theIdeaStudio (Customer Crossroads)

Humans love to compare: People Like U makes it even easier

In my little neighborhood in a big city, the local talk generally follows the same few topics, which we all love.

A perennial favorite relates to house prices. How much did they get for (or pay for) the house? Did you get your new tax assessment yet and what was the value?

We ask about roof replacements, new driveways and air conditioning units. We'd love to ask about the cost of the addition to your house, but that feels personal, so we mostly try to guess.

There's a feature in my weekend newspaper called Financial Facelift that let's us all look at the financial snapshot of someone else -- while they get advice from a pro about how to save for retirement, or solve their financial problems. I'm sure it's one of the best read columns in the business section.

We all love to peek and compare.

A new service from an Australian bank lets people peek in a more organized way. People Like U let's you compare your spending habits with other Australians.

I particularly loved the easy-peasy 6 questions you use to categorize yourself in thedatabase.

Don't you totally wish you had one of these for your own region?

• 

My take

This interest in comparing applies to pretty much any human endeavor from sports to hobbies. If you are seeking a way to engage people more in your product, service or category, consider the possibilities of letting your consumers compare themselves to others.

Mobile money - it's that land grab, gold rush thing all over again

Sorry I've been away for so long -- these days, when you have good work to do and are busy, you can't take that lightly. So I have pent up ideas, pent up writing. In my head, I'm talking to you regularly. It's been fun, but somewhat one sided.

One of the things I've been watching is the development of mobile this and mobile that, as part of my trendwatching duties.

What I'm specifically interested in is the financial stuff -- that great marriage of digital money and digital platforms. Credit cards, then debit cards, ATMs, multi-branch banking, telephone IVR, then internet. Wow, internet, what a lot of possibilities THAT opened up, and still being explored. And now mobile. Not just mobile access to internet, but things you can only do on a mobile teleconnected computer aka a smart phone.

It feels to me like a gold rush, where everyone is trying to get a stake a claim as quickly as possible.

Announcements are being made practically daily. My favorite source is Finextra -- it reads like the racing form these days, or the sports pages (pick your metaphor) -- telling you who's up and who's down, who's breeding with who, who's out of the season.

We're not talking about simple financial apps here, or simply internet via mobile access to your bank account. We're talking about being able to buy a burger and pay for it with your phone, and have that transaction integrate into your financial management software immediately. That kind of integration -- although it scares people -- seems to be what we want.

Depending where you live in the world, this is either old news or bleeding edge stuff. And there's a good reason for this -- it relates to when your current legacy infrastructure was created, and who is most invested in it. If you happen to live in Sweden, or Japan, or many other places, some of this is old news.

Here in Canada, where I am, we were fairly advanced in things like ATMs and debit cards -- but the lines were drawn then, and these lines are getting in the way of development now. No one in the regulatory business some 30 years ago could have easily envisioned that a telecommunications company might want the ability to execute payments on your behalf. Without paying a bank every time. Which is exactly what they want to do now, and are trying to do. And so are a bunch of other people.

And PayPal, bless their hearts, is going exactly where I always thought they wanted to go. They are becoming a true digital bank, and they're doing it in classic disruptive fashion.

Another thing that is interesting, is that the technology folks, who kind of thought they were going to sweep in and show those dusty old banks how things are done, are finding that the settlement process is much much much more difficult than they thought. Gee whiz, there are all those different currencies. And different regulatory structures! People want interoperability. Who knew it could be so complicated!?

Throughout history, when new land was settled, the immigrants changed things. This time will be no different. The old players will have to adapt to new neighbors, and their different ideas. The new participants will also have to adapt, change their plans, and learn a new language.

The technology may not actually be the biggest thing, it may ultimately be the marketing of the technology that really changes things up, as new players get creative to be heard. 

For the rest of us, we can be fairly confident, (I think), that at the end of the day, there will be a lot more functionality for consumers and small businesses than we ever thought possible. We will truly have control over our money, in the same kinds of ways that global corporations have had for years. But instead of having to invest in a CFO and a treasury management department, we will have it all on our smart phone. And won't that be fun.

That's my take. What's yours? What developments do you think are most exciting, or most scary? Best analysis you've seen? Company to watch?

Can BankSimple live up to its promise of "not sucking"?

BankSimple is a new internet-only banking offering. Not quite a bank, but more like the front-end of a bank, linked to actual banks. So something like Mint, but with transaction capability.

"Our core brand value is 'Don't suck'" according to CEO Josh Reich, as reported in Fast Company. On their web site, the vision is a bit more conventional:

• Real service, real support     
• Putting people, not policies, first   
• Mobile from the ground up
• No surprise fees ever
• Plain, simple language

Other Internet Only Banks

It's an interesting idea, but certainly not the first attempt. ING Direct was created with a very similar philosophy. There have been a few other internet-only banks that started and folded. These were all actual banks, however, with all of the regulation and capital requirements that entails.

A few that come to mind:

President's Choice Financial -- not quite internet only, because they have grocery store kiosks. Still rolling.

BizSmart -- had a few kiosks in what is now Staples stores. Targeted to small business with a free checking offer. Closed a few years ago and folded into their parent, CIBC.

Bizner -- an internet only bank targeting small business launched by RaboBank. Very innovative offering, especially their linkage to online accounting software. Folded back into RaboBank in 2010.

Swift Financial -- a branchless bank focused on small business launched in 2007, and made it as far as 2010 with that model. Their vision was documented by CEO Ed Harycki on YouTube. They are now doing business as Swift Capital, and appear to be only in the business of factoring merchant receivables. I really thought their model was cool, but they've changed their strategy.

The fact that others have tried this actually confirms the market need, in my view. So eventually someone will get something together that is robust enough to make a profit long-term.

The challenge of "not sucking"

I did find the "doesn't suck" line just a wee bit arrogant, however. If only it were so simple. I guess the rest of the industry is filled with people who don't really get it, or don't care? 

New innovations like this do force the rest of the industry to stay on the game and keep making their experience better, and that's a good thing. If these folks can stay focused on serving one segment really well, perhaps they can survive over the long term.

Resources

A bank that doesn't suck, by Tim Fernholz, Fast Company, July/August 2011

What is Bank Simple? by Jim Bruene, NetBanker, May 2010

Swift Financial Launches Product to Increase Small-Business Access to Capital -- company press release, August 2010

Online only banks list 2006, Bankwatch, -- a good list of the leading online only banks at that time. Only a handful are still around with the original business model.

 

 

A bank introduces Woops feature: ING Direct New Free Chequing

I never expected ING Direct to launch a chequing account. Why enter the ugly and expensive transaction part of the business? Well, they have proved me wrong, and good for them.

Their new Thrive chequing promises to give back the average $185 a year Canadians pay in bank fees.The pitch: unlimited free chequing, and access to deposits and withdrawals at ATM machines. (ING has no branches, only a few ING Cafes in major markets).

The splashy launch included women in orange bathing suits jumping in fountains, billboards that reveal themselves when passersby remove coins, and fun contests.

The marketing message at launch: "Today we bring you Freedom." Nice insight behind that one -- speaks to deeply felt wishes, especially in a tough economy.

Where the Woops comes in

The Woops feature offers to cover your mistakes up to $250. A much better name than "Overdraft Protection" and again, speaks to the reality for most people, that an unintended overdraft is a mistake, not a moral failure.

There are also e-mail alert features included, to give people quick updates about their account balances. Another nice touch that acknowledges the reality that few people maintain detailed banking records now. And also leverages mobile without having mobile transaction capability.

How to reach people -- send the President to a shopping mall

Imagine a bank president speaking at a shopping mall -- that's what happened here. Of course ING Direct is a consumer bank, but even so, this is a big departure from the staid and stodgy approach we usually see.  And of course, what a great way to reach people from coast-to-coast, in a major tourist destination.

They've also added scarcity to the mix -- the account is only available initially to 10,000 of their million plus customers.

Yup, there's a social media strategy.

Finally, clever leverage of social media, with Flikr, YouTube videos, a Facebook site, and Twitter. With some content worth following, at least for a while.

Full disclosure

I didn't do the qualitative on this project. I just wish I had, because I think they have nailed it.

My take

So there's some new disruption in the marketplace. It should make for some interesting times.

What do you think?

More info: Finextra story, ING Thrive Microsite

Credit card fraud and the customer service problem

Credit card fraud is a serious, expensive and pervasive problem -- even as the banks use clever ways to protect transactions (e.g. chips) fraudsters seem to find ways to keep up.

The net result is that many honest card holders have had fraud problems through no fault of their own. We appreciate that the issuers are vigilant in monitoring card use and can move quickly when they believe a card has been compromised or is at risk. In research, I hear lots of people taking comfort from this.

But companies are not always as quick to let the customer know what's going on when they take these steps. The tale of woe sent to me this week by a regular reader makes this clear. An automated message was deemed to be adequate.

