly grab a different cola if it has an “instant win” cap. It’s like a free lottery ticket.

So when banks try to save a few coins switching customers over to estatements, I think it’s the perfect time to give some of it back in the form of a sweepstakes. You’ve created a little excitement in online banking and likely made it all back with a lift to the estatement response rate. ING Direct, Chase and many others have taken this approach in the past (previous coverage).

Wells Fargo’s current sweeps is pretty straightforward (link to details). For every account switched to paperless statements, customers get one entry in the sweepstakes. Ten customers will win $2500 each and one will get $25,000. A relatively small, but effective $50,000 prize pool.

The contest runs from April 12 through June 4.

Login splash screen (interstitial) (19 May 2010)

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Landing page after choosing “Switch now” above
Note: Link to View Samples (see below)

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Sample statement (click to enlarge)

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Holiday Themes: ING Direct Offers Up Anti-Black-Friday Tease

imageRarely does ING Direct disappoint when it comes to adding a little holiday pizzazz to its website. And it’s no turkey this year.

The bank’s homepage is given over entirely to a flash animation that starts with its trademark orange ball rising over a cityscape. Then a decked-out turkey joins the scene and its revealed that its a play on tomorrow’s NYC Thanksgiving Day parade balloons.

But the more interesting development is the small orange “Black Friday” sale tag in the upper right corner (see inset). ING Direct has four Black Friday specials that will be revealed at one past midnight this Friday at <ingdirect.com/blackfriday>.

imageWe are sworn to secrecy on two of the deals, but we can tell you that there will be a $683 discount (the average amount American’s spend on holiday gifts) on ING mortgage products (currently 3.75%) and a 20% off ShareBuilder deal.

The Black Friday tease was also emailed to ING Direct customers this morning (see inset).

My take: The Black Friday promotion, which is being pushed out to media outlets in advance of Friday, is brilliant. It plays perfectly into the more-conservative budget mindsight in the country and gives the press something else to write about beside the long lines at Best Buy at 4 AM Friday.

Grade: An A+ and an extra helping of sweet potatoes to ING Direct for both timing and creativity.  

In a quick survey today of the 25 largest retail banks, three others had holiday promotions or themes: 

ING Direct (USA) homepage (23 Nov 6 PM Pacific)

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ING Direct black friday landing page (25 Nov 2009)

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Zions Bank homepage (23 Nov 7 PM Pacific)
Note: Trusteer promotion on homepage

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Wells Fargo homepage (25 Nov 2009, 1 PM Pacific)

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Note: For future reference, this post was made on the day before Thanksgiving.

How Many iPhone Banking Apps Will There Be?

image Are you tired of hearing “there’s an app for that” yet? Well, get used to it, we are still at the beginning of the great app rollout

Even as recently as our iPhone Banking Report published in March, I assumed most financial institutions would have a single iPhone app. One bank. One app. It’s how the Web worked, for the most part.  

But when Starbucks unveiled a dedicated app just for its stored-value card (separate from the main Starbucks brand app), I realized that I wasn’t thinking big enough.

For example, in August PNC Bank become the first U.S. financial institution to offer multiple apps when it released an app for its Gen-Y-focused Virtual Wallet. That was followed last week by Wells Fargo when it unveiled its cash-management app for larger businesses, CEO Mobile (screenshot below; press release).

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image Now, I believe that each major bank will roll out dozens of apps, perhaps hundreds, to support their business lines, major products and large segments. There will be an app for each major affinity credit/debit card, one for students, one for small businesses, one for large business, one for senior checking, one for home equity lines, and so on.

And, if that’s not enough, there could be a dedicated app for each stock broker, loan officer and mortgage broker. There could be one app for every branch, neighborhood, or region. Right now the search-and-discovery tools at Apple would implode under the weight of all these apps. But they’ll figure that out. It’s worth billions to them. 

Today, more than 100,000 apps are available for the iPhone. But fewer than 20 are for U.S. financial institutions. It’s conceivable that in the banking vertical itself, well over 10,000 apps could be developed, possibly many tens of thousands (see notes 1, 2). 

Wells Fargo is first U.S. bank with a cash management iPhone app (12 Nov 2009)

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Notes:
1. They won’t all be iPhone apps. The mobile market is too big to have it all consolidated at one player. 
2. It’s also conceivable that we’ll move away from the dedicated app framework, and users will be able to configure their phones with hundreds of info feeds without needing to install an app for each one. More like the iGoogle portal model.  It will be fascinating to see how it plays out.

Don’t Waste the Marketing & Communication Benefits of an iPhone App Update

image I’ve written plenty about the importance of the iPhone App Store, both here and in Online Banking Report (note 1). But there’s one subtle side benefit I hadn’t thought too much about previously. 

