Strategically Speaking

The Customer Awareness and Education Disconnect

 Author: Karen Crumbley, karenc@gladtech.net

After working with Financial Institutions (FIs) since June 2011 on compliance objectives of the FFIEC’s Supplement to Authentication Guidance, it has become clear that many FIs are still struggling with the best way to address the guidance in order to provide customer awareness and education.  There appears to be a gap between the FIs providing educational materials to their customers and their customers acknowledging their receipt and understanding of the materials.

Here are some of the reasons why I believe FI customers may be ignoring educational materials:

• The educational material is not compelling -
  Regardless of the distribution method, the material simply fails to capture their attention. FIs utilize multiple distribution channels such as websites, brochures, statement stuffers, but with customers inundated with materials from multiple directions, educational materials are  largely ignored.

• A strategic communication plan and messaging is missing -
  Many FIs fail to create and follow a strategic roadmap for ongoing Customer Awareness and Education Program initiatives.  The messaging begins to lack specific focus and does not create compelling reasons why customers should be attentive to the communications regarding the need for additional or enhanced technology controls to prevent/detect fraud.

• The Customer Awareness and Education Program is stuck on that “backburner” -
  The Customer Awareness and Education Program component of the FFIEC guidance is not a priority, and other projects have taken precedence leaving enhancements in the conceptual phase.

• The FI is concerned that intentional efforts to encourage education may alienate  business customers -
  FIs do not want to imposition their customers by making education mandatory.  As a result, many business customers are falsely under the impression that their accounts are protected and insured against fraud.

Here are some ways that FIs have had success with their Education and Awareness Program:

• FI management leverages unique delivery channels for communicating to their higher risk commercial customers - 
  FIs see this as an opportunity to build relationships.  They utilize specific campaigns designed to create interest and a desire to learn more. Successful tactics include  eblasts and emails, outbound phone calls, in person meetings, marketing campaigns combined with customer facing events like  ‘ lunch and learns’, and web-based training to encourage customer participation. 

• FIs engage internal stakeholders for support and buy in for an active Customer Awareness and Education Campaign -
  As part of the strategic communication planning process, FIs identify, create and train internal cheerleaders who understand the purpose and importance of the campaign.  As a result, the FI employees are knowledgeable and are able to engage customers to emphasize the importance and to further education and awareness.

• Educational material is promoted as a value-added service -
  Instead of viewing the educational offerings as a burden to customers, FIs capitalize on education as a way to promote confidence and concern for the security of online banking transactions rather than an inconvenient feature and in this sense, embracing the guidance objectives as an opportunity rather than a burden.

An active Customer Awareness and Education program should be a strategic and ongoing initiative, designed to help your customers make the connection.  They own a large part of the responsibility for the security of their online banking transactions and your FI’s participation in  providing this valuable information to prevent and detect fraud can enhance and deepen the relationship with your customers.

I would love to hear your ideas for a successful Customer Awareness and Education Program. 

Lengthen Your Stride

 Author: Brandon Kunz, BKunz@profitstars.com

Several years ago I participated in a hiking trip with a group of boy scouts to a lake not too far from where we lived. The hike occurred over several days and was a lot of fun. Two or three other leaders were there with me, and I remember one of them hiking behind me during part of the trip.

Later, when we discussed with the boys around the fire what they had learned during the hike and how it could apply to their daily lives, that particular leader offered up a “life’s lesson” as an example. He explained that when hiking behind me he noticed that I had longer legs than he did. He isn’t a particularly short guy, but I’m a little bit taller and happen to have long legs. He told the boys that it appeared clear to him that with longer legs I was able to travel just a little bit further than he did; each and every step of the way. Perhaps the difference was only an inch or so with each step, but the cumulative result was such that it was difficult for him to keep up.

He explained to the boys that by “lengthening our stride” in our responsibilities in daily life and doing just a little bit more, but doing so consistently, “with each step,” we would travel much further and faster and accomplish so much more in life.

Sometimes we can become overwhelmed thinking we need to make major investments in time and effort to do something; that a task or desire is just too far out of reach.  Yet, many times the same task or desire can be realized by breaking it up into manageable chunks and applying a conscious and consistent effort to do just a little bit more each day.