Getting the automated message your card has been compromised

Here's a tale of woe from a loyal reader that highlights this issue:

On Monday, Aug. 9, I received an automated voice mail at my cell phone number advising that I was being issued a new card and that as of Aug. 6 my transaction limit was restricted to a maximum of $500. There was no explanation for why this was being done. Just a recorded announcement that was longer than the length allowed by my voice mail and that was cut off.

I can say for absolute certainty that no effort was made to contact me personally because my voice mail response for my cell phone specifically says not to leave a message at that number but to use another number. (BMO MasterCard has my home and office numbers and did not call either. They also have my e-mail address, but did not use that.)

I called on Aug. 9 and asked for an explanation and got the expected party line about how they are looking after my best interests etc etc. (And of course: "We are experiencing a significantly higher than usual call volume...." Do you ever not get that message?)

But here's the thing: On Aug. 5, I checked out from a seven-night stay at an all-inclusive resort and charged more than $3,000 to my MasterCard to pay for the visit. How would I have felt if my credit card was declined at that time over something that I was unaware of. Humiliated and inconvenienced are terms that come to mind.

In May I was in Europe for eight days and I didn't bother to take my cell phone because it doesn't work outside of North America. How would I have felt if my card had been cancelled or restricted during that trip without my knowledge? Humiliated and inconvenienced to the extreme are terms that come to mind.

Would a direct telephone call by a real customer service representative alerting me to what was happening be so hard?  ... After 30 years as a MasterCard and BMO customer I am considering switching to Visa.

My take

The focus on customer acquisition in the credit card industry means free points and bonuses for signing up. You might not be thought so valuable when you have a problem though.

If you have to get a new credit card number, you can plan on changing all those recurring payments yourself. A great example of a situation where you may as well look around for other deals since you're going to be updating everything anyway.

Profitability modeling has taken us to a place where your past real business counts for nothing, and your potential future business counts for everything. How bizarre, how bizarre.

What's your take?

Is anyone doing a good job on this? Do you have your own tale of communication woes over fraud problems?

Products versus services - what's the difference?

From time to time I hear the question raised about whether something is a product or a service. This comes about, I think, because marketers and brand managers in service businesses often refer to products as a matter of convenience. For example, a mortgage product or a vacation product.

However, there are some substantial differences between products and services, which definitely affect how you think about managing both the customer interaction and the marketing generally.

For example, services tend to be perishable in the sense that they cannot be inventoried -- what you don't sell today cannot be sold tomorrow. Consider the impact of this element on airline seat pricing -- it's a huge driver in that industry! 

Service quality is notoriously difficult to control. For example, one lawyer is not interchangeable with another lawyer, even though they may work for the same firm and have similar training.  This is very different from the world of products, where we fully expect two boxes of laundry detergent to be virtually indistinguishable.

I've attached a PDF you can download that gives you some examples as well as some criteria for consideration.

Download a PDF of "Is it a product or a service"

Brilliant bank expansion strategy from TD: innovative thinking

Innovative thinking can touch any area of your enterprise, not just new products or creative marketing. Here's a great example of innovative thinking at work in a retail expansion strategy.

TD Bank wants to expand in the eastern US, and has decided to snap up old burger and chicken outlets and convert them to bank branches.

Great idea both for customers and for the bank. These kinds of locations are usually ideally situated on major streets and intersections, and almost always have abundant parking. Fast food places often have a lot of windows above table-top level, which is exactly what you need in a bank --  a bright location that doesn't show below the desktop level.

An added bonus will be that many locations will be set up for drive-through access, something that can take a lot of time to get through zoning.

For the neighborhoods involved, a bank branch is usually considered an upgrade from whatever commercial enterprise was there before. In some cases, I suspect that these conversions will support the local micro-economy, because the food places may be sitting empty now because of the recession.

So it looks like a win-win all around both for the shareholders and the communities. Nice innovative thinking.

Resources:

TD cooks up burger joint plan for new U.S. outlets, by Grant Robertson. Globe and Mail June 17, 2010

Full disclosure: I own shares in the parent company.But this isn't investment advice, so who really cares?

Legal agreements: how simple systems evolve into nightmares

When I'm not blogging, I actually run a research + consulting enterprise. One time some years ago we bid on -- and landed -- a contract for a large municipality. They required us to have insurance. And so it began.

Somewhere in the distant past, insurance had its origins as a way of pooling risk. Everyone pays a little, and then if your ship sinks or your house burns down, you have that major loss covered. Absolutely brilliant idea.

I like to imagine that these early contracts were pretty straightforward. Then some fool or crook set fire to their own house, and the first exclusion clause was created. 

You can see how these things work, really. First, a few simple exclusions. Then some contracts are disputed in court, so the language becomes more precise. Then other things happen and more exclusions are needed.

After a few hundred years of this dance, we now have insurance agreements no-one can understand. My commercial policy has a printout of dozens of pages, and this is the short form! Even the summary document is mystifying.

It might as well be Latin

We pretty much have to take it on faith that there's something there for us if disaster strikes.  And it's not just insurance contracts. I feel the same way when I click the "Agree" button with every application or online service. Not to forget the waiver you sign whenever you go skiing or rent a canoe. Then there are the multi-page confidentiality agreements that large clients insist we sign. 

Like parishioners before the reformation, we know there's some important message in the service, but we never learned to speak Latin.

And it's just as well. Because when you do know what it means, it can scare the heck out of you. I've seen a few of these that are pretty onerous. I told one client something like this: "If you don't like what I do, you don't have to pay me. But you can't take my house." Thank goodness they agreed to remove the offending clause, because we wanted the work.

There's an opportunity here

This year, another massive policy increase has us shopping around.

All of the forms and questionnaires seem to have been created for people that drive dozers around, build bridges, and otherwise do concrete STUFF.  When you work in the airy-fairy world of ideas, which is pretty much our stock-in-trade, it's hard to connect.

I think there is a huge opportunity here for some innovative organization to clean up in this industry. Hire us, and we'll help you figure it out. And I'll be first in line to sign up for the policy.

This just in: Facebook payments, gold dispensing ATMs

Virtual currencies, Micro-payments and Facebook

Lots of people have been dabbling in Facebook as a financial interface, including linking to secure banking, apps related to peer-to-peer lending sites, and many more. Facebook is now testing virtual currency in partnership with GroupCard. Users would buy credits for 10 cents each from Facebook, paying with their credit card. They could then use credits to pay for things inside Facebook. The intention is to enable merchants to offer services for small amounts on a viable basis. Facebook would take a cut, generating a new revenue stream for the application.

Facebook may succeed here, where other microcurrencies have not. (Remember Beenz?)  Someone is going to get the micropayments thing right eventually, I think. This is not so different from the credits you buy on stock art sites such as istockphoto (and probably other places too).

Loyalty points are practically a currency, since you can buy a wide variety of items with points now.

Source: Finextra, June 1, 2009 Facebook begins testing virtual payments system

Gold works better than flowers department

A German precious metals trader, TG-Gold-Super-Markt is testing ATMs that will dispense gold.

Thomas Geissler, chief executive, told Reuters that the initiative is "more than a marketing gimmick.' The current plan is to place as many as 500 machines in locations like rail stations and airports.

I'll say one thing: it's easier to carry a gold wafer with your luggage than a bouquet. And the value lasts longer than a stuffed animal or a key-chain. It even works as an environmentally correct gifting strategy, since it's unlikely to wind up in landfill. 

Sources: Finextra, May 29, 2009. German firm plans gold-dispensing ATMs.
Reuters, May 19, 2009. German firm plans gold ATMs to meet growing demand.

Twitterati vs the banks

Twitter is one more thing that somebody said of it: "this changes everything". [656 hits for that exact phrase on Google, and probably bigger now]

One of my favorite reads is Bankervision, and author James Gardner had the audacity to go public with a Twitter-is-a-stunt-for-banks stance, releasing a firestorm in a teacup as Twitter defenders and bank bashers both rose to the challenge of commenting.

Some of the points made are interesting, though, so let me see if I can distill the main arguments.

From James:

• Banks that hang with the cool kids want to be first on everything. They like getting attention from social media mavens and marketing gurus
• Unpaid media is a compelling value proposition, but you have to be first to get any benefit
• Twitter is not economic for reaching thousands of customers with relevant messaging, because you'd need a roomful of people tweeting to do it
• It's a lot like virtual worlds -- looked important, but off the radar at the moment
• To invest real development time, banks need to see a real money business case
• Twitter experiences a lot of user churn - a lot of people go dormant after a few weeks
• Bank innovators should focus on mobile

Commenters:

• Twitter is more about listening than talking, if you are an institution. Case in point here.
• Twitter may not have reached critical mass, but it's way too soon to write it off
• Twitter is part of social media, and if you are going to be relevant to your customers, you need to find a way to be relevant in social media
• Twitter opens a channel to pass on good stuff, and limit the damage from bad stuff (Remember the Domino's viral video situation)
• Twitter has more utility when you add a bunch of other tools like Tweetdeck, Twhirl, Twitscoop, Monittor, etc
• Bankers just don't get it
• Virtual worlds that require a huge software download and big investment of time are not comparable to razor-thin Twitter apps that take almost no time and are totally mobile

Okay, I think you get the picture.
Among the more interesting remarks made on both sides is the challenge of scaling up such a system to communicate with customers.

