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BNPL. The High Cost of Low-Cost Lending.

Granted, I’m not an economist. I’m a marketing guy. So, to a certain extent, when it comes to the economy and predicting what the future holds, I pretty much have to rely on those folks who at least seem to know what they’re doing. But, you needn’t have a PhD in Economics to see that, well, we’re headed for tough times. Whether the fed raises interest rates two times or three times, or even four times next year is up for debate. And, as for the size of those rate increases, that is, too. Where am I going with this? BNPL, or Buy Now, Pay Later.

I’ve been reading quite a bit about BNPL lately. It’s a hot topic. In fact, the Buy Now Pay Later (BNPL) industry is booming, having generated nearly $100 billion in 2020, and projected to reach $3.98 trillion by 2030. I’m wondering, though… is getting into BNPL a good thing for community banks? Especially at a time when the economy seems just a bit less than robust.

On the upside, I understand that BNPL is convenient and low-cost — at least compared to credit cards — and consumers, especially younger ones, seem to love it. And heck, it appears to be awfully profitable for providers. Lots of non-bank, BNPL service providers such as PayPal, Klarna, and Affirm seem to be making a lot of money. On the consumer side, there’s the benefit, or so I’ve read, that “when used responsibly,” that BNPL can actually help consumers manage their budgets. But I’ve read the same about “responsible use” when it comes to credit cards and alcohol. And so, it goes.

On the downside, I gather that lenders make more money with traditional installment loans than they do with BNPL transactions. In addition, with its fees and administrative costs, BNPL can be expensive for merchants. Yet another downside is “regulatory scrutiny.” The Financial Brand points out, in The Dark Side of Buy Now, Pay Later, “compared to the heavily regulated credit card industry, BNPL providers have operated with relatively limited oversight. This is a risk to BNPL firms, especially as regulatory scrutiny has been on the rise.” FinTech AfterPay, for example, paid a roughly $1 million settlement to California’s Department of Business Oversight, which found that the company structured products to evade otherwise applicable consumer protections and made loans to California residents without a valid license.

Then there’s the potential for fraud. According to the Payments Journal’s article BNPL and Fraud: Riskier than Credit Cards, “It is tough enough to fight fraud when you have sound credit underwriting. Regulatory standards to ensure you “know your customer” (KYC) and that they have the “ability to repay” (ATR) help vet out many criminals. But certainly not every crook gets caught.” With lighter credit standards, BNPL experiences higher risk, and BPNL fraud is on the rise. From CNBC’s Criminals love BNPL, “Buy now, pay later services aren’t just popular among consumers. They’re also proving to be a hit with criminals. Criminal gangs are exploiting weaknesses in the application process experts say, using clever tactics to slip through undetected and steal items ranging from pizza and booze to video game consoles. One of the vulnerabilities is BNPL firms’ reliance on data for approving new clients. Many companies in the industry don’t conduct formal credit checks, instead using internal algorithms to determine creditworthiness based on the information they have available to them.”

Then there’s the risk of default. While BNPL options are becoming increasingly popular, analysts warn of default risks given the lack of credit checks and “opaque” debt reporting. Not checking a consumers’ credit history could lead to underestimating a borrowers’ debt levels when assessing new loan applications. There’s also the risk, some analysts warn, of consumers chalking up more credit card debt in order to pay off their BNPL obligations. According to a study by Credit Karma, 40% of U.S. consumers who used BNPL missed more than one payment, and 72% of those saw their credit score decline. And The Financial Brand goes on to point out that “16% of users admit to having had regrets over BNPL purchases. Among the reasons: the purchase was ultimately too expensive; late fees were high; easy credit led to buying something not needed; and finding that some lenders’ policy of not putting BNPL deals through credit bureaus meant the debt did not build credit.”

Finally, as we are clearly headed toward more economic uncertainty, along with a rise in both the cost of goods and of credit, is making it easier for consumers to borrow money a good idea?

What do you think?

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit bankmarketingcenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com.

As always, I would love to hear your thoughts on this subject.

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Inclusive Marketing. Fact or Fashion?

It’s time for another installment of “What is Marketing, exactly?” That’s because we need to talk about a topic that has basically commandeered any marketing department’s discussion of strategy: And that’s Inclusive Marketing.

