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Bank Leaders, Are You Targeting The Medical Industry?

  
  
  
  
  

Author: Lori Read, LoRead@profitstars.com

Have You Covered Your Tracks on HIPAA and HITECH? 

More and more banks are developing vertical markets in the medical industry and classifying themselves as a medical bank. However, some banks have not covered the bases on HIPAA and HITECH with what I call the “base rule”: people, products and processes. Banks, aka “Business Associates” now have specified audits and notification plans they must follow and can be held accountable for. It is the bank’s duty to educate employees on HIPAA and HITECH rules and the personal liability associated with violations. So, if you do not have a clearly defined HIPAA and HITECH policy and appropriate procedures in place to mitigate or eliminate risk, I would highly suggest pushing this to the top of your list!

Here are five items to consider:

  1. Do you have a “Business Associate” agreement in place for the healthcare clients for whom you process payments?
  2. Have you taken the time to properly document your processing procedures to ensure the safety of healthcare information?  If so, do you update your procedures immediately as processes change and evolve?
  3. What measures regarding privacy and safety have you taken with lockbox employees to ensure information seen and processed is kept confidential?  Some examples are prohibiting use of cell phones in the operations area, lockbox work such as documents and checks are kept in locked storage until processed, authorized personnel in the processing area only.
  4. Does your organization understand the requirements and penalties enforced under both HIPAA and HITECH?
  5. Do you provide on-going HIPAA and HITECH education for both sales and operational staff?

Many banks do not understand the effects of a potential or classified breach from both a legal and financial perspective.  As an employer, you have an obligation to educate your employees on the individual fines and potential jail time enforced under both laws.

Medical banking is definitely a way to differentiate yourself from your competition, and with proper due diligence, you can create a niche market with a peace of mind! 

Cash and eCommerce: Can They Coexist?

  
  
  
  
  

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Author: Kevin Moland, kmoland@profitstars.com

Even though everyone declared it was dying as recently as a year ago, cash is still very much alive. In fact, it’s not even sick. New reports indicate that cash is growing, or at least remaining a relatively steady form of payment in most developed countries.

Because it’s nearly impossible to track cash transactions done at the point of sale, researchers use a variety of methods to determine how much cash is being used to make payments. Everyone agrees that the total amount of U.S. currency in circulation has been increasing by about 7% per year since the beginning of the economic downturn in 2008, but most experts attribute this rise to a fear-driven increase in the amount of cash people are stockpiling and not to more frequent use of cash as a means to purchase goods and services. (As evidence of this, the number of $100 bills is growing at a much faster rate than the number of $10’s and $20’s.)

A recent study estimated that the total dollar value of cash used to make payments each year is rising—and would continue to rise—by a small amount in a majority of the countries in the study, but it also predicted that the percentage of point-of-sale transactions involving cash would decline—but only slightly—over the next 10 years in all of those countries.

So, there’s more cash around and more of it is used every year, but cards, online payments and mobile transactions are slowly eating away at cash’s piece of the growing payments pie.

For banks and credit unions, the key word in that sentence is “slowly.” The most detailed surveys indicate that cash’s portion of overall payment volume may shrink by as little as 1-2% over the next decade. In other words, people will continue to use cash as an alternative to checks, cards, and electronic payment methods for years to come.

And why not? Cash offers some compelling advantages over its more refined counterparts:

  • It’s Anonymous Cash transactions can’t be tracked, an important advantage in a society that is increasingly focused on privacy.
  • It’s Ubiquitous – Cash can be acquired anywhere and is accepted almost everywhere.
  • It’s Autonomous – Cash works all by itself. You don’t have to open an account, divulge your credit score or get your friends to sign up in order to use it.

While the use of cash isn’t restricted to any one demographic group, it’s an obvious staple for the unbanked and under banked, two segments that are getting a lot of attention from the banking industry these days.

Here’s the quandary: While many consumers still want to pay with cash, businesses benefit most when those payments are made online. Electronic payments save businesses money by allowing them to replace expensive cash handling methods with more efficient automated systems. More and more, people who want to pay with cash are going to collide with collection systems that try to funnel them into online channels.

