Bob Meara

About Bob Meara

Bob Meara is a senior analyst with Celent's banking practice and is based in Atlanta, Georgia. His research focuses on the branch and ATM delivery channels, customer analytics and check and cash payment processing technologies. A well known authority on remote deposit capture, Bob has led multiple consulting engagements including proprietary research projects involving financial services hardware, software and the impact of self-service on branch banking.

Before joining Celent, Bob was the director of product marketing at Alogent. In this role, he positioned and launched a series of Check 21 payments solutions.

Prior to Alogent, Bob also held positions in marketing and brand management at BellSouth, Hayes Corporation, and Procter & Gamble in addition to being a commissioned naval officer.

Bob earned a Bachelor of Science in Applied Physics and Electrical Engineering from Case Western Reserve University.

The Enduring Importance of Physical Engagement in Retail Financial Services

I take no issue with the growing importance being placed on digital in financial services. Indeed, it does not take extensive examination to see, in Wayne Gretzky’s words, “where the puck is going”. Digital needs to be a top technology priority among financial institutions – particularly in highly digitally-directed markets such as North America and Western Europe. But, that doesn’t mean physical engagement is unimportant. In my opinion, in-person (physical) engagement will be of lasting importance in financial services for at least three reasons:

1. Most consumers rely on brick and mortar for commerce and will continue to do so.

2. Most retail deposits still take place at the branch.

3. Most banks do not offer a decent digital customer acquisition mechanism

Most Consumers Rely on Brick and Mortar for Commerce

This week, comScore released its most recent measurement of digital commerce. It was truly exciting, with Q4 2016 m-commerce spending up 45% over 2015! But, even with that astonishing year-over-year growth, m-commerce constitutes just 21% of total e-commerce. And, with two decades of e-commerce, total digital commerce comprised just ten percent of total commerce in 2015. Plenty of consumers still like stores. * FRB Consumers and Mobile Financial Services 2011 – 2016, Percent of smartphone users with bank accounts
** US Department of Commerce, Internet Retailer, Excludes fuel, auto, restaurants and bars
***comScore

Digital is not equally important across segments. Books and music, for example, are highly digital. Not so much for food and beverage. I’m being simplistic for brevity, but the data suggests that most commerce will remain tied to the store experience – at least in part – for the foreseeable future. I don’t think financial services will be an exception.

Most Retail Deposits Still Take Place at the Branch

Banks are keen to migrate low-value branch transactions to self-service channels, and there is perhaps no better low-hanging fruit than check deposits. Yet, with a decade of remote deposit capture utilization behind us, a January 2017 survey of US financial institutions (n=269) clearly shows that the majority of retail deposit dollar volume still takes place in the branch. Like it or not, the branch remains a key transaction point for many consumers and small businesses. Sure, the trend lines support digital transaction growth (thank goodness), but we have a long way to go – farther than the hype would suggest.

Most banks do not offer a digital account and loan origination mechanism

Even as banks would love to acquire more customers digitally, most aren’t well prepared to do so. Unlike most every other retailer on the planet, most banks initially invested in digital banking for transaction migration, not sales. That is changing, but not quickly. The mobile realm needs the most work. In a December 2016 survey of North American financial institutions, Celent found that large banks, those with assets of >US$50b, had made noteworthy progress in mobile customer acquisition capability since the previous survey two years ago. Smaller institutions lag considerably. For these reasons, branch channels are getting a make-over at a growing number of financial institutions, with the objective of improving channel efficiency and effectiveness – effectiveness with engagement, not just transactions. Celent is pleased to offer a Celent Model Bank award in 2017 for Branch Transformation. We’ll present the award on April 4 at our 2017 Innovation & Insight Day in Boston. In addition to presenting the award trophies to the winners, Celent analysts will be discussing broader trends we’ve seen across all nominations and will share our perspectives why we chose those particular initiatives as winners. Make sure you reserve your slot here while there are still spaces available!