I’m sure you’ve been hearing and reading about it. In fact, it’s almost impossible to avoid the attempts at inclusive marketing that now permeate the broadcast airwaves. From dating apps to detergents, brands galore are jumping on the inclusivity bandwagon. So much so that I’ve begun asking myself… does it work? Am I really believing what I’m seeing? And then, of course, to write about it.

What exactly is inclusive marketing, anyway? Deloitte’s "Authentically Inclusive Marketing" describes it thusly: “On a given day, up to 10,000 discrete advertisements bombard consumers during their waking hours. Consumers—especially the youngest generations—are expecting more from these messages than just details about the latest seasonal sale. Rather, they are questioning whether a brand supports diversity and inclusion both publicly and behind the camera—and this focus is becoming increasingly important to brands, as well.” Some companies are even creating “departments,” if you will, who monitor their inclusion efforts. Scotiabank, for instance, is one. According to their global chief marketing officer, “we have someone whose actual job title is around managing the inclusion-by-design mandate.”

Now, if you’re NOT being inclusive in your marketing, you could be called “tone deaf”. Tone deaf marketing is… well, here’s a good example courtesy of the magazine Ad Age: KFC’s “finger-lickin’ good” campaign. For the most part, pretty innocuous, but not during the height of a deadly pandemic, right? In short, tone deaf marketing describes messaging that is insensitive to what’s going on in the world. And, right now, portraying your brand as sensitive to issues relating to social justice is, according to many anyway, imperative.

How critical? Again, Deloitte: “New U.S. Census data shows that in the past decade, the white population has declined for the first time in history, and people who identify as multiracial, Hispanic, and Asian are driving much of the population growth. A 2021 Gallup poll highlights that LGBTQ identity has risen from 3.5% in 2012 to 5.6% in 2020.” It’s pretty clear that here in the U.S., our consumer population is growing increasingly diverse, whether we’re talking race, ethnicity, sexual orientation, or even physical differences in ability. With that growth is an ever-increasing expectation—on the part of these consumers—that brands respond accordingly.

KPMG’s article, “The Power of Inclusive Marketing and Why It Works” makes, what I see, as the essential point here: “Inclusive marketing isn’t a tick-box exercise. Images of white people can’t be just switched with those of ethnic minorities, coloring packaging to pink won’t attract more female buyers, and rainbow flags pinned to a glossy campaign message won’t make them inclusive. So, what actions should brands take?” Here’s my answer to that question based on my own personal, brand building experience at a couple of fairly well-known ad agencies.

One, know your audience. Do the research. Understand to whom you’re speaking. I remember very well the focus groups, the 50-page consumer research decks, the commercial concept testing… There are a lot of ways to create and maintain a brand that is inclusive, as opposed to tone deaf, and understanding your audience is a foundational step. I do think that, in some ways, “inclusivity” has almost become an approach to branding that is more fashion than fact. Don’t get me wrong, I’m a firm believer in marketing to your audience. which is, perhaps, why I sometimes—when viewing a commercial, for instance—question the necessity of an inclusivity subtext. It all goes back to research and “the numbers.” It’s almost as if some marketers have forsaken the principle of targeted messaging in order to accommodate the “trend appeal,” if you will, of inclusivity. Don’t get lured into appealing to everyone—all ages, all races, all genders, for instance—just so that you can be viewed as inclusive… unless your audience truly is everyone. Is it? I doubt it.

Two, staff accordingly. Sure, the women in the shop could have been assigned to the motor oil account and the men assigned to women’s apparel, but that was never the case. When you see tone deaf advertising, it can very likely be traced back to the folks who created it not “being in touch.” Could you effectively convince a stranger, or even a friend, to purchase a product that you yourself never used? Probably not. At least, I wouldn’t put money on it.

Three, be authentic. This is critical and, of course, the most challenging. And that’s because in the end, (and we would see this when concept testing a commercial before it aired) people know when you’re not being authentic. Consumers can sense the difference between something you truly believe in and something that is merely an attempt at lip service.