If banks and credit unions want to keep their business clients happy, they need to help them solve this problem. Financial institutions need to find a way to help businesses accommodate cash without losing the cost savings and efficiency inherent in online payments.

What about digital currency? Companies like Bitcoin made a big impression in the financial marketplace by touting the idea of an independent “electronic currency,” but potential regulatory pressures may impact their ultimate success. Some pundits suggest that a large company like Google could develop its own online currency as a means to extend its market dominance.

But even if digital currency lives up to its promises in the online world, will that idea resonate with cash spenders? Will someone who finds security in government backed paper ever be comfortable with an independent electronic currency, no matter who stands behind it?

There are other, more pragmatic services emerging that offer users the option of making cash payments online. By partnering with corporations that have a broad geographic footprint, these services establish acceptance networks that can funnel local cash payments to providers across town or across the country. In this model, users visit the payee’s site, download a bar code or password to their mobile phone, and use it to make their payment in cash at a local acceptance point. The service transmits credit to the payee, thus completing the cycle.

While these online cash services aren’t nearly as flashy as digital currency and aren’t offered by companies with the market clout of Google, they do offer a practical solution that would allow people to keep using cash without abandoning the burgeoning online marketplace.

So what is the future of cold hard cash in an increasingly high tech society? No one can say for sure, but banks and credit unions would do well to begin pondering how they plan to meet the needs of those who wield the almighty paper dollar in the brave new world where online services are king.

Incident Response the Boy Scout Way

  
  
  
  
  

Debi Randol Author: Debi Randol, drandol@profitstars.com

As a Compliance Analyst for ProfitStars Gladiator Technology group, I have the opportunity to assist financial institutions with questions regarding actions to address actual or attempted information security breaches. The tactics fraudsters can think up never cease to amaze me. It appears that cyber-attacks are increasingly sophisticated, malicious and effective. While these conversations provide the opportunity for the IT Regulatory Department to glean more insight into ways criminals are trying to compromise banks, the rate in which I am receiving these calls is definitely alarming. With all the different types of technology available these days fraudsters have more “doors” through which they steal non-public information for financial gain.  Fortunately, FIs now have more types of technology and multiple layers of security controls protecting assets, so I am pleased to report that in most of my conversations, fraud has been stopped before significant loss has occurred.

Assisting FIs in regulatory compliance has taught me that you have to have a plan for everything! Thus I have adopted the Boy Scout motto: “Always be prepared.” Obviously I’m not a former Boy Scout; but I know well the necessity of preparedness. The question I am always asked after these incidents is “What are we supposed to do or required to do?” No one wants to have to ask these questions when you are frantic from just having an incident; you just want to know the answer, already! If you want to avoid this panic yourself, you have to be proactive and here are just a few of the questions you should be asking:

  • Has your Incident Response Plan (IRP) been updated to incorporate DDoS attacks?
  • What about Corporate Account Takeover?
  • Do you know what to do if these are just attempted incidents and not successful incidents?

This should all be spelled out clearly in your IRP. Remember to review and update your plan for current scenarios frequently as new cyber-attacks are hitting the news.

Case in point, I had a call last week from a bank getting multiple calls from various “insurance companies” no one was familiar with, attempting to verify funds. These calls were always from an unknown number and most of the time the caller was trying to verify funds on an individual who was not an account holder at this particular bank. It was certainly suspicious and raised a red flag amongst the staff.  Was this possibly a new scam trying to take advantage of people with all the health care changes? So, what is this bank supposed to do in this situation?  

The best place to start is testing of your IRP. Call your Incident Response Team together with a list of the “hot” security threats going on today and step through current IRP procedures. If you recognize gaps, you will want to update your IRP to incorporate measures to address these gaps. Always go back to guidance and best practices. For an incident of Corporate Account Takeover, check out the helpful Texas Department of Banking Supervisory Memorandum 1029.  And, for general guidance on Incident Response Plans look at FDIC FIL-27-2005. It is important to keep in mind that IT regulatory compliance directives for addressing security incidents are risk based and not prescriptive. Each scenario will be different, but having a game plan in place will go a long way to mitigating the negative results of a breach. Testing your IRP will help your management team to “Always be prepared”.