Every time a new version of a native app is released, users must take action to download it if they want the new features. While this process used to be a nightmare in the desktop software days where users had to use floppy disks, CDs or large downloads to reinstall the software, it’s an absolute breeze on the iPhone and usually takes less than a minute from start to finish. And there’s no restarting the iPhone or choosing installation options. It’s just a one-click process plus the input of your iTunes password if you weren’t already logged in.

So why is this process a benefit? Because each time a new release is available a little icon shows on top of the App Store icon (see screenshot 1 below). Users then press the App Store icon, choose update, and they see a list of applications with updates available (screenshot 2). At that point users choose to update them all or look at them individually.

We believe most users are interested enough in their financial apps to take a look at the update, at least until the novelty of the mobile app wears off some years in the future. This provides financial institutions a free marketing opportunity to not only explain the new features of the app, but also deliver other marketing messages. You are much more likely to make an impression with your customers during the update process, compared to sending out a random marketing email.

In the three bank examples below, only USAA (screenshot 3) uses the opportunity to further cement its relationship with mobile customers, touting its new remote deposit capabilities along with several other enhancements. Wells Fargo (screenshot 4) takes a matter-of-fact, “we’re fixing bugs” approach that is OK, but still misses the chance to communicate with users. But Chase (screenshot 5) completely annoys users with two sentences of marketing speak that says nothing about the update. 

Lessons for financial & mobile marketers: Whenever you release an update for your mobile app (note 2), take the opportunity to communicate with your customers as follows:

  • Clearly explain the benefits of the changes to the app
  • Highlight one or two related benefits of the app
  • Mention any related news or promotions
  • Strike a good balance between disseminating technical info and marketing new benefits

Screenshots

1. Main iPhone screen shows                        2. The Updates page shows the 4 apps
    that 4 app updates are                                       that have new versions available.
    available (right side halfway down).

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3. USAA’s latest update explains the specific changes made and provides several new benefits to using the app.

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4 & 5. On the other hand, the Wells Fargo and Chase update messages are sparse. The Wells Fargo update appears to be a minor bug fix, so we’ll cut them some slack for the terse message. However, Chase, with a minor update (2.0.1 update) to its major 2.0 release (released Aug 25), says absolutely nothing in 24 words of marketing-speak: 

We’re listening — You asked for a fully native iPhone banking application. This Chase iPhone app is built exclusively for iPhone and iPod touch users.

Seriously Chase, this is the best you could come up for the tens of thousands, if not hundreds of thousands, of iPhone users waiting for your updated app? At least the bank gets points for brevity.

                   Screenshot 4                                                             Screenshot 5

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Note:
1. For more info on the importance of a native iPhone app see Online Banking Report: Mobile Banking via iPhone.
2. The same advice holds true for communicating online banking improvements as well, although the communication methods are different (email, newsletter, statement insert, blog, interstitials, log-off messages, etc.).

Value-added Online Financial Services: $4.95 per Month is the New Free

imageAs we’ve mentioned before, there are surprisingly few fee-based online financial services in the United States (see note 1). But things may be changing. In the past month we’ve looked at three innovative services charging fees:  

Today, we highlight a fourth new fee-based service, also charging $4.95/month (or more), vSafe from Wells Fargo. vSafe is a secure online storage solution that sells for $15 to $15 per months as follows:

  • $4.95/mo for 1GB of storage
  • $9.95/mo for 3GB of storage
  • $14.95/mo for 6GB of storage

The service was introduced several months ago, and I’ve been using it for a couple months. The service automatically stores Wells Fargo statements, and allows users to upload any other file up to the storage limit. It would be even more useful if it offered automated retrieval and storage of other bank and biller statements.

Wells Fargo homepage (1 June 2009, 1:15 PM PDT)

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Landing page (link, 1 June 2009)

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Take a test drive in the Wells Fargo lab (link, 1 June 2009)

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Interactive video highlighting benefits

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Signup explanation

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Notes:
1. The golden rule of consumerism: “You get what you pay for.” Because online banking services are typically offered free of charge, U.S. consumers have had to contend with clunkier, slower, less secure and less feature-rich online services than consumers in other countries that pay for online access. Fees for online services can be a win-win, allowing financial institutions to offer premium online services for those willing and able to pay for them, while at the same time offering basic services free of charge so that everyone can benefit from online banking. 
2. Article updated 9 July 2009 to remove incorrect reference to Expensify’s $4.95/mo fee (see comments).

Why Mobile Banking/Payments will be Highly Profitable

imageMy credit card number was stolen again. It’s the third or fourth time since the Internet came along. It’s annoying, and a little disconcerting, but not a major problem, thanks to efficient card issuers who take the info, credit my account, and send me a new card. On a ten-point “hassle scale,” where 10 is having your hard drive crash, it’s only a 2 or 3.

And my previous stolen cards resulted in little financial loss to the issuer, other than the cost to process the chargeback and reissue the plastic. In those cases, either the issuer caught the fraud before anything was shipped, or the items purchased were digital (online subscriptions) and didn’t result in any lost inventory.

