Bank Marketing Strategy + Ideas

There is a great article in the latest edition of FastCompany.com titled Mobile Melee.

It describes the companies and industries that are fighting it out to turn smart phones into “wallets” and who could ultimately control the multi-trillion dollar U.S. payments industry.

The interesting thing about the article is that it predicts that banks will be the first ones out of the competition, even though they have millions of customers, existing merchant relationships and “dibs on most of our money.”

Nick Hollard, a mobile-tech analyst with the Yankee Group, explains, “They (banks) are risk-averse and they tend to be technology laggards…I can’t see them innovating here.”

The other problem I see is that most community banks don’t do a lot of marketing.

They’ll have to start getting more aggressive with their marketing or their “core deposits” will end up on millions of smart phones instead of in their banks.

Several merchants such as Chipotle and Starbucks have their own mobile-money app.

Chipotle has an iPhone app that allows users to order their favorite burrito and pay for it before even showing up at their local restaurant. Reports claim that over 600,000 of these apps have been downloaded.

The Starbucks app allows users to load cash onto their mobile phones, which then display a barcode that a baristas can scan at the register. The article says that merchants are too self-involved to lead the charge. They’ll probably just partner with a bigger player, much like they do with the credit card companies now.

Credit card companies are a major threat since merchants already tout thousands of Visa payWave and MasterCard PayPass terminals. This gives them an advantage if the mobile – payments standard becomes tap-to-pay. American Express launched Serve this year, a mobile platform that lets users send and store money – without funneling it through banks. (Community banks, please read that last sentence again.)

American Express, MasterCard, Discover and Visa recently joined a mobile – money venture, Isis™, which was formed by AT&T, T-Mobile and Verizon. They are claiming that the Isis mobile wallet will eliminate the need to carry cash, credit and debit cards, reward cards, coupons, tickets and transit passes, fundamentally changing how we shop, pay and save.

The mobile carriers like AT&T, T-Mobile, Verizon and Sprint are experts at processing payments, especially billions of cell-phone charges. While AT&T, T-Mobile and Verizon teamed up to create Isis with the top credit card companies, Sprint linked up with Google several months ago. The problem with the mobile carriers leading the charge is that they are not known for major innovation.

David Evans, founder of the tech consultancy Market Platform Dynamics says, “Just because there are partnerships doesn’t mean there’s anything real there.”

The leading digital payments platform PayPal, which claims 100 million users, could be a major contender. They processed $3 billion worth of mobile transactions in 2011 and have a suite of very useful smart phone apps.

My 25 year-old son and all of his friends use PayPal on their iPhones on a daily basis. PayPal also has a Facebook Connect-like feature called PayPal Access that aims to streamline the entire virtual-payments process. And it’s working on a cloud-based NFC (Near Field Communications) alternative that will allow customers to pay for products by using their phones to scan bar codes or by entering their mobile number and a PIN at existing payment terminals.

The problem with PayPal is that their ambitions require strong relationships with physical retailers, which has not yet been a top priority for them. This late start could put them at a slight disadvantage.

The tech titans are the predicted winners of this fierce competition. Right now Google and Apple are leading the charge, even though Amazon with its $34 billion online retail operation and Facebook with its 800 million users could easily make a sneak attack.

Google and Apple both have plenty of assets (in addition to plenty of cash). These include great relationships with consumers, more pull with physical retailers than PayPal, an active culture of innovation, and because they both outfit market-leading smart phones, control over when NFC chips could become standard.

There’s still more work to be done but most analysts agree that Google Wallet – with its sleek interface, ad-based business model, and rising adoption rate – is a big, bold step in the right direction.

My recommendation to financial institutions is to learn as much about this technology as possible and maybe even promote that you can show your customers how to take advantage of this new banking innovation.

Maybe even create your own version of a “Geek Squad.” You want to be perceived as the expert in all banking-related products and services. Be thinking about how you can use all of this new mobile payment technology to your advantage. I would love to hear your thoughts….

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Neal Reynolds has worked with hundreds of banks and credit unions around the country helping them to grow core deposits and market share without growing their marketing budgets. Contact him at nreynolds@eadshop.com.

Years ago, I invested in a flower shop. It wasn’t your typical corner flower shop filled with red carnations and yellow roses. In fact, we didn’t even have a shop. All we had was a van for deliveries.

I researched the flower industry and found that flower shops have very high margins, but very small profits. The main reason for this is the overhead cost and the fact that flowers are perishable. Since flower shops are typically in high traffic areas, their rent is often high. And they have to spend a lot of money on coolers and air conditioning.

We all know that flowers only last so long. If they don’t sell within a few days, you have to throw them away. So the secret, I believed, was to eliminate the overhead and sell the flowers before they wilted.

I hired a floral designer and we sent flower arrangements to all the top law firms, doctor’s offices, ad agencies, and insurance companies in town. This floral designer was also the salesperson. When one of our flower arrangements showed up to an office, our main salesperson got to meet the customer face-to-face. And because they came with flowers, the gatekeeper secretary always let them in!

We would deliver a large arrangement and let them know that we could deliver something similar every week for just $50. We started signing up customers. We would buy the flowers on Saturday from the wholesaler, make the arrangements on Sunday, and make all the deliveries before noon on Monday.

Since we knew how many arrangements we needed, we knew exactly how many flowers to buy. And instead of spending hours designing multiple arrangements, the designer would arrange all of them the same way. The best part was that when we delivered the arrangements on Monday morning, we’d pick up the vase from the week before, saving another $5. Our flowers were always fresh, and we had very low overhead and very high margins.

When you think about it, banks have similar challenges as flower shops. They are usually in high traffic areas, so their rent is high, and the money they collect in deposits needs to be invested in something quickly.

In banking, the secret is eliminating the overhead and utilizing the money instead of letting it sit in the vault. That’s why banks need to stop thinking about expensive branches and start investing in mobile banking.

People are spending hours each day on their phones, doing everything from e-mailing, texting and checking the weather to finding their way around a city or country. Most of these people, I suspect, would love to make deposits using their cell phones instead of driving through traffic to get to a bank.

And, chances are, they would also like to use their phone to pay their monthly bills as well as paying for the hamburger they are having for lunch.

Chipotle Mexican Grill has an app for the iPhone which allows you to order and pay for food right from your phone. You can use the app to find the nearest Chipotle and build your taco or burrito exactly how you want it. You can even include special instructions, like “easy on the beans” before you check out and pay for it. And yes, it saves your order so you can get your favorite burrito every single day without going through the process of rebuilding it every time.

Many banks haven’t even considered mobile banking. The market is still young and the time is now! Look at what PayPal, Ally Bank, ING and other internet banking services are doing.

My 25 year-old son and all of his buddies are using PayPal for almost all of their banking needs. When they all go out to dinner together, PayPal has an app that allows one person to pay the bill and then all of the others in the group can calculate what they owe and send the money to that person instantly. No need for pulling out a calculator or counting quarters, dimes and nickels!

My son doesn’t even open his monthly bank statement he receives from Bank of America. Everything is done on his phone or computer.

All you have to do is look at the sale of smart phones to see where banking is going.

If bankers don’t hurry up and find ways of cutting their overhead, they’ll be just like the local flower shop. They’ll be pushing daisies.

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Neal Reynolds has worked with hundreds of banks and credit unions around the country helping them to grow core deposits and market share without growing their marketing budgets. Contact him at nreynolds@eadshop.com.