Author: Deborah Matthews, firstname.lastname@example.org
Staying relevant in the current rapidly changing business environment is no easy task. Just ask Blockbuster and Kodak. Once their products were in great demand, their brands universally recognized and respected - today, both are on the brink of extinction.
Community financial institutions are also being challenged to remain relevant. FIs face unrelenting regulatory pressure and a growing number of legislative mandates that impact revenue generation, escalating competition from large banks and non-traditional providers, an increasingly transient customer base and a frenetic pace of technological advances. This dynamic landscape makes it difficult at best to filter through the noise, to be able to recognize strategic opportunities that support long-term viability and profitability.
In order to enjoy sustainability, it is imperative to proactively anticipate the future by embracing new ideas, employing new methods and identifying new markets. FIs must deliver innovative solutions that solve pain points and create value for which customers will pay. It is clear from recent events that consumers will not easily tolerate more bank fees. FIs must generate new fee revenue from a segment that is willing to pay for beneficial value, increased efficiencies, convenience and improved security. The answer is the small business market (SMB).
According to the Small Business Association, there are 27+ million small businesses in the U.S., representing a large, lucrative market for FIs. In fact, Dun and Bradstreet reports that the number of small businesses actually increased during the recent recession. An essential part of the fabric of American life, small businesses generate between 60 and 80% of all new jobs created.
Many FIs are already focusing on the SMB market, yet most are falling short in meeting the needs of small businesses. Even though small businesses spend $500 billion on financial products, recent research reveals they are underserved by FIs. Barely one-third are satisfied with their FI’s online banking capabilities. Ninety percent use a consumer online banking platform. A mere 25% feel their FI offers adequate tools for managing cash and tracking receivables and payables. Seventeen percent of business owners confess staying up at night worrying about cash flow.
For FIs interested in long-term relevancy, addressing this deficiency is urgent for two reasons:
- The National Federation of Independent Business said confidence among small U.S. business owners in January rose to 93.9, the highest level since December 2007. This means SMB are poised for growth.
- SMB are becoming increasingly technologically savvy, with half stating that they would switch their bank in order to access better financial tools. FIs that fail to offer these tools in order to retain SMB customers do so at their own peril: while the SMB segment represents only 10% to 12% of retail banking customers, they represent as much as 50% of retail bank revenue when taking into account the value of the small business owner’s account.
Here are 5 strategies for launching your SMB initiative:
- In a recent report, Aite Group recommended that FIs develop a strategy for migrating businesses off consumer platforms and onto systems designed specifically for businesses.
- The SMB market is diverse and complex. Specialize in a few specific vertical markets to gain expertise in their business models and requirements.
- More than 1/3 of small businesses rank collecting payments as their top priority, and they are keenly interested in improving cash flow and creating operational efficiencies. To win the hearts and minds of your small business customers, position the convenience and ease-of-use of remote deposit capture (RDC) as the keystone of your SMB product portfolio. Today, only 8% of SMB are using RDC, representing a huge missed opportunity to promote beneficial services to a receptive audience.
- FIs should further transform strategy into reality by enlisting front line and business development staff to proactively market products and services that deliver significant value, such as RDC. Branch originated sales leads accounted for less than 25% of all RDC leads. This is truly a case of FIs leaving money on the table. Educate your team on the requirements of your targeted SMB and build an arsenal of winning products and services. Helping your customers achieve success can translate into sustainability for your FI.
- Another highly desirable service for SMB is electronic invoice presentment and payment (EIPP). According to the US Postal Service, businesses in the U.S. spend as much as $35 billion annually on printing and postage for bills/invoices and typically send 48 billion account notices, statements, and bills to customers each year. SMB spend as much as $11 - $15 to generate a single paper invoice, versus “pocket change” to send an online invoice. EIPP can also reduce the length of time required for generating and delivering an invoice from 8 days for a paper version, to 3 days for online invoicing. EIPP can make a meaningful difference in collecting receivables and improving cash flow for SMB.