In one’s personal life that might be reading 3 - 4 more pages a day, which would equate to over a thousand pages in learning each year, 3 - 4 worthwhile books.  Running a few miles, three times a week equates to over 450 miles a year, enough to wear out a good pair of running shoes.  Watching one-half hour less TV each night equates to about 15 hours of time saved each month, almost two full work days.  100 fewer calories a day equals a 10 pound loss each year (or 10 pounds not gained).

At NACHA this past week, reference was made to the saying; “How do you eat an elephant? One bite at a time.” 

I think the first challenge is to determine which is the right elephant.  The next challenge is to determine where to begin.  Then you have to keep after it, day after day, week after week, until the goal is realized regardless of the challenges or obstacles that present themselves. 

Proper planning, “lean” thinking, and the help of experienced consultants and mentors can help drive value earlier in the process and save missteps.  For example, the Alogent group within ProfitStars works in an iterative, two-week development work cycle.  At the end of each cycle we have the opportunity to see progress made toward each of our goals.  On a periodic basis we are able to show that progress to key clients and use their feedback to determine whether to persevere or make adjustments.  As components are created that deliver discrete value they can be released to market.  That structure has served us very well, for many years, and has helped us apply our talents and our abilities on a consistent, ongoing basis to improving our solution offerings for the benefit of our clients.

And every once in a while, we get a chance to stop at the proverbial campfire, reflect, and realize that while we may have a long way to go, we’ve already accomplished much.  Then, we get to determine what to tackle next and keep after it, day after day, week after week, doing just a little bit more each day, traveling further and faster.

Just when you think you have it All Figured out … Something New Comes Along

 Author: Debi Randol, drandol@profitstars.com

After several years of working in a stable compliance environment, I started to notice a change.  Around June 2011 the FFIEC released the Supplement to Authentication in an Internet Banking Environment, and Financial Institutions (FIs) struggled with adopting the new guidelines.  Things were just beginning to settle and then the FFIEC released a new host of proposed guidelines in January of this year for Social Media Communication management.  After reviewing the feedback that FIs submitted to the FFIEC in response to the proposed Social Media guidelines, it appears that FIs are growing jaded from regulatory requirements.  I read quotes like “You are regulating us to death!”, “Adding more laws and entities are ridiculous!”, and “Do we really need another policy?” 

The truth is I can empathize with FIs because IT Regulatory Compliance expectations are high.   I can understand how community banks feel, “overburdened and overregulated”.   I have even heard in jest that, “bankers can’t be bankers anymore because they are too busy with policies and risk assessments”.  However, I also fully understand the importance of IT Regulatory Guidance.  I also know that being unprepared for an exam or audit is not a valid option.  Trust me, I have some experience with assisting FIs prepare at the last minute or the week prior to an exam or audit and they are overwhelmed.  All things considered, preparing for the next wave of guidance would be to the FIs advantage.  Since Social Media Communication is still a new medium, it presents unique risks.  For example:

• How do we keep customers and FI personnel from posting non-public information?
• How do we address record retention and vendor management when the vendors that provide these services are not traditional FI vendors? 
• What do we do if our social media page domain is hacked for the purpose of identity theft that steals FI customer’s credentials? 
• What about advertising regulations and employee acceptable use?

Regulatory bodies have recognized that these questions need to be addressed.  So what does all of this mean?  First of all, it’s important to note that the guidance does not impose additional obligations on FIs.  The responsibility to manage the potential risks associated with social media usage and access is no different from that which is required for any new product or service.  In addition, the pending guidance is expected to require a risk management program to be in place to identify, measure, and control the risks related to social media – even if your financial institution is not actively participating in this arena. 

It will be beneficial for your FI to plan and formalize a strategy now, if you have not done so already.  Is your FI going to actively participate in social media communication?  If yes, what do you wish to accomplish from it, and how are you going to measure those accomplishments?  These can be the building blocks for your policies, procedures, and employee training.