Distributive Lockbox – Moving Merchants into your Processing Cloud

  
  
  
  
  
Rob Hudecek Author: Rob Hudececk, RHudecek@profitstars.com

In these less than confident times, getting back to core values and competencies seems to be the resounding direction many businesses are taking.  Vendors are never looking to sell more widgets and process invoices or admit more patients and process claims.  Whether they are a retail store, city water department, hospital, or even a faith ministry, merchants across all verticals are looking for ways to minimize distracting duties that take any time away from their primary product or service.

Enter the lockbox — rooted in the concept of payments coming into a physical (locked) post office box that is accessible to a financial institution or commercial service to process on the merchant’s behalf. Today with the increased adoption of technologies, such as electronic bill presentment / payment, payment portals, automated character recognitions, and electronic deposit; the definition has blended to cover a wide array of services all with a common goal: relieving merchants of the work it takes to process payments.

As eager as merchants are to offload their payment handling, they also want to keep their hands somewhat in the process. Just as teller and branch image capture has been able to share the workload of proof of deposit processing in banks and credit unions, distributed lockbox is making strides to do the same for payments.  The distributed model, typically deployed through the web via a browser, allows the benefits of sharing workload, supporting division of duties, and concentration of expertise.

Features of distributive lockbox include:            

  • Remote scanning at the branch and teller line increases foot traffic inside the branch for payers of local utilities, tax offices, and businesses.
  • Remote scanning at the merchant eases the lockbox burden of mail opening, staging (batching items), and scanning. This feature allows the merchant to scan walk-in “stranded payments” or even scan all of their items, maintaining their payment mail-in address, while alleviating the cost and management of in-house imaging software.
  • Exception entry at the merchant allows more same day processing of lockbox payments and deposits by allowing merchants to make important transaction decisions, while minimizing the amount of items rejected and returned to the merchants.
  • Real-time, web-based reporting provides consolidated reports and item research for all payments; whether received by mail or walk-in.

 Distributive Lockbox

The timing is perfect to employ these distributive technologies into your lockbox offering; not only can it expand your geographical reach, it allows your merchants to feel connected to the work you are doing for them.  What methods is your institution employing to help move merchants into your processing cloud?

Four Small Business Lending Trends to Watch

  
  
  
  
  

Terry Renoux Author: Terry Renoux, TRenoux@jackhenry.com

Lending activity across the U.S. is improving. Slowly … but improving nonetheless. Visits to partner banks in the western U.S. over the past couple of weeks indicate that businesses are becoming more optimistic about their ability to grow.

According to bank partners, the specific segments that are seeing growth are small manufacturers, transportation, and businesses with ties to the energy sector. The agriculture industry was also noted as a stronger segment right now due to the current condition of this year’s crop forecast. National surveys show that only 20 percent of bankers believe small business lending will stay the same in 2013 as compared to the last two years. An overwhelming majority, more than 60 percent, say they believe lending will improve; one-third of those lenders believe it will increase dramatically. Results from this same survey suggest that three out of four U.S. bankers are planning to aggressively pursue small business lending in the coming year.