This is just the beginning. Once you have identified your target market, mastered your SMB expertise and gained their trust, it becomes easier to cross-sell other products and services, ultimately deriving increased profitability from a now-satisfied customer base.
Author:Jackie Marshall, JaMarshall@jackhenry.com
When prepping for your next IT exam, visualize the examiner with a pick and a shovel. As you work through the pre-exam checklist, consider what exists behind the check-box; if you don’t, the examiner certainly will. Can you provide specific details that indicate how you are complying with that task item or initiative? How often your IT Steering Committee and management team reviews exceptions, address residual risk and implements updates (technical or procedural), will indicate to the examiner that you are intentionally addressing IT management initiatives and not falling into a “check-box mentality.”
For example, indicating that your IT management staff and Information Security Officer regularly monitor systems for intrusions is considered an important activity for ensuring the security of your internal systems and data from internal and external threats/vulnerabilities. The examiner will also want to see actionable detail that supports specific reports, exception criteria, events to monitor for, and assignment of appropriate responsibilities to manage. Policy and procedural activities should also include requirements for documentation and archiving as well as reporting and follow-up of exceptions.
Understanding that the simple answer of “internal audit monitors the Core, etc...” may not pass muster in this post-FFIEC compliance environment should draw attention to actionable supporting activities. But, don’t view this “pick and shovel” approach as negative. Your FI likely spends thousands of dollars and many resource hours annually to monitor systems and data. Maximizing the potential benefits of these services, including validation of technology service provider relationships is an important component not just for IT but for the business success of your organization.
Knowing how to spell out strategic detail to your examiner will indicate an intentional enterprise-wide security approach that will speak volumes about your FI’s management team and respect for IT from a business perspective.
Author: Paul Miniutti, PMiniutti@profitstars.com
Many times when discussing ATM Cash Management the focus of the conversation turns to, “How good is your forecast?” I submit that there is a better question to ask, and that the focus on effective ATM Cash Management should be “How good is your process for reconciling all that money?”
The forecast is one small piece of ATM Cash Management. In most cases, what has happened over the last 30 days at an ATM can provide an effective forecast: simply add up what has been withdrawn for the ATM and divide by 30. That will give you a per-day cash need.
(Total Amount Withdrawn for Last 30 Days) ÷ 30 = per-day cash need.
Depending upon the number of days between cash loads, “pad” the cash order with an extra day or two. For example, if you are cash loading an ATM every seven days and that ATM has dispensed $60,000 over the last 30 days, your forecast for one cash load would be:
$60,000 ÷ 30 = $2,000 per-day cash need.
(7 days x $2,000) + (2 pad days: $4,000) = $18,000 forecasted for cash load.
This is not that complicated and, in most cases, can be very effective.
What can be complicated is the process to reconcile from cash load to cash load. We call this the “Cash Cycle.” If we use the above example for our first order of the Cash Cycle, and then have a subsequent cash load of $19,000 (slightly more because our withdrawals increased over the previous 30-day time period), and we are doing cash swaps, the Cash Cycle looks like this:
Day 1: $18,000 put in the ATM – Load 1
Money withdrawn from the ATM
Day 2: Money withdrawn from the ATM
Day 3: Money withdrawn from the ATM
Day 4: Money withdrawn from the ATM
Day 5: Money withdrawn from the ATM
Day 6: Money withdrawn from the ATM
Day 7: Money withdrawn from the ATM
Day 8: $19,000 put in the ATM – Load 2
Money left over from Day 1 (Load 1) returned
Money withdrawn from the ATM
The reconciliation of this ATM requires deeper understanding:
- Tracking the cash going into an ATM – the cash loads.
- How much money has been withdrawn from the ATM, (including partial day 1 and partial day 8 amounts as the armored company most likely loads the ATM mid-day.)
- The money returned from the ATM – from Load 1.