So, as more and more consumers are looking to align where they spend their money with the brands that fit their values, remember to put an inclusive lens on your marketing. And don’t just leave it at your messaging. Make sure that your “product,” your in-branch and online banking experiences, align and reinforce what your messaging proclaims. Because in order to be genuine and successful with inclusive marketing, it’s not merely what you’re saying: It’s who you are.

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit BankMarketingCenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com. As always, I would love to hear your thoughts on this subject.

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Is the banking industry warming up to global warming?

Financial industry regulators have been warning about the climate change threat for years. Recently, however, the Biden administration’s view on how climate risk will affect regulators’ oversight of the U.S. financial system has come into much clearer focus.

In May, with an Executive Order, President Biden directed federal agencies to put in place the mechanisms that could assess the country’s economic vulnerabilities related to climate change and to begin crafting policies to address them. Then, according to The Economist’s “Could climate change trigger a financial crisis?” the White House issued a fact sheet detailing “six core pillars of its approach to combating climate risk. Those pillars include boosting the financial system’s resilience, protecting citizens’ savings and pensions, making the government’s procurement practices greener, incorporating climate risk in underwriting of government-backed mortgages, and building more resilient infrastructure.”

Many bankers, including those at many of the country’s largest institutions, have acknowledged that extreme weather events, a societal transition to cleaner energy, and other consequences of a warming planet pose significant business risks. At the same time, just how significant these risks are is up for debate, and many are concerned that climate regulations could burden their institutions with a number of new disclosure requirements, tie their hands when lending to certain industries, and even increase their capital requirements.

Back in early November, Board Governor Lael Brainard told American Banker that the Federal Reserve will subject financial institutions to “scenario analysis” of their climate-related risks. “Scenario analysis,” she said, “should help with risk identification and management as firms account for the physical risk of global warming, such as severe weather events, and the transition risk that will come from changing consumer behaviors and government policies. Although we should be humble about what the first generation of climate scenario analysis is likely to deliver, the challenges we face should not deter us from building the foundations now.”

Back on May 20th, the President issued Executive Order 14030, Climate-related Financial Risk. One of the main assignments given to financial regulators was a major report from the Financial Stability Oversight Council (FSOC). Led by agency heads across the government — a 15-member body of federal financial regulators, state regulators, an independent, President-appointed insurance expert, and chaired by Treasury Secretary Janet Yellen — FSOC was tasked with assessing the “climate-related financial risk to the U.S. economy.” 

In response, the Council released its report, which as you can view here, focuses on the options that regulators have in incorporating climate risk into their supervision of the financial system. In it, Yellen says, “financial regulators, financial institutions, and investors need to have access to the best information and data to measure climate-related financial risks.” In it, are the Council’s recommended steps to be taken by member agencies, such as utilizing scenario analysis to evaluate the need for new regulations in assessing climate-related financial risk; enhancing climate-related disclosures for investors; improving the gathering of climate-related data for better risk management; and developing both the capacity and the expertise to ensure that climate-related financial risks are identified and managed. “These measures,” says Yellen, “will support the Administration’s urgent, whole-of-government effort on climate change and help the financial system support an orderly, economy-wide transition toward the goal of net-zero emissions.”

Some FSOC members have already taken action. The SEC has begun to develop more robust climate disclosures for publicly traded companies, including many of the nation’s largest banks. The Federal Reserve Board is focusing on developing a better understanding of climate-related risks and incorporating them into its supervision of financial firms. And, the Department of Housing and Urban Development, working alongside the Department of Veterans Affairs, the Agriculture Department, and Treasury, are working to modify their federal underwriting and lending program standards in order to better address climate-related financial risks to their loan portfolios.

Taking on the challenges that climate change poses to our financial security will take time and commitment. Climate change, and climate risk, present important implications (and opportunities) for banks who can get it right. According to Forbes, 73% of U.S. banks surveyed are already committed to managing climate risk and promoting the transition to a green economy. This, they believe, will help them attract both talent and customers.

So, where does this leave banks? Seems like a lot is being asked here; to do the job, at least in part, of agencies such as the IRS, the EPA, and the USPS.  The climate is changing all right.  The question is, are financial institutions warming up to the changes?