Here are a few specific trends that will help you stay one step ahead of your toughest competitor:

  1. Technology – Technology has become increasingly important to small businesses, allowing those businesses to increase efficiency and remain competitive. Online platforms are a must for time savings and increased efficiency. Online bank sources and non-bank competitors are taking advantage of these platforms and making it easy even for your better prospects to deal with them instead of the traditional bank sources.
  2. Alternative lending loan types and sources – The days when all loans fit into traditional commercial and industrial (C&I) buckets are gone. Alternative lenders are creative in both the types of loans and the terms they offer. They also are often flexible enough not to turn down a borrower that you have a great relationship with and who wants terms not commonly found in traditional C&I. Partnering up with an alternative lending source adds an important arrow in your competitive quiver.
  3. Social media – Social media are not only more important in our personal lives, but they are now the bread and butter of many emerging and growing small businesses. Influencing factors include the JOBS Act (Jumpstart Our Business Startups) which allows small businesses access to up to $2 million in capital for underwriting their own IPO without SEC filings.
  4. SBA – Volumes moving through the Small Business Administration (SBA) have only been stronger than 2012 one time in the SBA’s 59 year history. You have to learn to work with and around the SBA.  

In light of the long-term recovery plan that will be needed to come out of the shadow of the government shutdown, now is the perfect time to prospect for new borrowers.

What’s your story? Has your FI experienced any of these small business lending trends?

*Source for survey data-2012 Banking Trends Outlook Survey by Omega Performance. 

IT Infrastructure Reporting – Do You Have a Winning Game Plan?

  
  
  
  
  
Author: Jeremy Taylor, JTaylor@jackhenry.com

I love this time of year! The days are cooler, the leaves are starting to turn, and every weekend football is on the air. I’m a huge sports fan and I take in as much football as I can each weekend. One thing that is blaringly obvious when watching these games is that you won’t get very far without a winning game plan.

Every weekend our countryside is full of teams trotting onto the field with high hopes and eager desire to advance to their next game with a winning record. In much the same way, we want to ensure our organizations and institutions will exceed as well and advance to the next level. Both situations require similar strategies to guarantee success.

In the same way an offensive or defensive coordinator will plan for their upcoming game, financial institutions should be planning for their upcoming projects as well. This will often take on many forms, such as planning for a new expansion, taking on a new initiative, or simply keeping up with the status quo. How are you addressing these needs currently? Is it based on real-time reporting data and analytical analysis? Do you have access to reporting trends and historical data? If not, how are you ensuring that your game plan is truly adequate to address the needs of your organization?

In order to make sure you are equipped for success, you need access to all of the relevant data within your technology infrastructure. There are a number of reporting options available today, many of which will tell you everything you need to know about one component of your infrastructure, such as a router or a storage unit. A mix-and-match reporting strategy, however, is about as effective as a head coach focusing entirely on a wide receiver or quarterback and neglecting the rest of the team. What you need is a way to tie all of that data together to ensure you are making the most effective decision as possible. That’s where having a managed IT service can prove valuable and can help win the game!

Utilizing a managed IT offering can make certain that you have all of the necessary data you need, right at your fingertips, to manage and grow your network. Plus, you will have access to a large array of highly trained engineers to assist you in your planning. It’s like having a Super Bowl-winning coaching staff there, right at your disposal, to help you win your next game!

So the next time you watch Tom BradyIT Infrastructure Reporting Game Plan or Peyton Manning drive their team down the field for a winning score, ask yourself if your organization is prepared to do the same thing, figuratively speaking. If not, perhaps it’s time to revise your game plan.

The Do's and Don'ts of Online Bill Pay

  
  
  
  
  
Danny Payne Author: Danny Payne, DanPayne@ProfitStars.com

Bill pay means so many things to so many people.  My parents set up their mortgage payment (online) to draft from their account on a monthly basis, and as a result, they now feel they have entered the world of “online payments.”  Based on my 12 years of experience in online payments, I may slightly disagree with that, but to be honest, even I think it counts. 

The world of payments has evolved so much.  We’ve seen the evolution from paying your bills in person to sending a check, paying over the phone, paying over the phone through IVR, and now paying by touching the information into your phone.  That doesn’t even include the online evolution of paying everything on the Internet.  Mobile Payments Today reported 71% of all bills are paid electronically.  That number continues to grow and will grow as our addiction to “on demand” and “mobile functionality” grows.  I have written previous posts about buying mobile in the past, so this won’t focus on mobile payments or mobile banking; instead, I would like a take the opportunity to focus on your financial institution’s bill pay service, what your bill pay product should and shouldn’t do, and how that affects your process of your evaluation. 