Let's consider customer wants

The part that I think is getting short shrift here is the underlying desire, need or want. [I know, I do go on about that, don't I?]

Yes, banks and others need to monitor Twitter. But if that ever became a primary communication channel, something is seriously wrong. I do think that the banks running a help line on Twitter are probably doing a good thing. I monitor a few of these, and I don't see them getting that much traffic, and what they are doing is redirecting the enquiries, for the most part.

Long before the internet, a disgruntled customer could call their local newspaper columnist or local TV consumer reporter with their gripe. And the company would get right on the problem and fix it. This did not mean it was a primary communication channel.

Since that time, banks have made many changes. They have standards of customer service, much better quality control and quality tracking, faster decision turn-around, and many other service improvements at banks. And ombudspeople as a last resort.

Social media have a democratizing effect: it means small voices can more easily be heard. They help balance out the power imbalance of one customer versus a big institution.

The scaling thing is still a big issue

Regardless of what the communication channel is, people want more access to institutions. They want it fast, and they want it convenient. They don't want to be on hold for half an hour. Call centres were certainly scaled up to provide more convenient access. And a few institutions do a good job with e-mail, which has got to be a demanding operation, and fraught with potential problems.

Twitter seems to offer possibilities for alerts

Relatively few banks offer customers feed services for things like rates. This would appear to be a good application for Twitter. What about campaigns and promotions, announcements of new locations, all that sort of stuff.

Or maybe an automated system should tweet me about the status of my application.

Lots of other innovations are possible using these new channels.

[Note that what I am suggesting here would also work well or better on mobile. And probably be more secure]

Most consumers expect banks to innovate first in helping them stay on top of transactions and money. They expect a lot less in the 'cool' department than they do of brands like Virgin Atlantic or Pepsi.

We are all trying to figure this stuff out, for ourselves and our clients. Thanks James for putting on a nice show over there.

Idea Marketplace wins awards for Lloyd's TSB

A fascinating story is told on the Bankervision site by Lloyd's TSB head of Innovation, James Gardner, pictured above. The firm just won an innovation award for the work on an ideas marketplace. I've heard of these before, but not in financial services. Very leading edge.

In particular, I was interested in Gardner's comments about the emergence of marketplace behaviors like inflation and insider trading.

He's coming out with a book in the new year from Wiley, FutureProofing, which sounds quite promising.

In another post, Gardner reports on his experiment in social networking, whereby he tries to make his status updates as banal as possible:

"Over the past few days, I've been conducting an experiment: using my Facebook status, I've been trying to see just how ridiculously uninteresting I can get before people dump me. "

Instead of dumping him, he is getting more response than ever. From this he draws some interesting conclusions about the role of social networking, and why banks aren't flocking to it in droves.

More than Scrabulous: Credit unions, P2P lending and payments now on Facebook

While some of the major FIs have garnered publicity for their pages on Facebook, others have been starting to offer actual transaction capability. So when I take a break from playing Scrabulous, I can check out account balances or send money to a buddy. Soon, I'll be able to apply for a peer-to-peer loan, or check out my loan portfolio.

Credit Unions leading the charge to transacting on Facebook

SEFCU is a credit union with 160,000 members serving New York State, and is the latest to announce transactions on Facebook. MShift, a provider of mobile banking solutions, built the SEFCU application, as well as the KeyPoint Credit Union Facebook application, launched November 2007. KeyPoint's 80,000 customer base is heavily weighted to technology professionals, and it only makes sense that they would be at the forefront of access innovations.

FiServ, the giant solutions provider for financial processing technology has launched the MyMoney application (screen shot above) that offers access to a number of credit union accounts. And possibly the ability to aggregate from multiple credit unions, although that wasn't entirely clear to me after researching this. Although the application was built with credit unions in mind, Fiserv says they can work with any operating platform.

[One thing I didn't care for too much were the gushing testimonials from Fiserv employees on the comments page.]

The driver behind this initiative is simple -- bring the banking to where the people are, especially Gen Y potential customers. But not only them, of course -- other demographics are rapidly adopting social networking as well.

P2P Lending

Lending Club has a Facebook application that is really just a page at this point, with redirects to their web site. But they are in a quiet period while awaiting their SEC approval to issue another 600 million in notes. So I'm guessing things will look quite different here in the near future.

Prosper, another P2P lender, is also live on Facebook. Prosper's application appears much more interactive inside Facebook, adding items to your feed about opportunities you are following, etc. Transactions still occur inside the Prosper web site.

Sending money around

A few operations are now launching that promise to let you send money around the web via Facebook as well. PayMe promises to let you use PayPal from inside Facebook. OneClick Pay is already live, as is Moneybookers.

Is Facebook taking over the world?

Most of these applications have users in the dozens. So there's no need to panic if you're an FI without a strategy in place yet. However, exponential growth curves do tend to look slow in the beginning.

Some buffing up is needed in the customer experience

One thing I noticed about these Facebook apps and the associated pages is that the companies are not doing a tremendous job of interacting with people. For example, the KeyPoint page has a question about the app dated April 1, 2008 that has no response.

Here's my tip: if you launch a social networking application, you need to build communication protocols and revise job descriptions to ensure that ongoing communication occurs. What's the point of opening a dialogue with your customers  and then failing to talk? 

Resources:
Finextra: SEFCU taps Facebook, July 10, 2008

SEFCU press release about Facebook

Credit Union Journal, Fiserv units unveil  financial platform for users of Facebook, April 2008, PDF file

Bloggers writing on this topic: CU Tomorrow; NetBanker, Inside Facebook

Finance on the web: automated budgeting tools for the less affluent among us

The web just seems to be made for managing money. From the beginning, things like stock trackers and portfolio trackers were present, and they keep getting more sophisticated. Direct trading online forever changed the investment industry. Payments were next, but quickly moved outside the control of the banking sector.

PayPal and its rivals
PayPal, of course is one of the gorillas, and shows signs that it may someday try to do more than facilitate payments. Initially, it was about buying online, but it rapidly expanded the options for both payers and payees. Some time ago they added a personal payments function, so you can send money somewhere.

It seems so easy, but it wasn't that many years ago that people had to do things like wire money to do this sort of thing. You can already keep funds on your account there, and go across currencies with ease. It would be a short jump for PayPal to add other features that would make them look a lot more like a bank.

While PayPal has buried most of its direct competitors, there are still lots of P2P payment systems around. And eventually the banking industry caught up, and said 'OK, you can e-mail a payment. But only if you aren't a business.' 

There are many other direct P2P payment systems around. iKobo is still in business, using fulfillment of the transfer via a VISA prepaid card at any of one million ATMs worldwide, and anywhere else that VISA is accepted. Senvia is another. There may actually be hundreds of these, targeted at specific ethnic and geographic niches. At one time, Western Union and your country's Post Office virtually owned this game. Not anymore.

Budgeting systems, the new battleground
The new battleground appears to be budgeting tools that help the average person manage their money more effectively, linking directly to the transactions.

CIBC has budgeting and expense management tools attached to its credit cards through a service called CreditSmart.

Manulife One launched a service to permit you to integrate all your balances and offset borrowing costs. In addition to this, the statement classifies spending. It seemed like a really smart idea, but seems to have lacked serious uptake due to the lack of retail distribution power such as the banks have.

There are more online budgeting tools than ever. Many of the most recent entries have nothing to do with a bank, and they are definitely going to force the financial industry to raise the bar if they want to stay in the game. Here's a few that have come to my attention -- and I'm guessing there are many others.

The Automatic Money Manager promises to help you "take control of your money."

"The system retrieves all your transactions from your financial institutions, automates your bills, manages your spending & savings, and gives you access whether you are at home, work or on your mobile phone."

The system works using the "envelope" system of budgeting, with direct linkages of your accounts to the tracking system. For things like credit card spending, every transaction on a credit card is automatically linked to the "pay credit card" envelope, to encourage full balance payment each month.

Pretty slick for only $129 per year, or $189 if you sign up for two years.

MVelopes promises "complete control of your finances" for the same prices as above, and also has mobile phone access. A really informative site, it even lists the banks you can link into. And it's a HUGE list.

Banzai promises similar benefits for only five minutes a day and $4.95 a month, and calls their envelopes Jars. They have the added benefit of bonuses for signing up others. They've brought their fake-Zen-speak to the site, which makes me think they won't make it over the long term.

Mint offers the same automated account linkages and some budgeting features, and it's free. [It's not entirely clear to me what their business model is, but I'm guessing it's targeted advertising for financial products.] In addition, Mint lets you compare yourself to others on spending and saving.