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit BankMarketingCenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com. As always, I would love to hear your thoughts on this subject.

 

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A blog about… blogging!

Time flies, doesn’t it?  It’s been almost two years to the day that we posted a blog about the importance of getting into the social game.  Now, we’re back with a similar discussion. This time we’re posting a blog about, you guessed it, posting a blog!  Why? Social media marketing has taken on an even greater importance over the last two years and, well, blogging has become an even more important component of social media marketing. 

As we discussed back in January of 2020, the key to growing deposits, customers, and revenues is growing relationships. That hasn’t changed. What has changed is the way consumers behave, and at the heart of it, a watershed shift from in line to online.

Take customer service, for example. Customer service has always been an important component of a bank’s offerings, right? According to tech consulting firm CapTech, in their 2021 Innovations Study, communication with a company using online chat has increased 18%, from 28% in 2020 to 46% in 2021. Another statistic? 54% said they would always choose a chatbot over a human customer service rep if it saved them 10 minutes. Goodbye human being, hello chatbot. I’ve found that online chat customer service has come a long way over the last couple of years and I guess we have advancements in technologies such as AI and Machine Learning to thank for that.  This is just one example of how critical your “digital presentation” is.

So, it’s no surprise that banks have been working hard over the last 2 years to execute against strategies that make social media marketing an integral part of their overall marketing.  And blogging should be a major focus. Not only can blogging connect with your customers, build relationships, increase brand awareness, and generate sales leads, it’s efficient, effective, and measurable. Blogging facilitates interaction, interaction equals engagement, engagement equals relationship, and relationship equals loyalty and (ideally) increased revenue. 

Blogging can put a face on your digital presence.

A website isn’t exactly the most personalized consumer touch point, is it?  And we all know how important a personalized experience is to our customers.  A blog can put a human face on your bank which, while it can’t take the place of a face-to-face, in-branch encounter, helps make your bank feel more personal, and more accessible.

Blogging helps people find you.

Start by thinking about the size of your website. How many pages are there?  Probably not that many, right? And think about how often you refresh/update the content on those pages. Probably not that often. This is where your blog comes in. Every time you create and publish a blog post, search engines consider that yet another indexed page on your website.  This means that with each blog, you’re creating one more opportunity for your site, through that blog post, to show up on the search engine results page (SERP) and drive traffic to your website in a prospect’s organic search. 

Blog content can take many forms.

Obviously, your social media marketing consists of, well, social media platforms such as LinkedIn, Facebook, Twitter, and Instagram. Every time you create and post a blog, you’re creating content that 1) you can share across your social platforms and 2) people who see it can share with each other. So, with blogging, you’re not only strengthening your social reach with the blog itself.  You’re also creating a web of engagement points that connect with each other and ultimately lead everyone you’ve engaged right to your website.

Blogs can drive long-term results.

Hubspot says: “Imagine you sit down for an hour on Sunday to write and publish a blog post. Let’s say that blog post gets you 100 views and ten leads on Monday. You get another 50 views and five leads on Tuesday as a few more people find it through social media. But after a couple of days, most of the fanfare from that post dies down, and you've netted 150 views and 15 leads. It's not over.” Since that post is now ranking, it means that for days, weeks, months, and years to come, you can continue to get traffic from that blog post. That’s because a blog post can bring traffic to your site long after its first posted. In fact, according to Hubspot, “about 90% of the leads we generate every month come from blog posts published in previous months. Sometimes years ago.”

Is this a comprehensive treatise on blog posting?  No. There are a number of additional benefits to blogging that we haven’t discussed here. And, there are a number of companies out there that can advise you on how to get the most of your blogging, from software and templates to guidance on creating a blogging editorial calendar. My hope here is that you’ve learned just enough about blogging “to be dangerous,” as the saying goes.  It’s a terrific tool for engaging customers and generating leads, so get out there and give it a try!  Oh, and by the way.  We’ve been taking our own advice. By blogging and posting regularly, we now find ourselves on the first page in a “bank marketing” organic search. So, yes, it works!

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and with them, your brand.

To view our marketing creative, both print and digital – ranging from product and brand ads to in-branch brochures and signage – visit bankmarketingcenter.com.  Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com.  As always, I would love to hear your thoughts on this subject.