Of the previously mentioned 71% of all bills that are paid electronically, 46.5% of those are paid on a bank or credit union bill pay product.  Therefore, you as a financial institution are responsible for almost half of all payments being made on a monthly basis.  Congratulations! 

I can tell you from experience that these statistics are part of an ever-growing trend.  But don’t get too excited ... depending on who you are using for bill pay, a lot of those “electronic” payments are being sent on a paper check.  That’s right: electronic payments via paper check.  That doesn’t sound too innovative, does it?  That is just one example of my thoughts around what you need to know about online bill pay.  Let’s discuss the rest below:

Do: for online bill pay

  • Have a bill pay provider that wants to integrate the look and feel of your online banking product.  That look and feel approach means a lot to your customers and alleviates any concerns they may have of moving to a foreign website to enter their bill pay data.
  • Mobile integration is a must. You need to have a bill pay partner that has a mobile banking product or offers mobile banking integration to your product.  While adoption is still low (2%), you can’t give up that service to your important customers.
  • Ask your bill pay provider to give you their electronic versus paper ratio.  If you are paying per transaction, that number could mean a lot of money in savings to your institution.  There are bill pay providers that range from a 50/50 ratio to 80/20 ratio (80% electronic).
  • Work with a bill pay provider that provides complimentary user adoption programs.  Higher adoption rates cost more money, but it also means a more loyal customer base and more valuable customer to your institution.  This should be a service your bill pay provider offers at no cost and can be embraced by you.
  • Use a bill pay provider that has a track record of excellent customer service.  Your bill pay provider should have a history of helping financial institutions and their bill pay subscribers.  Those phone calls are extremely valuable to customer loyalty and continued bill pay usage.
  • Look for a provider that sees you as a partner, not a customer.  Feedback on functionality, customer service, and usage are all important aspects of a relationship between you and your provider.  If they aren’t listening, then chances are something is wrong.
  • Ask your bill pay provider what is coming next. If they are looking ahead with you and your customers, you have a solid partner.

Don’t: for online bill pay

  • Don't sacrifice service for price.  The second phone call is always worse than the first.  If your vendor isn’t properly solving the problem for your bill pay subscriber, you have a much bigger problem when they call you.
  • Don't be forced into a bill pay product based on your Internet banking provider.  Most good Internet banking products have integrations to all bill pay providers.  Make sure you evaluate all options independently to get the best overall experience.
  • Don't allow your current provider to hold you hostage with high de-conversion fees.  Most bill pay providers offer options to offset that cost and allow you to still upgrade to a new service.
  • Don't fall into the “status quo” trap.  Many times, it is easy for us to just keep things as they are.  But, to grow your customer base, usage, loyalty, and retention rates, you might have to go out there and upgrade services and offerings.  That investment could save your customers/members from going down the street to open an account for an incentive.

This is a small list compared to your average RFP or evaluation process, but it is important to know.  Your online bill pay solution isn’t the reason a customer will open an account at your bank or credit union, but it very well could be the reason they stay or leave.  BAI reported that consumers who use electronic bill pay and electronic bills (e-bills) are more satisfied with their financial management processes and feel a greater sense of financial control. Also, there is a proven correlation between bill pay use and deeper customer relationships; bill pay users have higher balances, lower attrition and purchase more revenue-generating products than non-users.  Simply stated - these customers are normally more valuable and are the type you want to keep. 

I will be the first to admit that I don’t have all the answers.  But I have listened to financial institutions, bill pay subscribers, bill pay companies, and many industry experts.  The recurring theme is that bill pay is growing and will continue to grow.  Regardless of the mechanism, your customers want access and want a quality product with quality service.  I hope this provides you with enough information to ask the right questions when reviewing a product.  And here is my one company plug, I hope you will consider iPay Solutions as a part of your evaluation.  

Foursquare and Mobile Banking – What’s the Connection?

