What Makes USAA Unique?

USAA was kind enough to invite me with other opinion leaders to spend a couple days at their headquarters in San Antonio at their expense. I was impressed, not by the hotel, but by the way USAA punches above its weight, especially on digital channels. They were the among the first out with mobile remote deposit capture, and do an outstanding job of integrating across lines of business. Why is this?  
  1. USAA feels more like a credit union than a bank. Actually it is more of an insurance company than a bank, but that is different tangent, and one in which I have no expertise. Customers are called members and surplus profit is returned to the member owners, much like a credit union.  As Bob Meara has documented in his excellent report on branch transformation, credit unions tend to invest more in automation than banks. When banks ask, “What is the ROI?”, credit unions ask, “Does it improve member service?”
  2. In order to be a member, one must have some sort of tie to the US military: either active duty, honorably discharged, or a close relative. So USAA has a clear target market, which has specific needs. Their members are geographically dispersed across the globe, which places some unique requirements on USAA. And USAA understands these requirements viscerally; nearly one in five employees is a Veteran. USAA’s celebration of Veterans Day goes above and beyond what you would find at most other institutions, by an order of magnitude. While I don’t generally write about such non-technical topics such as corporate culture, it is absolutely palpable at USAA. Providing financial services, to members of the US armed forces is a mission, and pursued with a missionary like zeal.
  3. USAA has no, or today, very few branches. The difficulty in setting up a USAA branch near members stationed in Afghanistan, for example, forces USAA to think about how to serve their members via digital / non-branch channels. I say non-branch because USAA allows members to deposit checks at around 2,000 UPS stores. It is a non-branch channel, but involves brick and mortar. Since USAA isn’t investing in brick and mortar, they can invest more in digital.
  4. Active duty soldiers don’t bring PCs with them on deployments. They do have smart phones. It is my perception that the active duty service member is the most revered customer, though likely the least profitable. This drives innovations in mobile.
  5. LOB silos are much less pronounced due to the strong member service culture. USAA has an integration layer across the banking, insurance, and investment product lines and ties this all together with a single CIF. Now we get to the techie side and what it means for products and customers. Let’s compare what Citi, Capital One, First Republic, and USAA—all respected financial institutions — are able to do to achieve the 360 degree view of the customer on their Internet sites.
  Citibank  

Citi lines of business

                            Capital One         First Republic

First Republic Lines of Business

                    USAA       The difference is telling. I’ve heard rumors that USAA may open up its membership to a much broader audience. On one hand I hope it is true. I think it would raise the game. On the other, I hope it’s not, because it would dilute the culture that drives USAA to really excel in its chosen niche.    

Reporting from the Celent’s Banking event in London

Celent Banking team has kicked off 2011 with a bang. In addition to the flury of new reports, we hosted an industry event in London. Management of multiple channels continues to be high on many of our clients’ agendas, and so we decided to focus on the multi-channel theme and called our event “Branch is Dead; Long Live the Branch.” Bart Narter, Celent’s Senior Vice President for Banking opened the event and introduced two distinguished guest speakers representing two sides of the argument. Batting for the “Branch is Dead” corner was Mr. Steve Townend, CEO and co-founder of MoBank, an independent mobile money management app in the UK. He asserted that “customers increasingly want and need to control their finances in ways that allows them to get on with their lives” and claimed that mobile is becoming an important financial management tool for many consumers. At the other side of the argument was Mr. Anthony Thomson, co-founder and chairman of Metro bank, the first UK high street bank to be launched since Queen Victoria ascended to the throne. Given the Metro bank’s core values of convenience, service, transparency and engagement, branches are very much a cornerstone of the bank’s value proposition. It was a hard act to follow for the two Celent’s Senior Analysts, but Bob Meara and I accepted the challenge. Bob painted the vision of the branch of the future, describing it as a “journey, not a destination”. While bank branch renewal programmes can take different shapes and forms, Bob is yet to find a bank that is happy to say “we are done”. And I began with the assertion that the UK banks can do more with their investment into the online channel and use the channel for more than basic customer self-service. I shared with the audience some of the lessons from the other markets, such as how banks are re-claiming the P2P payments. However, eWise payo, UK-focused Online Banking ePayments solution represents perhaps the biggest opportunity for the UK banks to leverage their investment into online banking and Faster Payments infrastructure. Now is the right time for the UK banks to make a decision whether they should adopt such a solution. Finally, the event concluded with a mobile banking and payments panel, featuring Celent analysts from around the world, including France, Japan, China, Korea and the US, which not only affirmed the rising importance of a mobile device in financial services, but also demonstrated the diversity of development patterns around the world. And that is the value that Celent brings to its clients – a global insight based on deep local expertise in multiple markets. If you attended the event, we hope you enjoyed the presentations and networking opportunities. If not, we missed you and hope to see you at our next event – don’t forget to check our website www.celent.com for the latest schedule.