I strongly recommend not delegating this responsibility to one individual, as it merits the attention of more than one stakeholder.  Social media is far reaching and needs to be a group effort.  First, get your board and senior management approval and involvement.  Then, with all the regulations that intertwine with social media (17 and counting) make sure you are involving your compliance department or vendor.  Recognizing the regulatory requirements and guidance for social media communication and involving key individuals is potentially the most difficult step.  Once you have made the commitment to address social media guidance, then you will find that as with anything new it will soon become part of your regular processes and procedures. 

Are you ready to take the next step for planning your social media communication strategy? 

Better Tools, Better Bankers

 Author: Kevin Moland, KMoland@profitstars.com

A couple of Octobers ago, I asked my seven-year-old son what he wanted to be for Halloween. He replied, “Dad, I want to go as a pickup truck.” I explained to him that we didn’t have the time, materials or tools to create a truck costume. The next morning, however, I saw a large box in the garage and it got me thinking. Two nights later, my son proudly stepped out in his cobbled together cardboard version of a Ford F150, complete with chrome—ok, aluminum foil—bumpers, a poster board grill, and two hastily configured guitar straps that let the entire chassis rest on his little shoulders. It was the best Halloween of his life. His “truck” wasn’t perfect, but it got rave reviews at every house we visited, and I got brownie points that lasted until the next Halloween, when he expectantly declared, “Dad, this year I want to go as an eighteen-wheeler!”

When I hear financial industry pundits talk about how banks and credit unions need to leverage their payments data to better understand their customers’ needs, the look I see on bankers’ faces reminds me of how I felt on that pre-Halloween evening, sitting in my garage with a cardboard box, a few cans of spray paint, two rolls of duct tape and a crazy vision of a costume that I didn’t have the slightest idea how to build. In short, I empathize with those who are asked to do a seemingly impossible job without the appropriate tools.

When it comes to making better use of our data, the pundits are right: The answer to some of our most important questions lies buried in activity logs, audit tables and archived databases. Collectively, this information can tell us what our customers/members are doing, what products they’re using, even where they’re spending their money. Companies like Apple, Microsoft and Google would happily shell out a few of their hard-earned billions for a look at the financial service industry’s treasure trove of data.

Financial institutions spend a lot of time and money providing space for it and protecting it, so why do so few spend time doing meaningful analysis of the data stored in the nooks and crannies of their IT systems?

Simply put, they don’t have the tools to do the job.

Financial services vendors have been busy turning new technologies into popular product channels (e.g. – Internet banking, mobile banking, mobile remote deposit), but there has been little progress in helping banks and credit unions utilize the increasingly complex flow of payment data generated by these new services. Without the means to quickly and intuitively evaluate their data, most financial institutions resort to burdensome manual processes to monitor customer activity. Many just give up.

With recent regulatory changes and a renewed examiner focus on anomaly detection, financial institutions have to do a better job of utilizing the information they store, if only to protect themselves. Instead of using security as an excuse to leave transaction information cloistered behind firewalls and network security defenses, software providers must give financial institutions better methods to view key metrics and drill down to determine the behavior and status of key account holders.

Unfortunately, developing data analysis tools is difficult and expensive. Efforts to give banks and credit unions the ability to instantly and intuitively slice payments data can impact the entire payments platform, even requiring major changes to how the data is stored in the first place.

But there is some good news! The industry and the market are beginning to reward vendors that help clients analyze their data. Earlier this week, NACHA awarded SmartSight®, an interactive dashboard that powers actionable insights from payments data running through ProfitStars’ Enterprise Payment Solution products, the 2013 Kevin O’Brien Award for ACH Quality. And as other tools appear, similar industry accolades are sure to follow.

The primitive days of analyzing information with the equivalent of duct tape and aluminum foil may soon be over. Financial institutions are beginning to look at data in innovative new ways. Once they have the right tools, banks and credit unions will finally be able to see past the numbers to understand what the data means.

What tools have you found most helpful in analyzing your data?

