Archives for June 2009
We think most banks will pass on the idea. Why? Because mobile RDC is disruptive. It may delight millions of consumers, but it also would challenge the status quo among retail operations organizations, forcing rapid change in ways few banks may be prepared to embrace. USAA doesn’t have this problem. Over a short period of time, USAA has transformed what was once a significant competitive disadvantage (no branches) into a compelling competitive advantage. Its membership and deposit growth proves it. Retail banks need to pay attention.
The most profitable DDA customers are those at the top of the scale who keep large balances and provide low cost deposits, and those at the bottom of the scale who keep very low balances and generate NSF or overdraft fees. They subsidize the other half of customers in the middle who neither keep large balances nor bounce checks.
Why is this important? Competitors are slowly chipping away at both the top and the bottom of the markets. Direct banks are offering high rates to lure away the balances. Most people know about ING Direct or E*Trade Bank. On the bottom end of the balances the General Purpose Reloadable (GPR) card is making inroads and the 100 pound gorilla of mass retailing, Wal-Mart is moving into this space in a big way with their 3/3/3 pricing: That’s $3 to buy the card, $3 to load cash onto it, and $3 per month. With Wal-Mart’s aggressive pricing and huge retail presence, this move could move GPR cards out of the ethnic neighboroods and niche markets and into the mainstream. Main street banks should take note.
A no-brainer for banks is to offer GPR cards to those who don’t qualify for a checking account. Do banks want to wait for Wal-Mart to take their customers or move them to a more suitable product themselves? Wal-Mart is persistent and wants to be a power in financial services for years. They don’t want all your customers, just the 25% with low balances and high profit.
- We opened up with a great presentation by Celent SVP, Bart Narter, who gave a comprehensive summary of the top technology trends in the banking space.
- Celent Senior Analyst, Red Gillen, captivated the audience with his review of the healthcare banking space. This was no easy task as Red’s presentation was just after lunch
- Oliver Wyman Partner, Aaron Fine, gave the audience a fresh perspective on deposit gathering
- Mobile Banking for the Masses, moderated by yours truly. Bank Systems & Technology was in the room (along with many other press folks), and published a great piece called Mobile Banking is Now a Must-Have for Banks. This article is a summary of the panel session. 4 great panelists provided their take on the evolution of mobile banking:
- Alternative Payments Go Mainstream, moderated by Bart Narter. This eclectic group provided an innovative take on the payments space and explained how the market is evolving: