How Banks will Generate Revenue on Payments and Checking in the New Era
•
2 recomendaciones•985 vistas
Presentation at the BAI Payments Connect Conference, March, 2010. Survey of bankers to understand implications of new changes in Reg E, impact on earnings, and future changes in Checking Account revenue.
Recomendados
Recomendados
Más contenido relacionado
La actualidad más candente
La actualidad más candente (20)
Similar a How Banks will Generate Revenue on Payments and Checking in the New Era
Similar a How Banks will Generate Revenue on Payments and Checking in the New Era (20)
Más de David Kerstein
Más de David Kerstein (7)
Último
Último (20)
How Banks will Generate Revenue on Payments and Checking in the New Era
- 1. How B k will G H Banks ill Generate Revenue on t R Payments and DDA in the New Era y BAI Payments Connect Conference Moderator: David Kerstein, Peak Performance Consulting Group Panelists: P li t : James Allen, Broadway Bank Alex Calicchia, MidSouth Bank , Dominic Venturo, US Bank
- 2. Agenda Introductions The b i Th burning platform: l tf impact of Reg E changes Industry survey What to do? Near term impact Longer term issues: what will it mean? Q&A © 2010 Peak Performance Consulting Group - Page 1
- 3. Introductions David Kerstein President Peak Performance Consulting Group dkerstein@ppcgroup.com Jimmy Allen Group EVP, Retail Banking Broadway Bank jallen@broadwaybank.com jallen@broadwaybank com Alex Calicchia EVP and Chief Marketing Officer g MidSouth Bank acalicchia@midsouthbank.com Dominic Venturo Chief Innovation Officer, Retail Payments Solutions U.S. Bank dominic.venturo@usbank.com © 2010 Peak Performance Consulting Group - Page 2
- 4. Scary times! Up to 70% of non-interest fee income at stake Solicitation for webinar on industry website y Free Checking Could Go the Way of F f Free Toasters” T t ” Article headline Sweeping Away Free Checking? Article Headline © 2010 Peak Performance Consulting Group - Page 3
- 5. New Reg E opt-in rules: everything changes opt- The facts: Without positive opt-in cannot charge opt in, overdraft fees that occur as a result of ATM or Debit transactions (some exceptions) Opt-in required for new customers effective Survey Respondents July 1; existing customers August 15 Significant revenue at risk, impacting fundamental profitability of checking accounts 17% Reality h k R lit check – surveyed over 100 i d t d industry leaders 9% Bank 111 Respondents 83% were Bank or Credit Union executives Credit Union 74% Over 50% were C-level executives Consultant, Supplier Survey conducted in first 2 weeks of February, 2010 0 0 © 2010 Peak Performance Consulting Group - Page 4
- 6. Most think the impact will be in the 10-20% range 10- Impact of Reg E Changes on OD/NSF Income Over 30% 15% 20-30% 24% 10-20% 38% Less than 10% 16% Minimal Impact Mi i l I t 6% 0% % 10% % 20% % 30% % 40% % 50% % © 2010 Peak Performance Consulting Group - Page 5
- 7. Our analysis confirms 15-20% impact for most 15- banks Number of % of Total % Total EFT or ATM Impact NSF/OD s NSF/OD’s DDA Accts NSF/OD only – assuming Income % Income 60% Opt-in No NSFs 74% 0 0 0 1 to 4 12% 3% 1% <1% 5 to 9 5% 9% 4% 2% 10 to 19 4% 18% 7% 3% 20+ 5% 70% 29% 12% TOTAL 100% 100% 41% 16% Source: 2008 FDIC Study of Bank Overdraft Programs, Peak Performance Analysis Some “opt-ins” are more valuable than others: S “ ti ” l bl th th 9% of customers generate 78% of fee income © 2010 Peak Performance Consulting Group - Page 6
- 8. It’s not over: more restrictions coming Do You Believe There Will Be Additional Regulation Negatively Impacting DDA Revenue? More restrictions coming 70% Opt In Rules are all we'll get 30% 0% 10% 20% 30% 40% 50% 60% 70% 80% Survey Comments: potential risk areas Debit interchange Regulators will impose more restrictions “While Dodd Bill may not pass other legislation likely – Banks are While pass, strong populist target for both parties” © 2010 Peak Performance Consulting Group - Page 7
- 9. Implementing Op-In Rules: Most still formulating Op- plans (survey conducted Feb. 1-15) How are you implementing Opt-In rules? Handling everything in-house 41% Prioritizing efforts agains high users 25% Contacting all customers 25% Using vendors for communications 24% Using vendors to collect and certify opt-in's 14% Using vendors for telephone campaigns 5% 0% 10% 20% 30% 40% 50% Does not add to 100% due to multiple answers © 2010 Peak Performance Consulting Group - Page 8
- 10. “What actions will your bank take to address decline in deposit fee income” Actions My Bank Will Take Eliminate Free Checking 14% Add or increase fees 25% Reduce expenses 34% Focus on Bus. Banking 35% Sell new optional fee services 43% Increase emphasis on Debit 47% Revise DDA Accounts 55% Increase cross-sell efforts 57% 0% 10% 20% 30% 40% 50% 60% 70% © 2010 Peak Performance Consulting Group - Page 9
- 11. Most believe industry will add fees and eliminate free checking – but not their bank! “What actions will your bank take?” compared to “What actions will most banks take?” Largest Gap: My Bank vs. Industry 75% Add or increase fees 25% 46% Eliminate Free Checking 14% Industry 68% My Bank y Sell new optional services 43% 48% Reduce Expenses 34% 0% 10% 20% 30% 40% 50% 60% 70% 80% © 2010 Peak Performance Consulting Group - Page 10
- 12. Who will be the winners in the new environment? Agree or Strongly Agree Community Banks Credit Unions Large Banks Non-banks (e.g. PayPal) 0% 10% 20% 30% 40% 50% Survey Comments: “There’s room for everyone” “Execution is key, not type of institution” page 11