Why FinTech is Cool…

 Author: Danny Payne, DanPayne@jackhenry.com

A couple weeks ago my 4 year old daughter said, “Daddy, what do you do for work?”  My 10 year old son answered her and said, “Dad talks on the phone all day and flies on airplanes.”  I spent a few minutes trying to explain my job, my company, and then quickly gave up.  What was I going to say?  “Honey, I represent a technology company that provides bill pay services, mobile banking, and mobile check deposit.”  I am sure she would have looked up at me and said, “Got it Dad!”  Instead, all four of my children look at me and think… BORING!  And here I am trying to look at my children and saying, “No really… my job is cool.”   And honestly, I would love to see my 14 year old son get interested in what I am doing and understand why I think FinTech is cool.

I will be the first to admit, I did not sit down with my high school counselor or my college advisor and say, “I want a career in financial service technology”.  Honestly, I wanted to be a basketball coach.  My first online experience was on a user board.  I actually remember saying the words, “Are we actually inside the internet now?”  I am also old enough to admit that the first cell phone I used was in a box that plugged into the lighter on a car.  I could never have imagined that cell phone or the smaller square (6 inch thick) phone I carried in my pocket around college would eventually evolve into a device more powerful than my Pentium Pro DELL 386.  It’s really kind of wild to think of the major evolution of computers, mobile devices, and the internet in general.  Technology is now assumed and expected.  Our children will expect all of their electronic devices to interact with everything.  Isn’t that cool?  But isn’t that SO MUCH different than how we grew up and what we expected our first cell phone or our internet to do? 

The world today is very different than that world I described above.  Along with the mobility of our laptop computers, everyone is also carrying around a tablet and cell phone that is lighter, smaller, and easier to manage.  The world of financial technology has to be accommodating that kind of availability. And even though it doesn’t get the press that Facebook or Google does, this is the same kind of coding and developing happening. I have personally visited some of these small, fast growing, and innovative companies.  If you didn’t know better, you would think you had walked right into “The Social Network”.  It is cool, it is exciting, and it is innovation happening right before your eyes.  They are building these interfaces that we use every day when banking, depositing checks, or paying our bills online.   You see where I am going with this?  This technology is very cool.

Think about it… how much different is your relationship with your financial institution than it was 10-20 years ago.  For many people, the days of walking into a branch are over.  When was the last time you called your financial institution or biller to ask for your balance or how much you owe this month?  If you need something, there’s not only a website for you to go and get the information… there’s an App for it too!  And if you are like most people, you have a way to log into the website and own the application on your cell phone and tablet device.  We are overwhelmed with communication options that allow us instant access to data immediately.  All of this is creating a huge opportunity for financial services technology companies.  All of this is cool.

In my world, inside ProfitStars, and the companies I partner with… we provide this kind of experience every day.  Recently the William Mills Agency, The Association for Financial Technology, and Crone Consulting announced mobile banking is growing five times faster than internet banking (Bankers as Buyers 2013). These companies are focusing on you (the bank and credit union) and you (the customers).  They want to bring more information and more ease of use to your computers, tablets, and cell phones.  Twice a year I try to make sure I attend Finovate.  If you aren’t familiar with this event, I highly recommend it.  Finovate holds two US based conferences where 30-40 handpicked companies get 7 minutes on stage to show their latest and greatest innovation. With over 1,000 people in attendance and social networking spreading the news to thousands more, they have the chance to be #BestofShow or #FAIL.  And even though the average person may not think financial technology is on the “cutting edge” or creating dynamic and ground breaking technologies, the truth is… the average person wouldn’t know how to live without the FinTech products we are putting in their hands.  We, the members of a large family of financial technology companies, make up the vastly different services that are provided every day for millions and millions of people.  So back in the 1990’s, FinTech didn’t even exist the way it does today.  And the founders, presidents, and CEO’s of these new innovative products weren’t even ready to understand the products they are building today.  But it still happened, and it is happening.  It is everywhere and it is important and it is being introduced to more and more people every day.  Young and old, more and more people are adopting easier ways to manage their personal financial world.  So, there is a chance, before my 14 year old son graduates college he could recognize the opportunity for a career in FinTech.  He could be a developer, a product manager, an operations leader, or a good old sales guy… just like Dad.  And just like FinTech, that is really cool. 