Three Common Mistakes Banks Make

In my work as a research analyst, I run into three particularly common mistakes. Banks aren’t the only ones that make these mistakes. I make them too and have to be vigilant to avoid them.
1. Failure to appreciate diversity of needs or preferences
2. Failure to appreciate the shrinking half-life of facts
3. Failure to skate to where the puck is going
Let’s look at each one briefly…

Failure to appreciate diversity of needs or preferences This is utterly common. You see it in headlines all the time. “Millennials this…”, “Small businesses that…”, Community banks are…”. The trap involves extrapolating limited data to an entire population. Two current examples illustrate: The Use of AI in Banking is About to Explode. Apart from confusing AI with predictive analytics (which is more broadly used), the article asserts “explosive” future adoption of AI right around the corner. I’ll just say that this assertion vastly overstates planned adoption of AI among North American banks based on recent Celent research. Bank on Changes. Among other things, this pleasant article states “Smaller community banks like Edison, which emphasize personal service, said they have no plans to scale back drive-through or other services at brick-and-mortar locations.” While referring to a small number of community banks interviewed for the article, it projects those results on the entire community bank population.

So, are community banks planning on maintaining their current brick-and-mortar services in their entirety – despite the growth in mobile banking utilization? Some are and some aren’t. the figure below displays results a very question posed in a December 2016 Celent survey of North American financial institutions. “Compared to your current branch count, how many branches do you expect your institution will operate five years from now?” The report is not yet published. The idea is simple: banks serve diverse markets and make a diversity of decisions as well. The diversity of expected response is glaring in this data! So as not to give away too much of the report’s contents, I refrain from graphing the results of that question by asset tier. Failure to Appreciate the Shrinking Half-Life of Facts Assertions abound about customers, what they do, want and value. Some data points supporting these assertions are dated. This is increasingly dangerous. Samuel Arbesman argues for a shrinking half-life of facts in his book, The Half-Life of Facts. Most substantive change takes a while to accomplish – particularly among large organizations. I think many banks are at risk by assuming the facts as they knew them at the beginning of a protracted initiative will remain after the initiative is finished. When it comes to mobile, for example, six months is a long time and a year is eternity.

Failure to Skate to Where the Puck is Going Even those of us who aren’t hockey fans are familiar with the famed Wayne Gretzky quote about skating to where the puck is going instead of where it has been. I saw this up close and personal as part of a research effort exploring the current and likely evolution of retail delivery channel technology. Omnichannel delivery clearly remains aspirational at most institutions (I’ll defend that assertion thoroughly in the upcoming report). Yet, even as most surveyed institutions concede the importance of omnichannel delivery, the significant majority are not yet meaningfully engaged in bringing it about. How could that be? Many banks – particularly those with below industry average mobile banking customer utilization – aren’t feeling the pain yet. They are skating to where the puck has been. When they do feel the pain, it will likely be the result of much damage already inflicted.

Thoughts on Branch Transformation 2016

Last week, I had the pleasure of attending and presenting at Branch Transformation 2016, sponsored by RBR. The event was held in London on 6th-7th December. Unlike one once stalwart retail banking industry event in the US, RBR’s attendance has been on a multi-year growth trajectory. This year, attendance was up 20% over 2015 and included delegate representatives of 116 banks from 53 countries. It was time well-spent. [Read more…]

Two Hallmarks of Successful Branch Transformation Initiatives

Since my coverage areas include branch and ATM channel technologies, I often get asked, “What distinguishes successful branch channel transformation initiatives?”

Questions like this cut to the chase. Spare me all the charts & graphs, Bob, just tell me what successful institutions are doing. Fair enough. But, don’t we all want easy answers? How many diets are out there being promoted? They all sound pretty easy. If only…

But, I got to thinking… There are at least two hallmarks of successful branch transformation initiatives, despite there being a diversity of approaches and outcomes. Here goes:

1. Two, Not One

Except for the smallest of community banks, branch channel transformation involves two, concurrent initiatives – the current network and the future network. Why’s that?