- 13. What to do? Five Categories of Options Raise fees f R i f for Re-structure R t t Innovate New I I t N Improve Sales S l existing services Existing Products And Relationship Checking Management Accounts Reduce Operating Cost © 2010 Peak Performance Consulting Group - Page 12
- 14. What do we need to do? What is impact? Agree or Strongly Agree Need to innovate new DDA products 81% Increase investment in new payments 78% technology Need to invest more in CRM 71% Bank mergers will increase 63% Doom and Gloom is overstated 42% Reduce distribution costs/close 36% branches 0% % 20% % 40% % 60% % 80% % 100% % © 2010 Peak Performance Consulting Group - Page 13
- 15. How some banks are approaching the new reality Stop selling Free Checking Impose new fees Value added, fee based, insurance services to enhance products Early Access program, “overdraft on request” Fee based premium features with “Build To Order Free Checking” Innovate new products: Virtual Wallet cash management checking © 2010 Peak Performance Consulting Group - Page 14
- 16. BBVA Compass: Build to Order Free Checking © 2010 Peak Performance Consulting Group - Page 15
- 17. PNC Virtual Wallet © 2010 Peak Performance Consulting Group - Page 16
- 18. Top Five Take-Aways! Take-Aways! 1. Enormous revenue is at risk – management of the opt-in process is critical 2. It won’t get easier: deposit fee income will continue to be under pressure, and more restrictions are likely 3. It s 3 It’s not a revolution, but an evolution: most banks won’t impose revolution won t significant new fees or completely eliminate Free Checking 4. There is no silver bullet: banks need to re-focus on building profitable relationships. It’s been too easy to sell “Free” and make fit bl l ti hi It’ b t t ll “F ” d k money on fees. You need to have the right technology (CRM at the point of customer contact), effective on-boarding, and strong sales process to succeed. l t d 5. Product innovation – and a culture of innovation, testing, and continuous improvement – is critical in this new and uncertain p environment © 2010 Peak Performance Consulting Group - Page 17
- 19. More information? David Kerstein President Peak Performance Consulting Group 512-607-6332 dkerstein@ppcgroup.com www.peakconsultinggroup.com © 2010 Peak Performance Consulting Group - Page 18
Notas del editor
- DK will introduce everyone
- Dave – lay the groundwork
- Jimmy – expecting mid-high teens, but all depends on success of opt-inAlex – it’s not just percentage, but absolute $ amount. Some states, such as Louisiana, have higher percentage of HH with lower income. Even though we are primarily business bank, nevertheless we garner relatively high deposit fees compared to peers in other states because of demographic/income makeup of market. So bigger impact on bottom line, even though percentage may be same.Dominic – Rick Davis recently quoted as saying he expects opt in to be low. Any comments?
- Any comments on 60% Opt In?
- Alex – CEO particularly active in legislative affairs, don’t see Dodd Bill passing. But so much activity in congress that hard to predict. Expect there will be further restrictions of some type – more likely by regulatory change rather than congressional action. Worrisome issue – short time for comment, changes will come quickly. Need to be flexible and keep reading the tea leaves.Jimmy – recent OCC exam clearly focused on OD/NSF. Still developing their approach, but can expect much more regulatory focus, which will shape how we deal with this issue.
- Typical response – “looking at all options now”Jimmy – talk about discussions with regional managers and staff, need to understand and articulate impact, developing scenarios and role playsDominic – already out in the market talking to customers. Need to work this over several month period.
- Jimmy – cross sell efforts critical to build relationship depth, share of walletAlex – surprised more people aren’t thinking about eliminating free checking
- Discussion item – why the gap? Possible comments (trade off between us so there is discussion):Highly publicized comments by TCF, long time Totally Free Checking bank, that this will kill free checking.Press reports that fees are increasingWishful thinking? We won’t do it but and will reap competitive benefitSurprised more aren’t focused on expense side
- Alex – talk about how community banks have strong advantage?Jimmy – reinforce it is really all about executionDominic – big banks have some advantages in turn of innovation, scope of distribution, segmentation.
- Alex – great setup for your Oracle implementationDominic – reinforces need for better market segmentation to get close to the customer
- I’ll talk about TD and TCF.Identity Theft – ranks high consumer surveys. Alex and Jimmy, you both offer these type of products (you both are Affinion customers). Possible comments: fits well with certain segment of customersExpect to place a greater emphasis on this in the futureEarly Access – Dominic, US Bank offers this as well. Comments: encouraged? Too early to tell? Still experimenting? (press reports on 5/3 said “20% of eligible customers had signed up for it” but no comments on usage)I’ll set up Compass/PNC for next slide
- Jimmy and Alex – please trade off comments, something like:Interesting positioning. Build your own account gives people reason to opt in for additional services. Customers up-sell themselves? Makes the bank more flexible. More complicated, so takes more training of sales force, clearer customer communicationsDominic – possible set up for next slide: interesting way to reconfigure Free Checking, but ultimately we’ll need to readjust “checking” to be more “cash management” account. Who writes checks any more?