Pretty Flashing Lights – Not Just for Christmas

 Author: Chris Sutherland, CSutherland@jackhenry.com

Spring has sprung and for most of us winter is definitely over.  Christmas lights may be boxed and put away … or just coming down, but in the world of Information Technology, those flashing lights aren’t just there for your holiday enjoyment!

Recently one Saturday morning a financial institution came into the office and nothing was working.  Their virtual server environment was down.  They were unable to do anything! They found out the hard way that not proactively monitoring the storage area network (SAN) and those amber color lights did not bring gifts; but near disaster.  If the equipment was monitored regularly it could have been caught before the breaking point and potentially have avoided a week of system down complications and emergency fix costs.

While everyone is busy, this type of situation leads us to remind IT administrators and IT staff of the importance of watching your equipment and not assuming that all is well just because all is “running”.  It reminds us all to be proactive in monitoring our environments. 

Here are a couple of things that should be checked regularly:

1. Hardware – All hardware have indicators to help you watch for problems.  Some even have displays to give you information such as error codes or which particular piece of equipment is malfunctioning.  One of the biggest things to watch on the hardware is the lights.  Most vendors use amber lights to indicate problems.  At least on a weekly basis walk into your server room and look at all the equipment and make sure there are no amber lights telling you there is a problem.
2. Software – A lot of hardware manufacturers include software that can also assist in watching for issues that could arise.  Most of these also have alerts that can be configured to either alert you or record errors into logs that you can monitor for faulty equipment.  Be sure to configure your software to alert you in the event a problem is detected.  However you can still not completely replace the trip to the server room; sometimes with all the emails that are received you can miss critical alerts that can be seen by that weekly trip to the server room.
3. Backup verification – This seems like an obvious statement that most IT staff would do, however this is missed and not tested.  Depending on your backup solution you may be getting “good” backups, but as we all know your backups are only as good as your tested restores.  There can be underlying problems, for example, tapes that are aging can write data but will they still allow you to recover the data on them?  Just watching and making sure the jobs complete successfully is not enough, you have to be able to recover that data.

While there are more things that need to be watched these are just some things that can hopefully help reduce the burden of a failure and allow you to keep on top of your environment.

One final thought - what do you do if you find yourself in a situation where you arrive and your system is down?  Do you have a BCP (Business Continuity Plan) for hardware down?  Do you have an off-site recovery solution?  These are considerations that you need to have so you don’t have to be down without a plan to get everything back in service.  Down time leads not only to headaches but potential lost revenue as well.

It’s time to clean house: redesign your website’s content

 Author: Russell Anderson, RuAnderson@jackhenry.com

Websites are, by nature, unfinished business. No matter how recently you’ve redesigned a website, it’s easy to feel as though it’s growing stale and needs a change. But keeping up can be tough. The pace of technology aside, design trends constantly fluctuate and shift greatly depending on the actions of a few key players (Apple, Microsoft, Google, etc.). Chasing this moving target can be expensive, time consuming, and frustrating.

Perhaps, then, we can find some ways to update a website beyond the ever-changing graphical elements (colors, shadows, typefaces) and flashy functionality (popups, animations, etc.). Ultimately, these are just window dressing, anyway. The foundation of your website is the content: what it says and how it says it. Content has a major impact on a website’s effectiveness and perception.

If you’re looking to spruce up your website, start by redesigning the content.

A little spring cleaning

I’ve heard it said that web redesign is like moving from one house to another. Usually when people move, they use the opportunity to take stock of all the stuff they’ve gathered over the years. They’ll find things they haven’t touched in decades, and seeing them again begs the question of whether or not they’re even necessary. More often than not, they’ll end up throwing a lot of stuff away.

The same thing needs to happen to your content. Your organization has likely had a website since the late 90’s. Over all that time, pages and paragraphs add up, resulting in a great deal of information that may no longer be relevant or effective.

Be careful not to use your website as an online filing cabinet.

Outdated content can have a negative impact on the perception of your institution. Put yourself in a visitor’s shoes for a minute. Imagine you visit a website, and land on text that is clearly obsolete, or worse, the wording contradicts what you’ve recently been told by someone at the company. What will be your impression of that organization’s attention to detail? What about its trustworthiness? According to a recent survey, 65% of responders felt content on the web was unreliable.¹ Don’t give visitors reason to be skeptical of your institution, too.