Most banks appear to associate branch channel transformation with radical changes in the branch operating model. Arguably, for many banks, radical changes are needed. At the same time, very few North American financial institutions appear to have a clear vision of what they’d like to build. The “branch of the future” is not yet in focus. This is understandable given the cacophony of vendor voices urging banks to adopt a growing variety of physical designs, automation approaches, and paths to superior customer engagement. Banks should, in Celent’s opinion, embark on an ambitious branch of the future project with deliberate caution and methodical rigor. Proceeding in this manner — even with swift internal decision-making — will take several years. And implementation is rarely a “big bang.” Instead, new designs are rolled out over time, taking years to reach their eventual maximum impact.

The problem with this approach is two-fold. First, it tends to justify inaction until a clear future branch vision is embraced. After all, how can one begin a journey unless the destination is clear? The second problem is more significant — it confuses developing a future branch design vision with preparing the existing branch infrastructure for those new designs. For example, physical design is clearly a new branch design element. By contrast, underlying software platform choices and how new loans and deposit accounts get originated can impact both current and future branch designs.

parallel-initiatives-oct-2016

I’ve spoken with too many banks who, for example, postpone a teller image capture initiative on legacy branches until their “future branch” design is finalized. Most institutions are under pressure for short-term results. Most branch transformation efforts won’t produce a near-term ROI. Two projects are needed – one on the current network and another focused on the future network – with close coordination between the two. Something like this:

branch-xform-as-two-concurrent-initiatives

2. Lead with Human Capital, Not Technology

The second hallmark has to do with when human capital plans are implemented – prior to, coincident with, or following future branch initiatives. Strongly-held opinions abound. What appears to resonate broadly is this: branch interactions are becoming more about sales/service and less about transactions. This invites new, more highly-trained roles with a different skill mix.

The prevailing argument for positioning human capital strategy at the tail end of the journey is typically cost-focused. No one wants to pay the price to recruit, train and compensate Universal Bankers – only to spend much of their day playing the teller role.

The prevailing argument for leading with human capital is user experience-focused. In the final analysis, what differentiates a branch experience from the constantly improving digital experience, if not face-to-face engagement? Leading with human capital may indeed be a more costly experiment. But every financial institution I’ve interviewed who did so are glad they did. Conversely, every institution I’ve interviewed who didn’t (many of them) wishes they had.

Will Banks Eventually Lead in Retail Digital Sales Growth?

I subscribe to Marcus & Milichap’s research blog. Getting my head out of banking from time to time is refreshing and provides useful perspective. A recent blog post commented on the changing make up of commercial property construction as a result of the continued growth in digital commerce. The completion rate of new construction (measured in millions of square feet) has been roughly a third of its pre-2008 boom. Dramatic indeed!

No big mystery, however. As retailers close stores (Macy’s is a recent example), property developers must re-adjust their development to sustain revenue growth. As large merchants exit, they’re being replaced with smaller service providers – restaurants, medical practices, financial planners and grocery stores – mostly services that are less likely to migrate online. Digital plays a role in my healthcare, for example, but I’m still going to see the doctor next week for an annual physical. It helps to do that indoors.

That got me thinking. Three years ago, Celent predicted a steep decline in US branch density based on an analysis of branch dynamics in other developed markets and changes in store densities in other retail categories. In part, we argued that reductions in store densities have been non-uniform across retail categories for a reason. In the final analysis, as commerce becomes more digital, fewer brick and mortar stores will be needed to fulfill the same level of demand. We argued that two variables play an important role: the susceptibility to digital self-service and the degree of product differentiation. Arguably, retail banking is highly susceptible. Loan rates are easily compared online, but you may want to try on a new pair of pants before buying.