  
  
  
  
  

Author: Jennifer Geis, JGeis@jackhenry.com

Tech Crunch recently published an article, No Check In Required: Foursquare Starts Rolling Out ‘Proactive’ Push Recommendations On Android. The article announces a new version of the Foursquare app that makes a big move toward offering  a ‘post-check-in’ experience, one that doesn’t require the user to officially and proactively check in to a specific merchant. Instead, the new feature automatically beeps or buzzes a user’s phone with targeted and personalized recommendations based on that user’s physical location, without needing them to check in at all.

For example, you could walk into your favorite Starbucks location, and because it is officially fall, it may buzz your phone to let you know that the pumpkin lattes are now being offered. Or, you may visit a new restaurant that you’ve never frequented before, and as you walk in, it may buzz your phone to let you know that they give away a free side salad to all new customers.

How does this relate to mobile banking? And, does it really tie into financial services? The link to financial institutions in this scenario is the potential to inject FIs into the buying experience by putting mobile deals in the hands of consumers and letting them not only select extra savings from their mobile device, but also select how they want to pay, from which account the money will be deducted AND provide real time information on available balances AT THE FINANCIAL INSTITUTION.

What if, you entered into Nordstrom’s to buy the newest pair of Citizens of Humanity jeans, not officially ‘checking in’ on Foursquare, but just entering the store, and as you shopped, you received an email or text that said ‘Today only, Citizens of Humanity jeans  - 25% off’! You know you just got paid yesterday but aren’t sure if the $220 pair of jeans is within your budget this week. So as you get the offer, you also check in with your bank to see if the available balance in your checking account will cover the purchase. And, sure enough – your checking account (and your financial institution as your trusted resource) tells you to go ahead take the plunge and make the purchase!

And then, because you’re so happy with your purchase, you posted a comment on FaceBook that said ‘Great sale at Nordstroms today! Love my new jeans!’.  The merchant gets a purchase that otherwise may have not been made and the bank gets an extra login to mobile banking that may not have been made and both receive a happy customer. That match of consumer behavior and technology capability is the future direction in shopping and cash flow forecasting.

Customer voice and personal recommendations are the best form of advertising. It kind of reminds me of the digital version of the popular Geico Insurance TV commercials, where the Geico Gecko, says ‘I just saved $500 on my car insurance by shopping at Geico’’!  Love that commercial!

Get a Head Start with Education on Pending Social Media Guidance

  
  
  
  
  
Karen Crumbley Author: Karen Crumbley, karenc@gladtech.net

 “Hey, look here…” as Uncle Si from the Duck Dynasty TV show would say, “I live by my own rules (reviewed, revised and approved by my wife)…but still my own.” 

Si’s quote reminds me of Social Media: Consumer Compliance Risk Management Guidance: Proposed Interagency Guidance, an OCC bulletin released in January of 2013 that outlines proposed guidelines for Financial Institutions (FIs) communicating via social media channels.  Similar to Si’s comment, FI personnel will soon be required to follow social media communication standards that are reviewed, revised and approved by FI management. The OCC bulletin [Docket No. FFIEC-2013-0001] provides straightforward insight for managing risks related to social media.  However, even with the detail provided there is still much to learn about this guidance.  For example:

  1. Will there be significant changes from the proposed guidance?
  2. What will examiners choose to focus on after the guidance is available?
  3. When can we expect the official release and date for compliance?

Even without the formal release of the guidance, FIs can start their strategic approach to address forthcoming social media initiatives, beginning with employee education on social media communication usage.  The following bulleted item is a minimum expectation that FIs can anticipate:

  • An employee training program that incorporates the institution’s policies and procedures for official, work-related use of social media, and potentially for other uses of social media, including defining impermissible activities.

Regardless of how an FI uses social media, it should address social media communications for employees within its Acceptable Use Policies and Procedures.  Bank management should review relevant points in these employee policies and consider enhancing the content.  In addition, each FI will need to document the training deployed to personnel that participate in FI-related social media communications as part of their job description.  These individuals will need to understand the legal, compliance, reputational and operational aspects associated with social media so that they can carry out their job role accordingly.  Having the ability to demonstrate employee participation regarding social media training through automated activity reporting would also be beneficial. 