Sweep up the cobwebs. Sift through and find out-of-date material; then either update it or trash it. Repeat this process as often as you can – it’s one of the many reasons we offer a content management system, or CMS.  Take a look at your website’s statistics. If a page has seldom been visited, get rid of it! If it really is crucial information for your users, you need to rethink how to get it in front of them.

“Make it pop”

We hear this phrase from clients a lot when it comes to creating our graphic designs. People want their website to stand-out from the crowd and catch peoples’ eyes. The same is true for your content. You’ve got to “make it pop”!

People don’t actually read websites, they scan them. Think of the last article or blog post you’ve read (including this one). Did you really read every last word? Or did your eyes jump from paragraph to paragraph searching for the information that was relevant to you? Here I am suffering over every last word of this post, when only my boss (and maybe my wife) will actually read the whole thing.

When visiting your website, your users are hunting for key pieces of information. They’re seeking to make quick comparisons about the products and services you offer. Maybe they’re in crisis-mode because they’ve just lost their debit card, or they need to find the nearest branch quickly.

If your website is cluttered, your content too lengthy, and your pages too many, it becomes difficult for users to do what they need to do.

Furthermore, bloated content can make it difficult for your website to turn prospects into customers and increase business from existing customers. Transparency is important in the financial industry, but this does not mean that every last detail of every last product needs to be on your website. Techniques like progressive disclosure can help users who want more information find it. Give them the details they need to make an informed decision, succinctly and without jargon.

Also, be sure to give your users a clear call-to-action on every page – to an application, contact form or phone number. Make sure every bit of content moves your user forward in their relationship with you.

What you can control

Ultimately, you may not be able to exert much control over Web trends and technology, but you do have control over the words on your website.

Redefine the redesign: focus on content.

 

References

¹ http://content-science.com/expertise/content-insights/65-percent-of-americans-surveyed-think-web-content-is-not-reliable

Financing in Healthcare; the Patient Pay Effect

Author: Pat True, rtrue@profitstars.com

The market for financing the patient pay portion of medical claims is expanding in the U.S. and will grow significantly during the next ten years. As this market grows, healthcare providers and patients are both seeking new ways to accommodate payment terms for these obligations. This need represents a new opportunity for financial institutions to add services within their communities by offering programs that ease the burden of increasing healthcare cost for the patient while also enhancing the timing of cash flow for the facilities providing services.

“What is included in the patient pay portion of claims”, you ask?  The answer: Any amount of the balance that the patient is responsible for paying.

1. It includes the patient co-insurance portion of larger medical procedures such as surgeries.
2. This includes procedures offered by medical professionals, such as elective surgeries and some screenings.
3. Patient pay includes the individual and family annual deductibles, which have been increasing as insurance plans migrate to more of an HSA structure.
4. In some cases, the patient pay market also includes procedures for those individuals who are uninsured at the time of service.

From 2000 to 2011, healthcare cost in the U.S. rose at an average annual rate of 6.5%. In 2011, total personal healthcare spending was just under $2.27 trillion, including $849 billion in hospital expenses, $530 billion in physician services, $269 billion in prescription drugs, $151 billion in nursing home care, $108 billion in dental care, and $363 billion in several smaller categories such as medical equipment and other professional services. Incidentally, that represented 17.9% of GDP. Of this, $304 billion was covered by direct patient payments, representing 13.4% of the total expenditures.

In mid-2012, the US population was 311.6 million. The direct patient payments are expected to be over $1,000 per person ($312 billion forecast for Patient Pay divided by the U.S. population). With an average household size of 2.6, that comes out to approximately $2,600 per household. The per-person average was approximately $715 in 2000, $557 in 1990 and $258 in 1980. Given that healthcare costs increase significantly for those of us age 65 and older, and given the number of baby boomers reaching retirement between 2011 and 2025, the patient pay segment of healthcare claims will be significant in the years ahead.

Statistics from The Centers for Medicare and Medicaid Services.