If you want to set goals and track more than your budget numbers, there are starting to be services for that, too. Goalmigo and 43Things are social communities where you can set and monitor goals and get group support.

MyProgress promises to track how you are doing relative to everyone else on practically everything, from net worth to fitness. [Looks like a lot of data entry, however, so I didn't have the patience today.But dang, the possibilities are enticing, aren't they?]

Conclusion

All that stuff that used require hard work with a ledger book looks like it might finally become automated. And if, like me, you hate repetitive detail, this could be a really good thing.

Acknowledgements and stuff

Thanks to TechCrunch for some interesting comments on MyProgress, and the lead to Goalmigo

If you want to see how this trend translates to business, check out Bizner.

Chasing the wealthy

Merrill Lynch and Capgemini recently reported that there are now 9.5 million people who are "high net worth." This only seems like a big number until you consider the world's population, or even the developed world's population.

High net worth defined

The Merrill/Cap study defines high-net-worth as individuals having net assets of at least $1 million USD, excluding their home and consumables. [I guess this means the contents of the wine cellar don't count?]

Ultra-high-net worth individuals have to have at least $30 million by this definition. There are about 95,000 of these people worldwide. A few, of course, have much more. There's no category for them, but they can afford to buy wide-body private jets at $150 million a piece. Boeing apparently had 11 such planes on order at the time of the report.

True customer-centric approach demanded

The point of the Merrill/Cap research is that the needs of this group are becoming ever more demanding, and they need the services that only an organization with global reach can muster. More important, they want a true needs-based approach to managing their money and investment needs. 

Some want to buy luxury goods, such as the jets mentioned above. Others want to invest in philanthropy. None of these folks wants a cookie-cutter solution. Nor do they want to integrate all these services themselves, which is time-consuming and kind of boring really, if you can get someone else to manage it for you.

Two implications to ponder

We have a lot of people out there in the wealth-management industry chasing a very small number of wealthy people. Europe and North America each have about three million of these HNWIs. In Canada, we have a measly 248,000, less than one per cent of the population. If you can't move to a high-value-added delivery approach for this exclusive group, perhaps you need to rethink your target market.

There is another implication that is important for anyone covering the mass affluent -- those people who don't quite make the cut as HNWI. And it's this: soon you will be expected to provide something closer to what HNWIs can get in terms of customized and customer-focused investment and money management services.

There is a consistent pattern where services only available to the most wealthy -- either businesses or individuals -- gradually become available lower down the market. At one time, you could only buy currency futures in seven-figure amounts. Then it was only in six-figure amounts. I believe it's now five-figure amounts, but I may have missed something. There may well be locker-lunch and lemonade-stand futures being sold somewhere.

The same thing happened with Treasury Bills. Heck, it happened with maid services, didn't it? Look at luxury spa services. It's even happened in eco-tourism. It's getting harder and harder to find a category of goods or services that is truly exclusive, available only to a select few.

Exclusive goods and services tend to become less exclusive over time. One reason for this is that a successful business strategy can be built on bringing that exclusive stuff within the purchasing power of the next layer down. The corollary to this is clear: if you want to serve that exclusive market, you need to keep pushing the bar higher, to avoid having your exclusivity eroded.

Resources:
Merrill Lynch and Capgemini announcement is here

PDF file of the report is here
There are some interesting charts in this report, including the one that compares the current approach to serving the needs of wealthy individuals with the new, more customer-centric direction.

Another entrant in the peer-to-peer lending show

I learned about Lending Club today via Facebook. They are the latest entry in the burgeoning peer-to-peer (P2P) lending space. Here's how they describe themselves on their web site:

Lending Club is an online lending community where people can borrow and lend money, bypass the banks, and get better rates. By working together, members can borrow money more easily and at a better rate than they would get from a bank, or invest in a portfolio of loans at higher rates than those served by savings accounts or CDs. A proprietary technology called LendingMatch™ helps match lenders with borrowers using connections established through social networks, associations and online communities, and build diversified portfolios based on lender preferences. Lending Club is backed by Norwest Venture Partners and Canaan Partners.

Other P2P lenders include Zopa and Prosper. Although the models differ in various respects, they are the latest form of dis-intermediation. A bank is an intermediary -- it takes deposits in various forms, and turns them into loans of various forms. These P2P operations aren't deposit-takers; they facilitate the matching of lenders and borrowers. Because of this, they aren't covered by most of the regulations that affect banks.

These organizations are low-end disruptive in the Clayton Christensen sense of the word: an innovation that brings an imperfect solution to the market that addresses needs of a particular group of customers more cheaply than the current solution. It's a 'good enough' solution. These P2P operations cannot possibly offer lenders or borrowers some of the bells and whistles of conventional financial services, or even the simple speed, efficiency and reliability. But they may offer better rates. Over time, they are likely to get better at what they do, and take a share of the market through sustaining innovation.

Previous articles on this topic:

Update on Zopa and Prosper, online un-banks. August 17, 2006

Financial Services Innovation Watch: The E-Bay Model Comes to Banking. March 30, 2005

A related topic: Vendor Relationship Management - What the heck is it? June 13, 2007

New in credit cards -- the iCache

A brilliant concept here -- it'll be interesting to see how this performs in the marketplace. The device you are looking at is called icache. It's a thin wallet that contains a 'credit-card' that can mimic any of your cards. You select the card you want to use, and the mag-stripe is programmed with the needed information.
The data on the 'dynamic mag stripe' is overwritten by the next transaction, or expires.

Biometric security reduces the risk of having all your plastic in one place.
It isn't a hosted solution -- the biometrics and card data is stored with the consumer.
It requires no modifications at the merchant level -- one of the major barriers to a consolidated solution.
It works on contact-less units as well, such as RFID (which we'll be seeing a lot more of).

Icache wisely plans their initial roll-out via financial institutions, and will give them the opportunity to brand the device.  I would assume the reason for this is to try to forestall some kind of defensive or competitive manoeuvre on the part of the banking community.

The company plans to migrate the technology to cell phones when cell-payment becomes more widely available.   

This all seems really great, for a device that might sell for less than $100. It even has the cool-factor potentially going for it.
One major bit of fallout will be card branding.

Resources:
Thanks to Business 2.0 for bringing this to my attention. "One card to rule them all", Sept 2007

Customer Service Carousel Redux

*** Updates are added at the end of this post.

I've been having some problems logging in to my main business bank accounts, as documented earlier.

I have now called the 800 number twice, and have spent a considerable amount of time -- as they requested I do -- documenting what exactly is wrong with their web site. I sent this information exactly as they requested, through a secure internal message site.

They promised

1. to get back to me within 24 hours
2. to e-mail me when their response was posted so I could log in to see it

They appear to have fulfilled promise #1, but I didn't know, since they didn't fulfil promise #2. I found out today that the problem isn't fixed, and it's basically my problem now.  Here's the message they sent me:

Thank you for your feedback. We appreciate the time you have taken to write us.

Please note that the team that answers messages only has limited access to customer accounts and personal information. Although we can assist customers with general inquiries, we are unable to fulfil account servicing or investigation requests.

For further assistance, please call Online Banking support at 1-xxx-xxx-xxxx. If you don't have a Telephone Banking password, at the start of your call press 0 twice to be connected to a representative. Assistance is available 24 hours a day, 7 days a week. If you're calling from abroad, the number is 1-xxx-xxx-xxxx. Collect calls are not accepted.

Thank you for using Online Banking.

Sincerely,

Jane
Internet Communications Specialist

This organization is making more than a billion dollars a year. And they are spending a LOT of money on branding.

This is what I would call a 'customer managed relationship.' If I want the relationship to work, I'm going to have to manage it. And that includes figuring out why their web site is -- you know -- [what's a polite word here???]

Update May 21, 2007.  My e-mail response to feedback has not received a reply. Problem still exists.

Web 2.0 and Banking

Wonderful, detailed and thought-provoking post about Web 2.0. Basically how to think through the implications for a large business (in this case banking) in a structured way. "How to Web 2.0 your bank", at Bankwatch.

While you are there, you'll find some other interesting reads as well as lists of banks operating without branches, and so on.

The Story of PayPal

An interesting read from Chris Skinner at Finextra.com tells the story of how PayPal got started, just over eight years ago. One of the key interesting themes here is that PayPal created their service in full view of the banks, and uses a lot of the same infrastructure.

Mr. Skinner says that PayPal worked where other new payment schemes failed (such as Beenz) because of three vital differences:

• it used the dollar as its medium of exchange, rather than trying to create a new currency for online payments;
• it used email for communications; and
• it used the existing bank networks for making the payment

PayPal is now a huge operation, recording 2006 revenues of $1.4 billion on almost $38 billion in transaction volume. Although their growth rate in transaction volume is slowing, it is still massive: 45 per cent in 2005 and 37 peer cent in 2006.

Well worth reading, and very thought provoking.

New in Financial Services: cool stuff, interesting bits from here and there

Things are starting to pile up on my desk, so herewith a round-up of the relevant tid-bits on the financial services file.

