technology opportunities for community banks€¦ · add on banking services - payments need for...

Pacific Coast Bankers’ Bancshares

Technology Opportunities ForCommunity Banks

Steve BrownPresident, CEO



Let’s Talk Tech


Goal of This Discussion

1. Understand industry –altering shifts in community banking that will take place over the next 10 years.

2. Look at ways for community banks to capitalize on the trends.


Innovation and Visualization

1/14


Banking Innovation (Or Lack Thereof)


Why 10 Years?


Visualization

Video Walls

Video Customer Service

More Use of Touch Screens


Centralized and Remote Tellers

Includes video chat


Checkless / Digital Cash

2/14


Checkless and Near-Cashless

Check usage will decline to near extinction in 15Ys

Cash velocity will be greatly diminished as well

Many networks will be bank based, as banks will remerge to play a key role in digital cash.


Mobile Integrated Commerce

Contactless payments

Location based with lifestyle offers

Data collection for provider

P2P payment through banks


More Ancillary Services

3/14


Add On Banking Services - Payments

Need for greater profitability and earnings stability will drive many banks to focus on fee income. Some ideas:

• Alerts and messages (balances, payment clearing, etc.)• Long-term statement archival• Account payable tools (invoicing, shipment monitoring)• Secure & variable credit card numbers generation• Downstream credit monitoring• Prepaid accounts to entry checking• Smart bill payment • Employee expense management


Add On Banking Services – Credit

• Alerts (loan status, payment due, rates, refi, etc.)• Micro lending platform (Loans < $25,000)• On call consulting (CPA, accounting, tax, planning, etc.)• Automated construction disbursement • Secure financial/tax statement analysis / budgeting and

quick book integration (OFX interface)• Insured payments• Small business credit rating / score consulting


Add On Banking Services – Other

• Document storage• Tax / insurance assessment• VIP customer service / problem resolution• Fraud protection and insurance• ATM machines now dispensing prepaid cards


Less Transactions, More Relationship

4/14


Less Transactions, More Relationship

In 2012, average community bank ROE profitability for:

‐0.31%

Single Product Customer

19.70%

5 Product Customer


Customer Financial Management

The value of your institution will be derived not from loans, or even deposits, but from your ability to aggregate and manage customer profitability.


Customer Financial Management

Redefining “Community” Lending important but customer more important More packaged/bundled products Rise of banks as a sales organization More fee lines of business Greater descriptive or needs-based selling Self-aggregating customer clusters Product design to promote profitability

through customer satisfaction


Subscription-Based Banking

In order to increase fee income and create a stronger brand, banks may elevate a segmented-type annual subscription to include a package of products, services, information, financial leadership and technology.


Power of the Process

5/14


The Importance of The Process

In the future, the loans you book will be less important, than how you book them:

Quality of underwriting

Consistency

Turn around time


The Importance of The Process

• Institutionalize the process

• Innovate along the way

• Drive long term value


Process Map Example – Deposit Opening

Clear signage, greeting, introduction and offering of

drink

Targeted questions to determine need

Rep presents customized solutions, options and education according

to need

Walked through disclosures and risk without banking

jargon

Confirmed comfort level by validation – go back over

missed points

Once account package is open, taken around to other members of banking team and introduced. Each to give

cards and thanks.

Meeting concluded with a walk to the car and other thanks and encouragement to call with other questions

Handwritten thank you note sent

Follow up within 10 days to see if everything was received and OK


February• Data Gathering• Financial Goals

• Economic Forecast

March• Data Gathering

• Set Risk Tolerance

• PersonalAccount Focus

December• Year End Thanks

• Goal Update / Congratulations

• Contact Update

July• Mid-year Update

• Tax Planning• Check Goal

Progress• Data Gathering

October• Data Gathering• Long-range /

Strategic Planning

Institute An “Advisory Cycle”

May• Education

• Cash Mgmt • Prep-for Strategic

Planning


Customer Driven, Customer Focused

6/14


Customer Satisfaction

What bank financial institution company had the highest satisfaction rating last year?


Customer Satisfaction


Changing Customer Habits – 55+


Where Do You Want To Invest?


PNC’s Virtual Wallet Account Bundle


Customer Benchmarking


More Customer Intimacy

Banks will make better use of technology to generate fee income and customer intimacy. You already know the basics, but the next generation is:

1. Stand alone appsA. Real estateB. Car purchasesC. CRE valuation

2. Integrated customer-to-customer web applicationsA. Accounts / payable receivableB. Credit / risk managementC. Virtual lockbox


Integrated Payments / Cash Management

7/14


More Integrated Payments

The modern cash register costs approximately $2,000 per terminal. Apple’s new point-of-sale system runs on an iPad, has more capabilities (customer database integration) and costs $50. Retailers large and small will quickly convert.

Payments will soon be integrated directly to merchant’s bank.