Danger Zone for RetailSo, why is the reduction in US branch density occurring more slowly than other retail categories? In part, because industrywide retail banking sales mix lags other retail categories in its migration to digital. How do we know this? Through June 2016, digital commerce accounted for 13% of all US core retail sales. How does that compare to retail banking? According to a survey of Celent’s Branch Transformation and Digital Banking research panels, US banks and credit unions lag considerably, with roughly 90% of sales occurring in the branch or contact center.

sales channel mix

Here’s one reason I think this is so (see below).

shopbuyuse

Banks have invested heavily in migrating transactions to self-service (the “use” part of financial services) with polished transactional capabilities in the digital channel, but have paid comparatively less attention to making shopping for and buying financial services digitally frictionless. That’s now a high priority for a rapidly growing number of institutions at present. Good thing!

As banks do so, they will be rewarded with rapidly growing digital sales. In the past 12-months ending in June, total non-store retailer sales grew 14.2% YOY according to the U.S. Census Bureau and Marcus & Millichap Research Services.  Over the same time period Bank of America’s digital sales grew 12% YOY, representing 18% of total sales according to its July financial results presentation.

So, will banks eventually lead in retail digital sales growth? Absolutely – Bank of America is already there!

Passwords Suck – Bring on Biometrics!

Now that I have your attention. Let me be clear: I hate passwords, particularly when they are increasingly required to be longer, more complex and frequently changed. Apparently, I am not alone in this sentiment.

At a conference in 2015, a small start-up, @Pay, a low-friction mobile giving platform, offered attendees a free t-shirt in return for seeing a brief demo. I must confess that I was more interested in the t-shirt than @Pay’s product demo. The line went out the door! Here is the t-shirt.

@Pay's Sought After T-shirtWorking from a home-office means t-shirts are staple part of my daily wardrobe. I have tons of them. None of them, however, engender such predictable responses from complete strangers than the one above. Responses range from a simple thumbs up or high-five, to an occasional, “You got that right!” Passwords do suck.  I have so many to manage, I use Trend Micro’s Password Manager to ease the pain.

That’s why I am excited to see more institutions migrate to biometric forms of authentication. Dan Latimore blogged about the rapid increase in the number of US financial institutions employing biometrics within their mobile apps here.

Banks shouldn’t stop there, however. In a June 21 New York Times article, Tom Shaw, vice president for enterprise financial crimes management at USAA was quoted as saying, “We believe the password is dying. We realized we have to get away from personal identification information because of the growing number of data breaches.”

I agree with Tom’s sentiment, but if passwords are dying, it appears to be a very slow and painful death. Here’s one example of why I say this. The chart below shows surveyed likelihood of technology usage in future branch designs as measured by Celent’s Branch Transformation Research Panel in late 2015. More than two-thirds of surveyed institutions thought the use of biometrics in future branch designs was “unlikely”.

Branch Tech Usage Liklihood

Authentication and identity management may always involve a trade-off between security and convenience, but the industry’s overreliance on personal identification information is failing on both counts.

  • At ATMs – it contributes to skimming fraud
  • In digital customer acquisition – it contributes to unacceptably high abandonment rates
  • In the mobile channel – it contributes to its slowing rate of utilization growth
  • In the branch – banks deny themselves the ability to delight customers with improved engagement options made available by skillful digital/physical integration

We’ll be looking into the topic of authentication and identity management in our next Digital Banking Research Panel survey in the coming weeks. If you’re a banker and would like to participate in this or future Digital Panels, please click here to fill out a short application

Taking the ‘Madness’ out of Customer Onboarding

Earlier this year, I had the pleasure of moderating a panel discussion on the topic of omnichannel customer onboarding sponsored by Kofax. It was a heavyweight panel, including:

  • Jim Marous, Co-Publisher/Author, The Financial Brand
  • JP Nicols, Director, Next Bank
  • Brant Clark, Sr. Director, Mobile Solutions, Kofax, Inc.