Biometric Bank Machines in India

Thumbprint bank machines are being piloted in India. Given that the number of ATMs in India is expected to go from 35,000 to 100,000 in the next three years, this could be big. The focus is rural areas that have not had access to financial services infrastructure, and have traditionally done their day-to-day banking through high-priced local middlemen.

Literacy has been a barrier in previous efforts to get adoption in rural areas, according to Sunil Udupa, CEO of AGS Infotech, quoted in the Wired story. Illiterate farmers couldn't remember their PIN code, and couldn't read the machines instructions. The new machines have audio and symbolic instructions, and use biometrics. Biometrics are currently used by some land-records offices in India, so the technology itself is not totally new there.

Few are actually succeeding at cross-selling

A.T.Kearney created an Organic Growth Index to survey 4,000 customers of retail financial institutions, with an objective of tracking organic growth.  They discovered that the average number of accounts per customer across 32 institutions is less than two.

Great customer service scores are the price of entry, but not enough to grow share of wallet, according to author Andrew Green, also a VP at A.T. Kearney. Green concludes that banks have not created the integrated value propositions that could drive growth because they can't/don't/won't work effectively across their silo structures.

"Integrated value propositions represent new territory for most retail financial institutions, which typically are organized in silos around specific accounts. Success requires working across these silos and rethinking product pricing, positioning, marketing and even the traditional measurement and reward systems, which typically focus on one account rather than multiple products."

Tip of Hat to:
CustomerWorld for the Wired reference on thumbrpint bank machines in India.
"Thumbprint Banking Takes India", by Scott Carney, Wired, Jan 9, 2007

"Where's the cross-product value proposition?", by Andrew Green, BAI Banking Strategies, May-June, 2006.

[Strange Technical Issue: for some reason, pictures that format a bit too small in Typepad always wind up looking way too big in Feedburner. I'm knowledgeable in the ways of pixels and DPIs, but this one has me stumped. Anyone??]

Service Extras: BMO differentiates

Media in Canada reports that Bank of Montreal has added a couple of interesting extras for their clients.

First, a podcast series offered by the private client group.  Yes, we've heard of these before. But this time, they're using a household name journalist, and genuine personality, Pamela Wallin. Wallin recently finished a stint as Canadian Consul General in New York City, and is now Chancellor at the University of Guelph. Most Canadians know her as a great interviewer from her days on radio and television.

♥♥♥ Now we're talkin'! You want people to listen to your podcast, you need to give them a voice and content worth listening to.

They are also launching a concierge service for the BMO Harris private banking clients, to help with such things as concert tickets and vacation bookings.

♥♥♥ I don't know if this will bring in business, but I bet it works from a loyalty perspective. 

References:
"BMO thinks outside the bank", by Annette Bourdeau, Media in Canada , March 9, 2007

Banks Using Podcasts to Connect: First Direct stays on brand with clear communication

First Direct, a UK direct banking organization that is part of the HSBC group, announced that they would be charging customers with dormant accounts a 10 GBP monthly fee. Bravely, they have a podcast  that contains an interview with Chris Pilling, the CEO, explaining what is going on:

This podcast contains key information about the new current account proposition.
  Our Chief Exec, Chris Pilling, talks in detail about exactly what is happening and how it will affect our customers.

It's short, and worth listening to. He comes across as calm and clear, and provides a reasonable explanation of what is going on.  Whether or not you agree with what he's saying, this is such a great approach, to speak directly to your customers about what is going on. Way to go!

When I looked around their home page, you can see that the podcast is totally on brand for these guys: "jargon free service."

A couple of other things that caught my attention:

• imagery that is fun and friendly
• Pet insurance -- pets are big, and getting bigger. Plus they're cute and friendly for a bank to show on its home page
• "Most recommended" -- a much more compelling statement than the usual, "we're great." And it reinforces the customer focus

Customer Experience Coach Tips:

• Translate the core values of the brand into everything you do, including how you handle announcements of service changes and bad news in particular

Umpqua Bank building integrated customer experience as lifestyle brand

"If a bank wants to stand out, it’s fairly difficult to do so with the financial products it offers. It can, however, differentiate the manner in which it sells and packages those products."

Umpqua bank has charmed us before with their gorgeous web site and their coffee-serving branches that feel like living-rooms or hotel lobbies. They continue to push the envelope.

The CD
Their latest move is to offer CDs to customers that have compilations of local, lesser known musicians, as documented in the NY Times Magazine story, Branching Out. The program, called "Discover Local Music" is not an attempt to make money on the music -- just a way to entice people into the stores and build the brand. Check out their online store here.

Their corporate voice is really interesting as well.  Like this little sample from the music store page:

"We might be biased, but it seems our little corner of the world turns out a staggering amount of amazing music. Having grown up on the West Coast ourselves, we thought it might be nice to share a bit of that local flavor with you. You find your new favorite band. Local culture flourishes. Everybody's happy. We hope you enjoy."

Go, Reach, Savor and Cruise - these are bank accounts?

Bank products and packages are well known for their mystifying names, usually all about the bank, or pointing to a specific feature of pricing or interest rate. [See samples of Wachovia here and BMO here] Umpqua's packages have names that speak to life-stage aspirations. They may not tell you much about the account, but they at least appeal at an emotional level.  And there are other goodies too:

"Club Carefree 50 is an exclusive club geared toward people 50 or better with tons of great benefits such as travel discounts, The World's Greatest Reads Book Club, Club Carefree 50 Community Connection Corps, and much, much more. Visit your nearest Umpqua Bank to get involved or to find out more."

The current offers for this Umpqua club include a newsletter, travel discounts, charity events that members can get involved in, socials, and safe driving programs. It's easy to join -- you just open a Cruise account, available to those over 50. The name implies all the good things that we hope for in the second half of life: less hard work, more ease and fun, and of course travel.

Can a bank be a lifestyle brand?

Some people think that Umpqua doesn't have enough of a "bank" look and feel -- but what they are doing seems to be working for them in terms of business growth. They are distinct, they are pursuing their own pathway, and like Apple, they are bound to get better and better as they keep persisting.

Because after all, who really wants banking -- banking is boring, complex, sometimes scary, potentially frustrating and risky. It's only a means to an end. We want status, security, safety and  comfort. And perhaps some fun.

Cashless Monopoly: how we train the consumers of the future

We're not that far from toy-buying season, so keep your eyes out for the new cashless Monopoly, which will be available in the UK this year, and next year in other markets.  The new game gives players a VISA branded debit card, and includes a card reader that players use to exchange money.

Is cash disappearing completely? Probably not. But cards are here to stay, and are likely to become more and more embedded in behavior at younger and younger ages. 

While this may represent just another line extension for Monopoly, Visa deserves some credit for participating as a partner. Talk about product placement for your brand with emerging consumers!

By the way, the official history of Monopoly at the Hasbro site says that inventor Charles Darrow was unable to convince Parker Bros. in the game due to its many "design flaws". After Darrow sold 5000 to a Philadelphia department store and couldn't keep up with demand, Parker Bros. was willing to listen to him.  When you think you have something innovative, you have to follow your own judgment sometimes and take some risks, or the naysayers will get you.  And they never invented anything, did they?

References:
Thanks to regular reader Apoorv D. for bringing this article in The Mail on Sunday and this piece from the Financial Post to my attention.

Personalization Trend: design your own credit card

People want personalized and customized goods

People have wanted personalized and customized goods since forever.  Before the industrial revolution, that's all you could get, because everything was made by individual craftspeople.

The industrial revolution showed that people would trade low price for a lack of personalization.  Remember the famous saying, attributed to Henry Ford: "The customer can have any color they want, as long as it's black".  Low price in automobiles actually translated to access; before the Model T, few people could afford to buy a car.

Information technology = affordable personalization

What the information revolution has given us is affordable personalization. For some years now, this has meant incredible amounts of consumer choice in first world countries in items such as clothing and home decor.

The hold-outs are organizations that want you to display their brand, even if their brand isn't particularly cool or stylish.  So we've had two or three choices in computer color -- black, grey and beige, with the occasional dollop of white and silver.  Cell phones, equally boring, spawned a whole industry of covers, to give people more customization ability.

Personalization comes to financial services

The last hold-outs have been banks, typically offering very limited choice or customization options, uniformly bundled up in the corporate color with the logo occupying most of the real estate.  Change is on the horizon, however.

Postbank.nv lets you customize the look of your credit card

Postbank in the Netherlands lets you customize your Maestro debit card. You can use their images, or use your own image that you upload at the time of application. There are rules about the images -- nothing copyrighted, no pictures of art, no naked bodies, etc.   This is just too much fun for words, and apparently quite popular.  Postbank.nv is part of the innovative ING group.

Customized Visa card from Postbank.de

The German Postbank let me create this good looking card with a picture of my summer place*.