But this time was different. Someone used my card number to buy a PS3 gaming console and three games at a Best Buy in the Bronx. Assuming Best Buy follows proper procedures, Wells Fargo will be out more than $600 just for the merchandise. All told, with the cost of the investigation and processing, it’s probably an $800 to $900 loss to the bank and merchant.

Wells Fargo is generally very good about suspicious charges and usually calls us. I’ve had the card for almost two decades, and it’s been othe primary card for both my wife and me for much of that time. WF knows our purchasing habits better than we do.

Yes, we get to NYC at least once a year, but our charges are usually travel- and tourist-related ones in Manhattan. And we probably visit Best Buy in Seattle a couple times a year (we have teenage boys), so the gaming system charge is understandable. But it’s highly unlikely we’d buy a system while visiting NYC, and we’ve never visited the Bronx, so the authorization request likely triggered flags.

But unless there was inside theft, the bank’s authorization system evidently decided the $10 in interchange was worth the risk. Bad call this time, but probably right 99%+ of the time; otherwise, they’d be out of the card business.

What’s mobile have to do with it?
But if Wells Fargo had a real-time connection to me via mobile phone, they could have texted me for an OK (similar to the screenshot above, which is a text-based activity request to Wells Fargo). If it really had been I who stood at Best Buy’s register, it would have taken a second to reply “yes,” and the transaction would have gone through.

Of course, in this case, I would have said ‘no, I’m in San Francisco right now.’ Or even better, in the not-so-distant-future, if I’d allowed the bank to track me via GPS, they would have known, without even contacting me, that I was 3,000 miles away from that store. Either way, the bank saves nearly a grand from that single text message. Multiply that by the millions of fraud purchases every year and you have serious money, billions by most estimates.

So yes, mobile banking (really mobile payments) does have a robust and tangible business case from fraud reduction and customer service savings. The technology is in the hands of the users now, and most know how to use it. So, let’s get moving.

Note: For more information see our Online Banking Report on iPhone Mobile Banking

Notes from the Mobile Commerce Summit (day 2)

image Day two of the Mobile Commerce Summit ran just for the morning (see Day 1 highlights), but anyone who overslept missed the highlight of the conference: the much-too-short panel discussion on revenue opportunities that started at 8:15 AM and ended at 9:00 (note 1). 

Panel: Mobile revenue opportunities 

  • Drew Sievers, founder & CEO, mFoundry
  • Joe Salesky, chairman & chief strategy officer, ClairMail
  • Cameron Franks, director, Mobile Commerce Americas, Sybase 365
  • Jayatsu Bhattacharya, SVP business development, Mobile Money Ventures (Citigroup & SK Telecom joint venture)
  • Mustafa Patni, former director of mobile banking, WaMu

Observations from the panel:

  • POS payment services: NFC at point of sale
  • Value-added services
  • Fees for mobile banking services: transaction, monthly, or annual
  • Premium accounts with a rich mobile feature set
  • Stock/investment trading (Citi Hong Kong is able to charge a premium for mobile trading)
  • Bill pay: expedited payments
  • Person-to-person (P2P) payments
  • Much of the revenues will be indirect, from deepening and improving customer relationship
  • Remote deposit capture for businesses
  • Merchant advertising: offers to customers as they shop
  • Loyalty programs: driving customers to certain merchants with alerts, offers, and discounts
  • Lots of cost-saving opportunities: self-service customer service, moving bill payments to on-us transactions, loyalty program management, security, fulfillment, marketing, call deflection

Panel: Smartphone impact on the customer experience 

Armin Ajami, VP retail Mobile channel, Wells Fargo

  • Almost half of smartphone users use the mobile Web daily (source: ABI research, Feb. 2009)
  • 18% of U.S. consumers have smartphones
  • 263,000 apps now available for smartphones, predicted to grow to about 700,000 by 2013
  • There are 27 different app stores today
  • Mobile-optimized website <wf.com> launched in July 2007, text banking launched Oct. 2007, native iPhone app launched May 2009
  • Funds transfer on mobile-optimized websites takes 2 minutes with 5 clicks, no zooming or scrolling vs. 10 minutes via iPhone mobile browser with 7 clicks, 5 zooms, 7 scrolls and 10 minutes

Alain DeSouza, sr. mgr., market development solutions marketing, Research in Motion

  • Globally, 12% to 14% of mobile phones sold now are smartphones; in North America, it’s now above 20% (22% to 26%)
  • Blackberry app store officially launched April 1, 2009
  • Not excited about putting NFC chips into handsets (adds cost); will do it when it makes business sense (last year it was a top-5 opportunity, this year more of a top-20)
  • P2P transfer is not a killer app, but could be important for adoption
  • Be careful not to waste bandwidth in your app development

Note:
1. Note to conference organizers: Never start a session at 8:15 AM after a Thursday night in Las Vegas.