PFM Applications Will Go Business


More Integrated Payments

More robust cash management suites of product and services

1. Balance and cash movement alerts

2. Cash forecasting and benchmarking tools

3. Subaccount management 4. Cash sweep to investments


Integrated Financial and Tax Data


Social Media

8/14


Trend Toward More Social Products


LinkedIn• Networking

• Bank Customer Communities

Google• Search

Optimization• Adwords

Facebook• Build customer

community• Real time updates• Cross‐build traffic

YouTube• Viral marketing

• Customer acquisition

Wordpress• Blog

• Customer acquisition• Thought leadership• Build cross‐traffic• Search engine

optimization

Yelp• Generate word

local word of mouth

• Customer acquisition

Twitter• Real time updates

• Micro blog• Cross‐build traffic

Foursquare• Location‐based

marketing

Social Media For Banks (In Order)

Pintrest• Marketing

• Thought leadership

Google+• Build customer

community• Real time updates• Cross‐build traffic


Fansourcing

Efficiently connect potential customers with existing customers for instant recommendations.


The Google Strategy


A Shift In Human Resources

9/14


The Rise of the Knowledge Worker


The Knowledge Worker

• Hyperconnectivity

• Greater than 40% of employees will telecommute or work remotely

• Technology will relieve some of the service burden and thus technology and analytics experience will be in demand at banks


Truely Mobile Sales Teams

• Armed with iPads

• Personalized and connection in the customer’s own business office

• Properly trained sales teams that understand needs-based selling and push to close

• RCC, a process of Remote Customer Capture


Partnerships & Platforms

10/14


Tying Partnerships Together

Helping information overload, one relationship at a time:


Bringing Many To the Bank

Turnkey applications suitable for bank partnerships to increase PPC. Examples:1)Insurance2)Wealth management3)Cash management4)Gift / prepaid cards5)Credit management

There is no limit…


A Progressive ING?

Someone will move to play a role in helping customers execute the best strategy (even if it is not with them).


Multiple Electronic Channels

11/14


Future Customer Interaction


1-800 Social Media Commerce

• Several merchants such as Delta Airlines, JC Penny’s and others have begun selling directly through social media.

• Bank of America and JP Morgan routinely handle customer issues and sales through social media channels.

• Look for banks to have more direct customer integration with sales platforms within social media applications.


Now-Based Banking (Location Enabled)

Banks will take not only more of a financial leadership position, but will evolve into instant communication to inform and drive behavior.

• Special promotions, events and self-segmentation strategies• Enhanced access into financial thought leadership


Data Assimilation / Predictive Analytics

12/14


Predictive Analytics For Banks

Polling information from multiple sources, including past history, in order to help banks optimize operations.

The capture and analysis of customer information about product/service use, needs, wants, desires and behavior will be mission-critical.

Examples:

• Better cross sell• More fee income through data aggregation and benchmarking• More accurate credit scoring for wider selection of lending• Reduced probability of customer defection • Prospective probability of default and loss given default• Deposit forecasting


Can U Predict Performance By Loan Type?

Predicted ROEPredicted ROE

16% of bank performance can be explained by loan mix / type


High Correlation Example


Real Estate

Textiles R2 = ‐0.32

Electronics , Mfg & Internet Services R2 = ‐0.28

Machinery Mfg & Telecom R2 = ‐0.25

Electronic Equipment R2 = ‐0.15

Negative Correlation Examples

Engineering R2 = -0.10

Insurance R2 = -0.09


Predictive Allocation Performance Modeling

Giving banks a framework for asset allocation


Information Assimilation

The combination of social media, webification and database access will result in an unparalleled knowledge synthesis for banks. This will impact customer management, marketing and credit.


Information Assimilation

Examples:• Customer profitability management

• Customer prospecting

• Credit analysis


Choosing Customers Proactively

Nursing Facilities28% ROE

Architects5% ROE

Men’s Clothing 2% ROE



Roofers-3% ROE


Profitability By Industry


A Closer Look By IndustryR

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Targeted Niches

Vet clinics / Dentists

High profit margins

Low default rates

Institutionalized succession process

Property Management / Multifamily

Strong rental market

Prop. Management = stable deposits

Non‐Profits

Low cost / large deposits

Identifiable


More Intelligent Marketing

Customer Profitability

System Data & Analytics

Credit Report

D&B Report

Business Database

Property Records

Social Media

Customized calling list of profitable accounts in

descending order according to bank

objectives


Mass Customization of Pricing + Products

13/14


More Personalized Products

Banks will create products such as credit cards, checking and cash management bundles that can be customized to fit the needs of the individual or business.


Customized Pricing

Similar to capacity/airline/credit card models, banks will move away from pricing by product and move to pricing the customer based on attributes and behavior.


Experimentation

14/14


Experimentation

Applications that play into the trend:

Personal financial management (PFM) that integrates seamlessly into online and mobile

Shared bill payment that allows parents to pay kids bills and bank to keep the kids as customers

Credit tools that help customers maintain or build their credit profile and automatically receive new offers as credit increases


Questions?

THANK YOU !!


Contact Information

Steve BrownPresident, CEO

Pacific Coast Bankers' Bancshares 340 Pine Street, Suite 401 San Francisco, CA 94104

www.pcbb.com1-888-399-1930

technology opportunities for community banks€¦ · add on banking services - payments need for...

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