 

 

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Financial Industry Messaging that Hits it Out of the Park.

In our last blog, we talked a bit about marketing messaging and some of the art and science that goes into creating a compelling, relevant, message.  Since then, I had the opportunity to catch an ad campaign that, for once in a long time, (in my own humble opinion, anyway) puts some of that art and science to work in a beautiful way.

First, remember Abe Maslow? If you recall, Maslow was the psychologist who figured out that each person has about five levels of needs. He called this his “hierarchy of needs” and to visualize it, he built a triangle. At the bottom of the triangle was the need for basics such as food and clothing. In the middle were safety and friendship. At the top was self-actualization.

If you recall from our last post, this is important because when we are developing the marketing messaging around our products, we want to talk to our audience at the very highest level of the triangle. And that’s because the higher up you go in the triangle, the more important (and emotional), that level of need becomes. I used the example of the hitchhiker and their sign. Which one gets the ride faster?  “Miami” or “Home for Thanksgiving with Mom”? The latter of the two, of course: The one that appealed to the emotions of the driver who stopped to provide the ride.

Backing up a bit, I’m probably one of the harshest critics of marketing creative within several hundred miles of Atlanta. That’s because I grew up in the industry. Case in point: Friends over for football. Come commercial break, everyone finds a reason to get up and leave, to get something to eat or take a “bio break.” I’m the one who stays. This is probably because every spot takes me back to my ad agency days, when my writer partner and I sweated over a creative brief, put our hearts and souls into a concept, storyboarded it and then, presenting it to the layers and layers of agency and client-side decision-makers, hoped it would actually become a commercial. Sometimes, those concepts made the air, more often than not however, they contributed to my “file” of commercial ideas that never saw the light of day… a pile of 20 x 30 foam core boards in the corner of my office.

So, what is this campaign of commercials that I enjoyed (and appreciated for both its creative and strategic brilliance) so much that I felt compelled to write about it? It’s a campaign created on behalf of Mass Mutual. If you haven’t seen it, please click on the link and check it out: thirty-second spot for Mass Mutual. In it, the parents of a Little Leaguer “cheer him on” (sort of) while he’s at bat. I don’t want to give too much away here.  I’ll only tell you that the announcer comes in with just a few seconds remaining: “98% of kids won’t be getting an athletic scholarship,” he says. “Talk to us about college planning today. Feel comfortable about tomorrow.” Back to Maslow and his hierarchy of needs. Mass Mutual isn't just selling a college fund. After all, where's the high-level, emotional need in that? Instead, they’re selling the comfort, security, and peace of mind that comes with NOT having to rely on your child's athletic ability to pay for college. 

In a second commercial, the partner to this college planning spot, a couple ponders the question: Which one of our children will take care of us in our old age? The answer, which they discover by observing their children at play, is a bit concerning. According to the announcer, “55% of parents expect financial assistance from their kids during retirement years. Talk to us about retirement today and feel comfortable about tomorrow.” Should you rely on your kids to take care of you as you get older? Probably not.

This is what we, as an industry, need to be doing. Don’t focus merely on what your products and services do, but what they mean, as well. This is a great example of what we talked about in that last blog.  You could say that a checking account meets the need of having to pay bills from a distance. Or, that a savings account is a way to put money where you won’t be tempted to spend it. Instead, we need to talk about how these products meet those “higher” needs, such as comfort, security, and peace of mind.  Mass Mutual does this beautifully, in a message that blends humor with just enough discomfort.  

Again, that’s why we do what we do here at Bank Marketing Center. We apply the art and science of messaging to help you to get the absolute most out of your marketing dollars.

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit BankMarketingCenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com. As always, I would love to hear your thoughts on this subject.

 

 

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What is marketing, exactly?

Now if you’ve taken marketing courses and already know all of this stuff, feel free to leave now and go watch cat trick videos on YouTube.  If you haven’t, it might be fun — and maybe even useful — for you to stick around for it, even though it might remind you of being back in a classroom!