The Market Opportunity for Your Financial Institution
Regardless of legislation, the portion of medical claims due from individual patients is growing and that trend is likely to continue. This fact is changing the healthcare landscape and is resulting in new financing needs among both American consumers and institutions. Today, many financing firms are seeking ways to fund the patient pay portion of healthcare receivable, and one thing is certain - large service providers do not want to “tote the note.” They want to provide quality services, but they do not want to be the bank for their patients. Many are already using billing services to carry notes covering the large patient pay portion of medical claims. Now, they are beginning to seek a way to obtain monies for these assets. Here are some key statistics to consider:

• In 2012, about 13% of healthcare expenditures were forecasted to be paid by patients. That represented about $312 billion dollars.
• The centers for Medicare & Medicaid Services projects that this number will grow to $340 Billion by 2016 and $449 billion by 2021.
• These numbers will also likely be impacted by changes in healthcare insurance, driving individuals to higher deductible plans.

Statistics from The Centers for Medicare and Medicaid Services.

The Business Need
Today, most hospitals and other institutions offer payment plans to their patients. They utilize third party billing agents to handle the paperwork, but often carry the financing themselves. Most of these institutions could benefit greatly by receiving funds for these obligations. They are carrying these as accounts receivable on their books. As these numbers grow larger, these receivables become a more sizable ‘frozen asset’ standing in the way of institutional expansion and new technology. This is amplified by the fact that the terms of payment on these receivables can be as long as 12 to 24 months.

Financial Institution Challenges
In recent years, many of these large healthcare providers have approached financial institutions to finance patient pay accounts. Some financial institutions have offered lines of credit maintaining the institution as the guarantor, while others have used other means, such as their consumer loan system. Financial institutions have also been reluctant to jump into the market for three reasons. 

1. Privacy legislation (HIPAA) controls how the financial institution accesses and houses the personal healthcare data.
2. While a hospital’s claims can total in the millions of dollars, these can be hard to service since they are really hundreds of small consumer accounts.
3. Patient pay obligations can carry higher default rates than typical accounts receivable.

If you’re serious about being in the healthcare space, then its time put a strategy in place for capturing market share. Offering finance options to address this need, should be part of your game-plan.

How to Win the Mobile Wars: Nudging NOT to Buy

 Author: Lee Wetherington, lwetherington@profitstars.com

Though recently celebrated as the world’s top living CEO by the Harvard Business Review, Amazon’s Jeff Bezos was not always so popular.

When he first allowed the public to post book reviews on Amazon.com, some of Bezos’s shareholders took exception. “Why would you let people write bad things about the books we’re trying to sell?” they would ask. “It’s all about the long term,” Jeff would say.

He was almost forced out of Amazon.

The idea was radical. Instead of only giving consumers reasons to buy a given book, customer reviews also offered reasons not to buy a given book. In a recent interview, Bezos clarified his motivation:  “We don't make money when we sell things. We make money when we help customers make purchase decisions.”

According to Bezos, helping customers make better purchase decisions in the short term is precisely how Amazon wins in the long term. Under his leadership since 1996, Amazon has delivered shareholder returns of 12,266% and increased its market capitalization by $111 billion. These long-term results are precisely why Bezos is the world’s top living CEO.

What Financial Institutions Can Learn from Amazon.com

The convergence of mobile banking, mobile payments, and mobile marketing has renewed financial institution fears of disintermediation by the likes of Google, PayPal, and Apple. These fears are further stoked by buzz surrounding the Merchant Customer Exchange (MCX), a proposed merchant-owned, interchange-free mobile payments network due to launch later this year.

The good news in this fast-shifting, hyper-competitive environment is that financial institutions are uniquely equipped—in ways that non-financial institutions (including Amazon) simply cannot match—to leverage mobile devices and financial account data to help consumers make better purchase decisions in real time.

Think about the consumer value propositions offered by non-financial-institutions:

Google: “Here’s a business who sells what you’re looking for…a business who paid us to show you this ad.”

Amazon: “Buy whatever you’re looking for from us…or one of our MarketPlace resellers.”

Merchants: “Buy, Buy, Buy!!!”