Garanti Bank Flexi-Card offers many options, not just color

Turkish Garanti bank offers the Flexi-card. In addition to visuals, the Flexi lets the customer build their own feature set:

"During the application process on the web, applicants can manipulate over 10 parameters such as the reward rate and type, interest rate, card fee, and campaign type to create their preferred combination. Customers who want a simple approach can choose to select one of the four ready-made packages from the web -www.flexicard.com-
or  from Garanti branches."

GE Consumer Finance is a 25% shareholder of Garanti, so we may see more of this among the GE family.  More information on an English-language site is here.

Our take

Are you using IT to give more control over customization and personalization to your customers?  If you aren't, now would be a good time to start, before you are totally behind the proverbial 8-ball.

References:

Tip of the hat to Springwise, who brought two of cards to my attention.

Zopa and Prosper, who give their customers the opportunity to lend their money to borrowers using customized lending syndicates, also appear to be a manifestation of this trend.  We wrote about them recently here.

* The castle is actually an outbuilding of a castle near Alexandria Bay, N.Y., built in an age when hundreds of craftspeople worked for dozens of years to build something unique and individual that only the super-wealthy could afford. A nice era to visit, but I wouldn't want to live there. 

Update: second Bizsmart letter arrives

I'm a more important customer than I thought ... maybe ...
In a previous post, Sales missing in action, I told you about a rather weak customer retention effort made as a major financial institution closes down it's no-fee chequing/checking subsidiary, bizSmart.
It happens that I got a second letter... written to the owner (me) of a different business.  This one is offering me free chequing until next May. AND a different 800 number to call. 
Some differences in langauge between the two letters:

The "Good Customer" letter:

"We are committed to supporting small businesses and helping you achieve your goals. We appreciate your business and CIBC looks forward to continuing to meet your financial needs"

The "Get Lost" letter:

"If you do not make alternate arrangements, your bizSmart account(s) will be automatically closed... Thank you for your attention to this matter"

So the rule of communications in use here is, if we think your account is so small that it's a nuisance, we will use the minimum of civilized language and see no need to be overly polite.

Here's my take on this as a guiding principle: all your communications reflect your brand, no matter who you are talking to.  Especially when you don't really know who you are talking to.

Update on Zopa and Prosper, online un-banks

Zopa is an un-bank of sorts, a peer-to-peer finance operation. Zopa brings lenders and borrowers together in an online marketplace, letting the lenders (i.e. people like you and me) offer funds at a specified rate, for a specified term, with limits on the level of risk. Borrowers look at the funds on offer, and choose whether to take at that rate or wait for a better deal.  Zopa makes the market, provides administrative and matching services, and underwriting services, but it does not itself lend money.

Zopa has recently launched in the US, from it's UK origins, and decided to do some focus group research in advance of the launch. In the spirit of open-ness that seems to define this company, they have disclosed clips of the focus groups through a link on their blog, here. Or go directly to the clips here. (Quicktime required. And it takes a minute to download.)

The remark I found most interesting was the woman who wanted to help struggling artists, but couldn't figure out how to find them, and thought Zopa would be a way to lend them money safely. I guess the instinct to be a patron of the arts continues, even though most of us don't have the money of the Medici.

Zopa uses some clever marketing tactics, such as paying for referrals.  If you are an active Zopa lender and bring in another member who completes a transaction, you both get paid 30 pounds.

Zopa's blog invites guest authors to write.  Here's an example from Philipg27, a Zopa lender, who writes that Zopa is not a community, it is a market, and compares it to Lloyd's of London insurance. Philip27 takes the company to task for weaknesses in it's online functionality.

...most importantly for Zopa the message is that Zopa should be working towards making the market easy to use rather than attempting to foster a sense of community. The website is notoriously difficult to use, it should be as simple to use as my online-stockbroker, and provide me with enough information to make informed decisions on the most effective options to lend money. I don’t really need pictures of people jumping over mountains whilst baking bread. I need cash flow statements, better reporting and maybe even some idea of what’s happening to my loans being processed that are currently lost in the Zopa Triangle …

Prosper is the other major peer-to-peer lending operation, with a few differences from Zopa. 

Prosper permits lenders to form syndicates on their own, and choose their borrowers. Borrowers can also become part of a group, where the group's reputation rises and falls based on repayment patterns, which then affects their interest rates and ability to attract lenders. 

Prosper is a bit more wild and entrepreneurial in approach than Zopa, permitting lenders to take undiversified risks by lending a lot to one individual or group.  Zopa forces lenders to diversify.  Now that they are both operating in the same market, it will be interesting to see how things shake out.

I expect it will be a few years before we really see how these approaches work as a business.  Meantime, it's fascinating watching how both operations differentiate from banks in their communication approach.  If this approach really works, it seems obvious that a big player would try to enter the action, perhaps with a sub-brand, just as a few are now in the payday loans business using subsidiaries.

A Shocking Story of Sales Missing in Action

Or, how your customer communications can dilute your brand...

I was pretty sure this sad day would eventually arrive -- when Bizsmart closed down their free chequing for small businesses.  I got the notice today.  I have three months to find a new bank.

Bizsmart was always a subsidiary of CIBC, so of course this notice letter suggests I go move my account there, referencing the main home page and 800 number as a source of information.

Of course, moving my account to CIBC will likely be as much work as moving it to a competitor.  So I think I may shop around. Here are a few of the things your Customer Experience Counselor would suggest could have been done here:

1. Give the customer some incentive to move to the preferred option.

How about a free i-Pod, a promotion one of the competitor banks here just wrapped up?  A preferred pricing offer.  Free cheques.  A ball cap, for goodness' sake.  Free coffee at the branch.  Anything at all. 

2. Show some appreciation to build some goodwill.

Is it the customers' fault you couldn't figure out how to make money this way?  You should still say thank you. If you don't, what will they think about your main brand, and why should they continue to give you their business?

3. At least make it easy for your customers to move.

Suggest which branch would be best. Provide a name and phone number for the nearest location.  How about a special 800 line for switchers, set up to help facilitate the move? 

How about a landing page on the CIBC web site that provides some targeted support and links to critical information on the CIBC site.  It could also have FAQs.

First among those FAQs should be something about those online government payments -- a service which I truly love and cherish.  (Does anyone else have this?  Does CIBC have this? That could make a critical difference. Even my bookkeeper thinks this is a cool service.)

How about helping customers move all their online payments at the same time, to save them some hassle? 

Would you consider transferring some of the paperwork?  Or do I have to get yet another banking resolution? (My lawyer thanks you.)

My Take

Issuing a bare notification letter when you are making a big customer change has the advantage of clarity. But no matter what is happening, make sure it's brand accretive*. You just never know who might blog on this stuff, do you? 

Given the marketing effort expended on obtaining new customers generally, be sure you don't care before you act like you don't care.  After all, just like Mom told you, it doesn't cost anything to be nice.

* Is it Brand Accretive or Brand Dilutive?

Investment bankers and their pals talk about merger and acquisition opportunities as "earnings accretive", when they mean it improves earnings per share, and "dilutive", when it damages earnings per share. There's a good definition here.

We need to think about all communications as brand accretive or brand dilutive -- do they add lustre to the brand or not?

I had hoped this phrase came from me first, but unfortuntately I see three references to this term on Google.

Update September 1, 2006: My other business got the "good customer" letter after I wrote this.  Read the followup item here.

Buy cell-phone minutes at an ATM - Can a bank make your life easier with value added services?

Qatar National Bank has an interesting service that permits a user to top-up their cellphone account using a "secret code" issued at an ATM.  Very nifty idea. 

They are also providing free alert services, something available in many smaller banks with new technology platforms.  The free alerts are automated notifications on a variety of topics (e.g. account status, salary deposit) specified by customers. 

Perhaps someday these services will be available from 1st world banks??

Using the Power of the Web to Harness Opinion: marketocracy

Are there investors who can consistently beat the market but aren't working for a big fund manager?  Marketocracy thinks so. 

Forbes online describes their approach this way:

Ken [founder Ken Kam] and his team have recruited over 55,000 people to manage over 65,000 model portfolios that need to meet strict distribution and activity requirements – just like professional fund managers.

These aren’t people who have thrown darts and gotten lucky with one stock, they are real investors who been featured in the pages of Forbes and BusinessWeek and who have worked hard over the past three years to build up a record so they can have a shot at managing a real Marketocracy fund.

Marketocracy constantly analyzes and ranks all 70,000 investors and each month, selects their 100 best investors, the M100. These are investors who have proven ability to generate long-term results, but who also have demonstrated consistently superior long-term long term stock picking skill as well as shorter-term evidence that their investing style and strategy is working in today's market.

What does this mean? Out of tens of thousands of investors of all types, from value to growth to technical, Marketoracy is able to identify the 100 most successful investors with the hottest hands and bring you their picks.

My Take
I suspect that this system works better when it is small relative to the market, so  sign up now.  When there are a million people involved, or ten million, it'll probably have the same problems that fund managers of large funds have.  (Any economists want to weigh in here?)