Another point to consider as you review existing policies is that the proposed guidance defines social media as “a form of interactive online communication in which users can generate and share content through text, images, audio, and/or video.”  The examples they provide expand beyond the typical list of micro-blogging sites (e.g., Facebook, Google+, MySpace, and Twitter).  Other areas of concern include forums, blogs, customer review websites, and bulletin boards (e.g., Yelp); photo and video sites (e.g., Flickr and YouTube); sites that enable professional networking (e.g., LinkedIn); virtual worlds (e.g., Second Life); and social games (e.g., FarmVille and CityVille).  Consider all of the outlined examples when developing your training program and address the risks accordingly. 

In summary, training employees to understand the appropriate use of social media can benefit your FI’s ability to protect non-public information and also has far-reaching aspects for mitigating risks.  You will not regret planning for the inevitable roll out of the impending social media regulatory guidance, and remember….

“There are two kinds of people in this world…the educated and the unducated.” – Uncle Si, Duck Dynasty TV show

A Better Way to Price Loans and Establish Deposit Rates

  
  
  
  
  

Author: Tom Edwards, toedwards@profitstars.com

As a Lending Solutions Product Specialist, I devote much of each day discussing business challenges with credit union and community bank clients.

Margin compression comes up time and again. Is that any wonder? FDIC and NCUA call reports consistently show that net interest margin is a significant profitability indicator. Is there a Lending, Financial, or Credit Officer who’s not feeling the squeeze between what a financial product costs, and its marketable value?

Yet when asking these managers how they price their loans and establish their deposit rates, the sincere reply follows: “We have to monitor our local competitive market.” My mind’s eye immediately sees Bank A peeking through narrowly parted blinds toward Credit Union B (across the street), hoping to glimpse the lobby Today’s Rates board. All the while, Credit Union B hasn’t yet posted daily rates, because its lending team is still scanning the morning edition for Bank A’s specials. Sound familiar?

A credit union website in Washington, D.C., explains to their members how they set rates:

We consider a number of factors, including the cost of funding the loan, the security offered, the repayment term and the general level of market rates.

I agree! Cost of funds, credit risk, and loan terms should lead the list as fundamental decision support data – prior to referencing market rates. Your balance sheet and income statement do not rely on other players; and neither should your pricing proposals. Yet these factors are complicating and difficult, without an effective system. This is exactly what Portfolio Pricing Solutions can do for your institution.

Until lately, however, Portfolio Pricing Solutions for consumer and small business financial products were accessible typically only as add-on modules for more pricey full-featured commercial solutions. This forced the smaller, consumer-focused banks and credit unions to keep peeking through the blinds. Web-based technology is changing that, enabling easier deployment for smaller, highly focused software projects.

“Rate sheets” are commonly used to guide standardized pricing for consumer loans, small business loans, mortgages, transactional deposits, and non-transactional deposits. Rate Sheet Pricing Solutions suggest rates for a product’s target ROE (Return on Equity), fully supported by a relevant retail assumption set for important profitability drivers such as product capital allocation, origination and maintenance expense, credit risk, duration, and size – plus benchmark funding curves and updating loan pricing indexes:

Loan Pricing Indexes

Monthly usage fees (rather than large up-front licensing) mean smaller banks and credit unions may now access such critical decision support data for pricing their retail rate sheets with the assurance of targeted returns, based on real numbers.

However, we cannot disregard market competition. Companies like RateWatch, the industry’s largest provider of rate data, are able to provide rate surveys, product comparisons, financial strength reporting, local/regional/national averages, and fee reporting.

Maybe the next time you find yourself peeking through the blinds, it will be to enjoy a contented look at the sun setting on a confident day.

Loan Pricing Confidence

Read our recent press release to learn more about our web-based Rate Sheet Pricing Solution. To learn more about RateWatch visit their website at www.rate-watch.com

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