March Madness

Kofax is making a recording of this informative panel here.

It’s worth a listen. Why?

Customer acquisition is obviously important because it is a prerequisite to top line sales growth. Offering a low-friction digital capability is increasingly important because customers are becoming increasingly digitally-driven. Omnichannel customer acquisition matters because multiple channels – digital channels in particular – are influencing consumer’s choice of banking relationship. Banks therefore need to close the deal whenever and wherever customers make the decision to onboard. To do otherwise is inconvenient for potentially profitable prospects, and disadvantageous for institutions wanting them as customers.

The problem is, omnichannel customer acquisition remains largely aspirational for most North American financial institutions.

I’m looking forward to sharing two forthcoming research reports devoted to this important topic in the coming weeks.

Citi’s geolocation move

American Banker just ran an interesting article about Citi’s foray into the use of geolocation (beacons) as it pilots several use cases in its “smart branches.” Several thoughts immediately came to mind as I read Tanaya Macheel’s well-written article:

  • The use of beacons for cardless access to branch ATMs after business hours was the lead use case cited in the article. But, that’s just one of a growing number of potentially very useful applications for beacons in retail financial services.
  • Banks have barely scratched the surface in more usefully integrating digital and physical channels as they seek to maximize customer engagement.
  • Geolocation, in particular, is under-utilized by retailers (especially banks) and remains largely experimental.

My hat is off to Citi for its purposeful investment in developing expertise in this area and to American Banker for writing about Citi’s work. In my view, the most impressive aspect of this initiative isn’t so much Citi’s pushing the technology envelope; it’s the organizational effort that was likely required. Getting its branch operations, mobile product management, IT and LOB leadership aligned represents real commitment to innovation.

How far ahead of the industry is Citi?

Here’s one data point. In Celent’s inaugural Branch Transformation Research Panel survey in (June 2015), we sought to establish a benchmark on just how far and how fast NA institutions were pursuing branch channel transformation. Of course, several questions addressed planned technology usage. Out of a dozen examples of technology usage, geo-location ranked dead last in terms of the liklihood of usage in future branch designs – just 27% of surveyed institutions thought the use of beacons would be "somewhat likely" or "very likely".

Branch Tech Usage

Pretty far I'd say!

I hate being wrong: A precise look at mRDC adoption in the US

Nobody likes being wrong. I’m no exception.

Sometimes it’s not so much being wrong as much as being inaccurate. Here’s an example of where my best-effort estimates have been a bit off.

Mobile RDC (mRDC) has been a fairly hot topic and a mobile banking capability that has gained rapid and widespread adoption among US banks. But how rapid and how widespread? I’ve taken a stab at answering these and other questions over the past few years. Relying on a combination of financial institution surveys and RFI responses from the leading vendors, Celent has published comprehensive annual reports on the evolving state of remote deposit capture, including mRDC.

Back to the question…

Since empirical methods would be tedious and time consuming, I created estimates of mRDC bank adoption annually based on vendor-reported client base and implementation backlogs. It turns out that two of my last three annual estimates weren’t all that accurate. How do I know?

Last month, FI Navigator and Celent announced a collaboration to publish the industry’s most comprehensive report detailing mobile banking offerings on the more than 6,000 U.S. financial institutions that offer mobile banking and more than 50 vendor providers.

The report, Mobile Banking Quantified – Comprehensive Benchmarks for US Vendors & Institutions, will be available for download in late April 2016. The research leverages FI Navigator’s mobile banking data and analytics module, along with Celent’s industry research methodologies, to provide vendor and institution performance standards from nearly three years of month-to-month historical data.

Look at how my historical annual estimates compare to the more accurate FI Navigator data since mid-2013.

mRDC History

Back in 2013, vendors were implementing as quickly as they could. In aggregate, vendors reported over 700 banks and credit unions were under contract, but not implemented. It turns out that implementations proceeded faster than I thought, as my year-end estimate was 40% low! I did better in 2014, but estimated 9% high in 2015.