This model does harness the power of the web to circumvent traditional channels and ways of doing things, giving power and influence to those who were disenfranchised.  It also reminds me a lot of electronic marketplaces for forecasting. 

You may have heard of these in the context of budget forecasting inside organizations -- markets are set up to trade in various budget forecasts, and individuals inside the organization can buy and sell the forecasts for some nominal benefits.  Forecasts created in this way are much more accurate than the traditional methods. 

Really, we are just beginning to see how we can use internet technologies combined with computing power to improve many things. 

Thanks to creative trend-spotter Apoorv D. for bringing this to my attention.

Multi-channel integration for better customer experience: is it technology, organization silo problems, or both?

How long have we heard talk of multi-channel integration, and seen so little evidence of it?

Asaf Buchner, writing on a  Jupiter Research Blog  reports on the 2005 Net Finance conference.   Most multi-channel integration efforts are at the level of consistent look and feel across off-line and online.  But better efforts are starting to emerge, according to Mr. Buchner:

The few banks that were able to achieve a true integration offer a superior customer experience, allowing a client to start a dialog with the bank in one channel and continue it in another (e.g. start an application online and continue it from the same point off-line). In the following months, I will investigate the success of banks like Wachovia and Wells Fargo that were able to overcome technological barriers and break silos in the organization to fully integrate their marketing channels.

It's been a long time coming, hasn't it? 

The internal organizational barriers are real.  It's not just that people won't work together -- it's that most of our organizations are set up to encourage and reward other kinds of behavior.  Employees doing the right thing for customers are often doing it in spite of, not because of the organization. 

I had often wondered if there was just a paucity of innovative thinking from customer experience marketers in financial institutions.  However I'm learning this is not the case at all. 
The technology barriers have been real -- compounded by the data barriers.   

A really clever fellow from IBM Global Services, educated me on this topic at a roundtable sponsored by the Access Group in early March.   There are actually lots of good and innovative ideas out there -- but either the technology or the data are a barrier.  Or both. 

Not necessarily that the tech solution doesn't exist.  But few firms have the capabilities that Asaf Buchner is writing about.  (Yet).

What's your perspective?

Privacy and Trust: Watchfire Survey says it's about Trust

Online risk management firm Watchfire has sponsored a survey of online banking customers that suggests TRUST is the thing to pay attention to.

There are a lot of tables and charts, and some reasonable commentary, but from my perspective, it's this trust and loyalty thing that is interesting and new.  Although the commentary suggests that trust creates loyalty, that seems too simple.  The picture looks like this:  people with more of their wallet at one institution tend to shop around less, and tend to have higher trust.  So maybe the real formula here is this:  if you are trustworthy, I may give you more of my business, and have greater confidence to conduct business online.

The study also suggests that breaches of trust will be dealt with harshly.  Well, we need to wait and see on that one, because consumer inertia in matters of financial services is legendary.  I suspect the issue is a lot less salient when someone else had the problem than when it happened to you or someone you know. 

We'll have lots of opportunities to test this idea, since major breaches of security are becoming alarmingly commonplace: ChoicePoint, and now MasterCard. 

ChoicePoint was a spin-off from credit bureau powerhouse Equifax, who compromised the privacy of many thousands of people by unintentionally selling private data to crooks, enabling them to perpetrate identity thefts on a large scale. You can read ChoicePoint's apology to people who were compromised here.

The real story here is about the impact these problems are going to ultimately have on data mining -- maybe we've already had the golden age?

More on Choice, Intermediaries and Certainty: Using a Mortgage Broker

This advertisement in my alumni magazine caught my eye for a couple of reasons.  First, it is actually a pretty good advertisement -- eye catching simplicity that made me stop and look at the jam jars wtih the different labels. 

There are other interesting things about it though.  If you read the fine print, you'll find that HLC is actually part of CIBC.  That explains the dominance of CIBC affiliated brands on the jam jars... PC Financial and CIBC are the obvious ones, but First Line Mortgages is also part of CIBC. 

HLC is providing some options that CIBC might hesitate to provide directly -- sales of products manufactured by other Financial Institutions. 

Although the advertisement is about choice, this is not really what using a mortgage broker is about:  it's about certainty.  Choice is a euphemism in this context.  The web site has language that captures the certainty issue much better:

There are specific financing solutions available if you are self-employed, experienced previous credit issues or bankruptcy or require financing on a non-traditional property.

You know that a broker is going to get you a deal, if there is one out there to be found, no matter how difficult your circumstances.  And the broker is probably going to get you just about the best price you can get as well, even with their commission built in.  The real bonus is not having to deal with a dozen financial institutions telling you that you have "a difficult file", giving you the pained expression, or any other patronizing, demeaning experience. 

The broker's interests are almost perfectly aligned with yours:  get you a good deal so they can get your business, earn a commission, and probably get a referral from you.  Here's something you won't see at too many bank web sites:  names, e-mail addresses and phone numbers for the mortgage broker people.

(I actually put something just like this on a financial institution web site last century:  names and phone numbers of real contact people.  It was amazingly successful.  In fact, I personally used to get calls from all sorts of people who just hoped I could help them find the right person.  And of course the commissioned sales team was happy to be easy to find.  Back to our topic...)

Some mortgage brokers are so good at understanding the risk appetite and policies of the various lenders that they don't often get rejected -- they know how to package a deal so it can be done, and they send it to the right lender the first time. 

We bought our last car this way -- a less common thing, but worked great.  No sales person to deal with, no stupid negotiating game, and even with her commission tacked on, we got a better price than we likely could have by holding our breath till we turned blue. 

You can buy many things this way, actually -- commercial printing, commercial financing, in fact most commodities, a house... 

And the benefits are the same in each case.  You get one knowledgeable player who does the legwork for you, thereby increasing certainty, reducing complexity, saving time and cutting back hassle significantly. 

(Imagine trying to buy a house without a realtor and MLS ... driving around the city looking for signs, knocking on doors, reading ads in the newspaper -- what a nightmare!) 

Intermediaries use their market knowledge and negotiating power to improve the customer experience, making a nice living while they are at it.

Financial Services Innovation Watch: Artist Pension Trust

Imagine a pension plan for artists where the artist invests works of art for several years, for a guaranteed pension in the future.  Sounds pretty out-there, doesn't it? 
But that's exactly what the Artist Pension Trust is doing, as described in Wired, Paint by Numbers.
The whiz person who created this idea, Moti Shniberg, sees future opportunities in other areas of intellectual property, for people like filmakers.

The project relies on some research conducted at NYU by business school profs Michael Moses and Jianping Mei into the long term investment value of art.  They tracked art that had sold more than once at the major NY auction houses.  Guess what -- the art outperformed the financial markets over the period from 1953 to 1998.  And you don't have to buy masterpieces.  In fact, you are better off with gallery quality art that has not attained star status, and is therefore reasonably priced.

To select the artists to invite into the plan -- and you do have to be invited -- the investment pros turned to David Ross, a former director of major galleries the Whitney and SF MOMA. 
He says:

It's all about finding the X factor.  X doesn't equal talent.  Loads of artists have that. X equals promise. X equals the potential to hit it big

Not everyone is a fan of the speculative elements of this approach, particularly the possibility that the investment fund will attempt to influence the value of the art in their collection.  However, it's a popular idea:  the article reports that a number of other art investment funds are going to launch this year.

Additional stories and links:

Vested Interests, Price Estimates, and the Future Performance of Artwork , another paper by the same professors
Give Em Shelter, Forbes article on the topic
Art & Money, Perfect Together, in Registered Rep
Whitney Museum

San Franciso Museum of Modern Art

Financial Services Innovation Watch: The E-Bay Model Comes to Banking

The essence of banking is intermediating between buyers and sellers of the time value of money -- except they're called borrowers and savers.   

Just as E-Bay brought this intermediary role into a new place with hard goods of all types,   a service called Zopa hope to do this with borrowing and lending money.   

Wired has the story,  Either a Borrower or a Lender Be.
Richard Duvall and James Alexander are the innovators behind Zopa, as well as Egg, an internet bank. 

The driving force behind this innovation appears to be the distaste some kinds of borrowers -- and investors --  have with the whole banking experience.   Zopa's creators had economists helping them, sure, but they also had ethnographers. 

Stay tuned, this could get pretty interesting.   

Umpqua Bank is Posting to Blogs about Banking?

An interesting article on Decent Marketing about the Banking Experience, asking why the whole concept is so stuck in tradition:  Decent Marketing: The Banking Experience.

I've always wondered why bankers are so stuck in the traditional thinking of what a bank should be, since it seems to me there are so many opportunities to create an interesting and compelling experience around money.

Even more interesting are the comments posted in response, one of which is a pitch from Umpqua Bank.  They are pretty innovative, actually, but this was quite remarkable.  So I have sent them an e-mail asking them what they are up to here.  If I get a reply, I'll let you know.