USAA Easy Deposit Press Coverage Misses the Point

This fall, USAA began offering free check deposit services at nearly 30 United Parcel Service Inc. stores in San Antonio, where USAA is headquartered, and San Diego. USAA, whose main office is its only branch, plans to expand the service to more than 1,700 UPS sites nationwide by spring. Some of the press coverage of this initiative would have readers concluding USAA’s move into physical branch like deposit mechanisms is somehow a concession that its Deposit@Home and Deposit@Mobile services somehow fell short of the mark. Not so. Not even a little. The notion that not all customers enthusiastically embrace self-service transaction methods isn’t exactly a shocker. Most FIs (USAA included) serve a diverse customer base. Instead, USAA’s growth over the past several years absent a branch network is a huge success story and directly challenges the status quo among the significant majority of US banks. USAA grew its deposits at roughly three times the industry average since 2001 – and nearly doubled its growth since the launch of electronic check deposit gathering channels. Far from an indictment of Deposit@Mobile, USAA’s Easy Deposit initiative gives testimony to today’s multichannel imperative. But, instead of spending millions for traditional brick and mortar branches, USAA created an in-person deposit gathering channel on the cheap. By doing so, it has turned the historic competitive advantage of traditional retail banks (their collective branch networks) into a competitive cost disadvantage. Sure, there is a segment of consumers that prefer to transact with their FI in person – a shrinking segment. Soon, USAA will be competitive among that segment as well. Whoa – wait a minute – what about cross selling? The main point of USAA’s growing market share as well as its Easy Deposit initiative is this: the idea that bank branches are necessary for effective selling is simply a myth. There won’t be much selling of USAA services in the UPS stores. Not to worry, USAA has learned how to sell effectively with its other channels. In this capability, USAA has a significant competitive advantage. Today’s industry wide challenge is learn how to sell and service customers effectively across all channels. This must be done with efficiency ratios and net promoter scores that are both compelling by historic standards. USAA continues to do so as its growth exemplifies.

The newest alternate channel: Branch

Visiting with lots of bankers and technology vendors at BAI, one hears a great deal about alternate channels, and multi-channel integration. My conclusion after all these discussions is that the new alternate channel is the branch. More customers use “alternate channels” such as internet banking, mobile banking, IVR and ATM, than use the branch. I think banks need to turn their thinking around and think of the automated channels as primary channels and the branch and call center as alternate channels when their primary channels can’t do the job. Most new consumers have already changed their mindsets. Bankers would be well advised to do the same. Branch is the alternate channel.

non-branch channels

Two different banks in the past 30 days have come to Celent looking for help with non-branch channels, and the banks couldn’t be more different. One is a local bank in the US with a few dozen branches. The other is a global bank with operations in dozens of countries. Both are thinking about the shift of activities from branch to other channels as their clients change their behaviors. I believe that this will impact the technology infrastructure of all banks. Channel proliferation will drive banks to an SOA so that new channels, whatever they may be, can easily be added to banking infrastructure.
  • Branch
  • ATM
  • IVR
  • Call Center
  • Internet Banking
  • Mobile SMS
  • Mobile Web
  • Mobile Thick client / App
  • Twitter?
  • Facebook?
The list grows and grows. Since most of these channels are real time, systems will also need to be real time. Banks will need to invest to keep up.