I look forward to the extraordinary precision and depth of insight Celent’s relationship with FI Navigator will bring the industry. For more information on the report and additional offerings, please go to http://discover.celent.com/FIN-Mobile.

Getting to digital while missing the point

Digital banking is so hot right now – for good reason. The recently published research sponsored by the Federal Reserve, Consumers and Mobile Financial Services 2016, reported that 87% of the U.S. adult population has a mobile phone and 77% of them are smartphones, up from 71% in 2014 and 61% in 2013. Admittedly, it is getting hard to find a phone that’s not internet-enabled. But consumers are acquiring them for a reason – and it’s not telephony. The same report documented the rise of mobile banking: 43% of all mobile phone owners with a bank account had used mobile banking in the past 12 months, up from 39% in 2014 and 33% in 2013.

Digital Banking Not surprisingly then, the significant majority of US financial institutions now offer digital banking capabilities to their customers. But, most were designed to migrate transactions away from the more expensive branch channel to lower-cost self-service mechanisms. A worthy objective, but it misses the point (more on that later).

Celent has research in the field now designed to understand just how far US banks and credit unions have come in achieving digital channel adoption targets. The short (however preliminary) answer: not very far. It’s not for lack of trying, however. Two-thirds of responding institutions said they have specific, measurable digital channel adoption goals.

Digital adoption goals Mar 16
Source: Celent Managed Research Panel, March 2015, n=32

Beyond Transactions More recently, a growing number of banks and credit unions are thinking beyond transactions toward digital sales and service. Another worthy objective, particularly among the large number of institutions that are, frankly, desperate for revenue growth. A minority have specific , measurable goals to increase digital customer acquisition. We expect that to change as more banks embrace the imperative for omnichannel delivery. Institutions thinking beyond transactions are paying close attention to the state of digital customer acquisition – for good reason. About three-quarters of banks in Celent’s survey track completion rates, but far fewer systematically follow up on incomplete applications. This is a problem! The apparent disconnect seems to reflect a bias towards digital delivery. If cost reduction is the primary objective (it rarely is) than good. But if revenue growth and customer engagement are what banks are after (I believe that to be the case) then many are missing the point.

In my opinion, the objective of omnichannel banking shouldn’t be tied to migrating an arbitrary percentage of customer interactions to the digital realm – whether transactions or sales. Consumers are becoming increasingly digitally-driven without bank’s involvement! The point of omnichannel delivery is to offer customers consistent and convenient ways to engage with your bank whenever and wherever they so choose, not to achieve some arbitrary channel mix.

The fact is, most consumers don’t want to open accounts on their mobile devices, even though they are very likely to be researching banking products and services online. That’s why banks need to offer a variety of low-friction ways to engage with customers and prospects. Click-to-call and digital appointment booking are two examples. Digital appointment booking (DAB), in particular, has emerged as “low-hanging fruit” among banks seeking to better integrate digital and in-person engagement. Although impressive results can be obtained from relatively modest effort, few institutions have taken this step.

Digital Appointment Booking First and foremost, DAB is not about driving branch traffic or somehow prolonging its relevance as some have suggested. Rather, DAB is about improving omnichannel customer engagement. Best practices suggest it is not a silver bullet either, but one of many customer engagement mechanisms that leading financial institutions are learning how to orchestrate to better serve customers. DAB is also not simply about booking appointments. When integrated with lobby management systems, DAB solutions help customers efficiently and effectively accomplish what they want and when they want it. Done well, DAB is very much a win-win. This is the point, isn’t it?

I’ll be presenting on best practices in digital appointment booking at American Banker’s Retail Banking 2016 in Las Vegas on Wednesday afternoon April 6th. The presentation is part of Innovations for Credit Unions from 1:00 – 4:00 in the afternoon. If you’re planning to attend, feel free to stop by and say “hello”!