Choice and the Role of Advice: How Advisors Change the Customer Experience

I've been thinking a lot about choice lately, and this morning I awoke with this graph in my head. 
We are often overwhelmed by choice, because we live in a wealthy society.  And as your willingness to spend increases, so does the range of choice you have.  But then something strange happens -- when your expenditure gets large enough, the role of advisors starts to come into play. And the advisors can reduce complexity and choice.

This is easier to see using some examples.  Let's start with the most obvious: investing money.

Investing Money

Those who don't have much to invest we actually call savers.  And the options for savers are really fairly limited.  If you have less than $500 to invest, you are limited mainly to savings accounts, and savings bonds.  With a little more money, your options spike dramatically, becuase you can now afford mutual funds.  With still more, you can invest in a huge range of securities: bonds, equities and other financial instruments.  With still more, you could consider things like real estate, or direct ownership of a company.  One can imagine that the investment options available to Oprah Winfrey, Donald Trump or Bill Gates are virtually limitless. 

Something interesting happens along the way, however.  Most people pick up some kind of financial advisor. 

In the beginning, this individual can actually make things worse, by telling you about choices you didn't know you had -- like thousands of  mutual funds.   But as the money you are spending, on both the investment and the advisor, increases -- the role of advice is to radically reduce the number of choices that need to be made.   The advisor weeds out all the poor choices for you, and only asks you to choose among good options. 

This scenario plays out in many kinds of services. 

Interior Decorating
I had to shop for new drapes recently, and was expecting it to be a daunting task.  I deliberately chose to start with a single store that carried a wide range of goods, BB Bargoons.  My plan was not to overwhelm myself with decisions, and try to find a workable solution in this one store if possible. 

While I was there,  a woman came in with her decorator.  They had already been to at least one other store, judging by the swatches of fabric.  Together they reviewed a lot of fabrics.  The decorator kept coming up with new ideas and suggestions.  I could see the client becoming overwhelmed with the choices, until I actually heard her say "I don't really know what I want anymore". 

Many people who hire interior decorators leave the majority of the choices to the decorator.  They outsource all of the choice-making. 

Eating Out
The same dimensions appear to be part of the eating out experience too, although they manifest themselves differently.

At the low end, there are many possibilities, but little real variety: McDonald's, Wendy's, Burger King, and their competitors.  As you go up the quality/cost dimension, you have many more choices.  There are still chains, like Swiss Chalet and Pizza Hut,  But there are also independent bistros.  By the time you get to a Kelsey's, East Side Mario's or Shopsy's type of operation, the menu may have 80 or more items on it. 

But then you pass through that level, and something changes. 
When you get to fine dining, there are likely not quite as many choices, because the chef is making some of those choices for you.   The menu changes daily, as the availability of prime ingredients changes.  The serving staff can also assist you in making choices.

The number of items on the menu shrinks. Although the wine list may be overwhelming, there is now a sommelier who can choose for you, if you wish and you are prepared to pay the cost. 

And a select group of high-end dining experiences offer virtually no choice at all, with the chef and their staff taking as their mission giving you a memorable dining experience. 

Here's one:  if you dine at Susur, the menu is not set until 5:30 pm every day.  Eigensinn Farm, one of the stars on the global dining scene, serves a seven course meal to only 12 people each night.

What Does it all Mean?
The preponderance of choices facing us every day actually makes more room for the role of trusted advisors in many forms. 

An automated advisor doesn't actually add much to the cost.  Consider how Amazon shows you other books you might like.   It is cross-selling, of course, but it is also a kind of advice. 

Part of the role of brands is clearly to help thin out the choice-making.  You can get any kind of computer you want from Dell, so why confuse yourself with other suppliers?

If you are offering more choices to your customers, you need to also help them make wise choices, and reduce the tension and stress that accompanies too much choice.   

Researching the Remittance Business: How Easy is it to Send Money Somewhere?

I shipped a package abroad recently, containing dutiable goods.  Unfortunately, I underestimated the duty that would be charged, and now I need to send the recipient a cheque.   (Feeling annoyed with myself for dreaming that FedEx would handle this aspect and bill me, and now I have caused a big nuisance) My fall-back position is going to my local bank branch and obtaining a bank draft in US funds, which I would then mail or courier.  But I have another plan.

Remittance services, are a HUGE and expanding business.  Some countries take in more money through remittances than they do through major industries.  All those foreign workers and immigrants send funds home on a regular basis, and these are the services that help them do it. 

So I want to see if I can do this online through a remittance service.  Care to join me while I go shopping?

First stop, Senvia.

Loyalty Programs Turning Into Giant Cross-Category Alliances

Loyalty programs are moving from discount programs into more complex alliances, according to Rupert  Duchesne, President of Aeroplan Canada.   He had some interesting things to say over morning coffee last week at a seminar.   

1. More and more, typical loyalty programs will create less and less loyalty.  Notable exceptions are the programs offered by Sears and Zellers. 
2. Consumers want portability of their points under programs
3. As a result of points 1 and 2,  major programs are going to consolidate into competitive alliances which will look more and more like the battles of giants
4. Inclusive loyalty programs need to take these major spending categories into account:  GAS, PHARMA, BANKS, TRAVEL and GROCERIES   
5. Wal-Mart doesn't have a loyalty program -- they put this 3% cost into lower prices.  So loyalty programs that are really just discount programs may actually be doing damage to the companies that sponsor them, if they compete with Wal-Mart primarily on price
6. Starbucks has created unreasonable loyalty (speak for yourself, there Mr. Duchesne, I think it's quite rational, actually)
7. Only one in 6 of their 6 million members are regular flyers
8. Aeroplan aspires to make their miles as fungible as currency

After his talk, I had a chance to ask him if Air Canada was actually at risk due to their relationship with the now-independent Aeroplan.  Mr. Duchesne told me that this risk is actually the reason that they are in a 20 year agreement, and the non-renewal provisions are favorable to Air Canada for that very reason.  For example, Aeroplan would have to wait a full year to align with another carrier if they did not renew with Aeroplan.

If he's right, things could get interesting in Kansas, Dorothy.  Stay tuned, especially to see which grocer lines up with Aeroplan, and which with AirMiles.  And what does this mean for PC Financial?  (Maybe they start PC Travel???)

Concept Watch: Life Cycle of Information

I heard a new concept from a financial services executive recently that caught my attention:

The life cycle of information

When planning data collection strategies to build a custome-centric integrated experience, one needs to take a view on this issue.  You want the contact centre to know about the problem you had with your plastic at the cash machine last night, but a year later this information is probably valueless.  However, you do want the whole history of your mortgage is probably pretty essential.

This concept ports readily into other environments.  In conversation with a United Way representative recently, we discussed how some information is mission-critical during a given campaign, but has little or no lasting value.  Likewise, information that is useful for local committee management is mere clutter at the national level. 

A young IBM analyst told me some time ago that their company policy was not to keep hard-copy of anything more than two years old unless it was of continuing value as a reference, and unreplaceable.  A highly useful policy which I have tried to implement to keep the paper under control on my own desk (admittedly, not always with success).

Chief Compliance Officers Set the Record Straight

I received some thoughtful feedback about my recent posts on integrating compliance effectively with a customer-centric organization.   

Compliance vs Customers

There is a major push on to stop money-laundering activities by crooks, and to squeeze off the access of terrorists to funds.  These are laudable goals.   At a conference today on Anti-Money Laundering and Counter-Terrorist Financing I learned that you can buy a lot of terrorist activity for not very much money.   And that some terrorist organizations fund themselves through organizations designed to look like legitimate charities.   And I can see clearly why we need to keep the doors closed to dirty cash as a way to control crime.  No objection.  In fact, I confess I was oblivious to the magnitude of these issues, as well as the positive impact that has resulted from the various new regulations and standards, some domestic, some international.

However there are going to be challenges.  And one of them is going to be reconciling the need to focus on customers with the need to check in, check up and report on them. 

PC Financial & CIBC Service Recovery Opp

The Globe and Mail reported a story January 27 (CIBC glitch results in tax mix-up) about another "glitch" at CIBC resulting in the feds erroneously being notified that 3000 customers cashed in their RSPs.  You would have thought they were double-checking everything after the fax fiasco.  Pretty soon people will be attaching negative adjectives like "error prone", and that can't be good.

A technological blunder at Canadian Imperial Bank of Commerce resulted in headaches for more than 3,000 of its President's Choice Financial Customers, after the bank erroneously sent information to the federal government suggesting they had cashed out part of their retirement savings plans. The mix-up prompted the Canadian Customs and Revenue Agency to begin sending out tax reassessment notices to these customers in the mail. CIBC, which was recently engulfed in a fax snafu involving confidential client information, apologized for what a spokesman described as an "unfortunate incident," and said the problem is being fixed. The federal tax authorities will begin contacting each of these 3,061 PC Financial clients today, and hopes to resolve the issue by the end of next week. CIBC said the error occurred when it switched from a paper-based information delivery system to an automated process.

However, what counts in customer experience is not the glitch, it's the recovery.