We live in a world saturated with “buy, buy, buy” advertising, but no one likes ads. As Aite Group’s Ron Shevlin likes to say, “That’s why we have DVRs…so that we don’t have to watch commercials.” Anytime, anywhere mobile devices compound the presence of “buy, buy, buy” ads, creating opportunities for those who can simplify, streamline, and/or counter the non-stop push for unqualified consumption.

How FIs Win the Mobile Wars

To win the mobile wars, financial institutions must leverage their unique ability to advise consumers when it does not make sense to buy—advice based on the consumer’s capacity to buy at the time of prospective purchase, i.e., in real time.

Even when the merchandise in question has earned great reviews and is priced reasonably, financial institutions are the only entities that know whether the consumer has adequate funds, whether other impending obligations may soon compromise those funds, and whether making the purchase in question would exceed the consumer’s average monthly spending for such items.

So, to contrast, here’s the unique value proposition that can be offered only by financial institutions in the new mobile era:

“We’ll help you decide whether, when, and where it makes sense to buy the stuff you want.”

Financial institutions can still help consumers determine the best price, place to buy, and time to buy via in-aisle price comparisons and geo-located rewards, but only financial institutions can provide the context of available funds and projected cash flow that help consumers know whether it makes sense to buy at all.

A great example of this kind of technology is a mobile app developed by Banno. The app combines mobile banking, mobile shopping, and mobile personal financial management (PFM), and it provides real-time forecasting that replaces the manual or mental estimates people naturally make when considering an on-the-go purchase. Moreover, it also helps consumers determine the best payment method.

  

Remember Jeff Bezos

Historically, many banks and credit unions have been complicit in the short-term “buy, buy, buy” mindset by incentivizing transaction volume (and interchange fee income) on the debit and credit cards they issue, even when doing so might not necessarily be in the cardholder’s best interest.

By the end of 2013, there will be more mobile devices on Earth than people, and 80% of smartphone owners want more mobile-optimized product information while they’re shopping in stores.

To win the mobile wars, take a tip from Jeff Bezos and lead for the long term. The question is simple: are you in the business of selling things or helping people?
 

Prepaid Cards – the Benefits to Small Businesses

Author: Jerry Federico, JFederico@profitstars.com

In my last post, we talked about how prepaid cards can help a financial institution and their customers, as well as improve the lives of the people in their communities by giving them an alternative to check cashing fees. 

Today, I would like to discuss the benefits your small businesses can gain with prepaid cards. 

Businesses are continually looking for ways to provide employees benefits, while saving money and improving efficiency.  Prepaid cards accomplish all three of these goals.  

First and most obvious are the payroll cards.   Remember, they are different than the simple reloadable prepaid cards.   Payroll cards have to be free to the employee and conform to state regulations.   However, they allow an employer to go to 100% direct deposit and give their employees a solution to eliminate check cashing fees.  This can save an average employee 2 to 3% of their net income currently going to check cashers.

Additional benefits to the employees include:

• Receiving text messages advising when deposits are made
• Managing their balances on their phone
• Providing additional cards to family members
• Paying all their bills online
• The bill pay function will save them additional time, as well as money for the cost of money orders and postage.

These are real cost saving benefits that ALL employees can appreciate. 

Second and less obvious is using a prepaid card as a small business purchase card.   These cards replace petty cash and can be used as travel cards by employees.   Yes, current credit cards or debit cards could be used in place of prepaid cards, but a lot of small of businesses are concerned about control, fraud and reporting.  

By using a reloadable card as a purchase card, businesses can issue them freely to virtually any employee without concern of abuse of any credit line.  The amount of money put on a card need only be as much as required.   But, the business still has the ability to instantly add more money if necessary.   The business can control how the card is used in both the type of business the card will be accepted by and the zip codes it can be utilized in.  The owner can also receive messages identifying any time the card is actually used.

By saving the employee time in not having to fill out expense reports and wait for reimbursements, you are making their life easier and more efficient.  The business saves their time by not having to reconcile reports and make reimbursements. 

Bottom line, prepaid cards are here to stay because they address so many of the shortcomings experienced when we use cash or credit cards.  

As a financial institution, prepaid cards give you one more tool to help keep your business customers, as well as get additional fee income.  What could be better?