This reconciliation can get complicated. Without a thorough understanding of the day-to-day activities at the ATM, it is easy for the ATM to “go out of balance.” Many times you are dependent on ATM cash reporting from the armored company. If this is inconsistent, one of two things usually happens:
- A lot of time and resources are spent to reconcile the ATM(s).
- The out of balance is ignored and more cash is ordered—usually more than is necessary—which ultimately increases the costs of running the ATM(s).
Forecasting is one small piece of effective ATM Cash Management. The larger process that delivers clear visibility and tight control of the movement of cash from cash load to cash load can “make or break” your opportunity to run efficient, profitable ATMs. Rather than a singular focus on forecasting, a broader perspective and implementation of the detailed analysis needed to tighten the Cash Cycle can help drive greater success at the ATM.
Author: Lee Wetherington, email@example.com
Google is watching you. It recognizes your face. It knows what you like, where you are, and what you’re looking for. It has both satellite and street-view pictures of your house. It monitors your email and online chats. And it knows about your secret passion for knitting Hello Kitty® hats.
The Big Deal with Big Data and Big Brother
Historically, community banks and credit unions have been very conservative with their customers’ and members’ data, and for good reason. Security, regulation, and privacy are paramount in financial services. Beyond anomaly detection for fraud, however, many institutions literally ignore the data they so diligently protect.
That’s about to change. It must change for community financial institutions to remain viable, relevant, and, ironically, trusted long term. This doesn’t mean banks and credit unions have to “sell out” or compromise the security or privacy of the data they safeguard. Rather, they can intelligently and transparently mine that data to provide better financial advice, products, and services. Failing to do so will ultimately place them at a clear, competitive disadvantage.
The good news is that banks and credit unions enjoy three very distinct advantages in a data-driven world, and they should leverage these advantages to the hilt.
The FI Trust Advantage: 3‐to‐1
In a world where consumers’ every move is tracked, stored, and analyzed by third parties like Google, Apple, and Facebook, there’s a lot of paranoia, and, fortunately for banks and credit unions, a higher premium on trust.
Financial institutions enjoy a 3‐to‐1 trust advantage over third parties, merchants, and billers. According to Javelin Strategy & Research, about 38% of consumers are comfortable or very comfortable with letting their banks or credit unions track/analyze their transactions in order to provide better service. By comparison, only 10% of consumers are comfortable permitting third parties, merchants, or billers to do so.
Financial Institutions Already Do Data Analytics
While many financial institutions forswear ever doing anything with or to their customers’ and members’ data, they discount all of the data analysis, correlation, and anomaly detection they’re already doing in the fight against fraud—often by way of sharing data and collaborating with other financial institutions and crime enforcement agencies—to better protect those they serve.
In short, banks and credit unions already employ data analytics to fight fraud, and this rather common means of protecting consumers builds trust, not the opposite. If financial institutions are already closely monitoring customer and member data, why not also use that analysis to help those same customers and members better understand their finances and make better financial decisions?
This is already happening, and it’s called Personal Financial Management (PFM), the second generation of online banking. To immunize your institution against privacy concerns, allow customers and members to opt in or out of this better, more personalized service.
The Information Advantage: Transaction Data is the Holy Grail of a Data-Driven World
It’s easy to be intimidated by goliaths like Google. Google enjoys a 78% share of online search, and its Android operating system drives almost half of all smartphones globally. It also boasts a fifth of all Internet browsers and almost half of all online advertising.
From these enterprises, Google derives massive amounts of online/mobile behavior, search, and geo-location data, but it lacks the holy grail of predictive analytics: native demand-deposit account transaction data.
Banks and credit unions are sitting atop the most valuable, reliable, and actionable information available in the age of Big Data. If they employ the same level of intelligence and responsibility mining transaction data to improve personal financial management as they do already to fight fraud, financial institutions will enhance their trust advantage and gain loyalty from those they serve.
Just don’t wear the Hello Kitty® hat. Some things should remain private.