So, what is marketing? For starters, there is both art and science to marketing and, in particular, to developing the marketing message. A friend once described it this way; that marketing is the art of making the new seem familiar and the familiar seem new… and I think that's a pretty good description of what marketing is. For me, the simple way to define marketing is with the 4 Rs. The right person, with the right message, in the right place at the right time. Let’s see the 4 Rs in action. 

What sign will get you that ride?

Imagine you don’t have a car and you're hitchhiking to get home for the Thanksgiving holiday. You could have a sign that says “Miami” on it, for instance, because that's where you want to go, or you could have a sign that says, “Home for Thanksgiving with Mom.” Which sign, do you think, is going to get you that ride faster? Why do you think that is? How are those messages different? That’s what we’re going to talk about.

What Shakespeare can teach us.

So, let’s talk a bit about messaging.  Where does good, solid marketing messaging start? How about with Shakespeare… a reasonably successful playwright, right? “Know thy audience” he said. Well, he didn't really say that but he was a successful because he knew his audience and wrote to them; Not the lords and ladies in fancy dress, but those smelly, half-naked ruffians in the pit who liked dirty jokes, drinking, fighting and on occasion, throwing vegetables at the actors. As marketers, we need to know our audience before we can even BEGIN to start a conversation… especially one which we hope will lead to a conversion.

How to create artificial customers.

There's a science to getting to know the people you’re talking to. And an important part of that science is research. There are two primary types: Qualitative and Quantitative. Qualitative research involves interviews and focus groups, while quantitative research is designed to talk to a large sampling group using methods such as surveys. Many companies rely on qualitative research because this is where they can learn the most, then do quantitative research to, hopefully, verify and support their qualitative findings by talking to a much larger group. With the data you gather here, and in other ways, you can then create what are called “personas.” A persona is basically an artificial individual who possesses the character traits and behaviors you’ve discovered through your research. You can then use these personas to better focus your messaging, making sure that it’s truly meaningful and compelling to your target individual now that you know exactly who they are and what motivates them.

What we can all learn from Abe.

Not Honest Abe, but Abe Maslow. Maslow was a psychologist who figured out that each person has about five levels of needs. He called this his “hierarchy of needs.” To illustrate this, he built a triangle. At the bottom of the triangle was the need for basics such as food and clothing. In the middle were safety and friendship. At the top was self-actualization. Why is this important to marketers? When we are developing the marketing messaging around our products, we want to talk to that audience at the very highest level of the triangle, and that’s because the higher up you go in the triangle the more important, and emotional, that level of need becomes. Food and shelter needs, for instance, can be easily met while understanding who you are and why you're on this planet is not so easy. Remember the hitchhiker’s sign. The sign that gets you the ride is the one that appealed to the emotions of the driver who picked you up! 

Laddering up the Needs.

Marketers use Maslow's triangle because it helps us remember that when we're talking to people about products, we have to talk to them not about how our product meets a basic need, but how it meets a need that's very important to them; an emotional need. What are some of those needs when we talk about banking products? You could say that a checking account meets the need of having to pay bills from a distance. Or, that a savings account is a way to put money where you won’t be tempted to spend it. Instead, we want to talk about how these products meet those “higher” needs, such as comfort, security, and peace of mind. This is also what marketers call taking a “user focused” approach to messaging, instead of a “product focused” approach. In other words, you’re focusing on how your product meets a consumer’s emotional need, as opposed to how it works and what it does.

Meet the prospect where they are.

Now we take you on a little journey…the buyer journey. The buyer journey is basically the path that a consumer, (who we have now identified through research and persona mapping), takes when making a purchase and importantly the mindset that accompanies each step they take on that path. It’s often expressed visually as an upside-down funnel and as a three-step journey:  Awareness, Consideration, and Decision. If they’re at the start of that journey and know nothing about your products, they’re at the top of the funnel. Here’s where you give your consumer more information than they need… blog posts, websites, and thought leadership articles, for example, are good for the Awareness stage. As our consumer moves further down the funnel into the Consideration stage, we get more focused on our solution. We may invite them to give us their contact info in exchange for some more-detailed information, such as a white paper or e-book. By the time they get to the bottom, we’re using highly targeted messaging and can do that using, say an email campaign, because 1) we know they’re interested and 2) they’ve given us their contact info.

Gather that data!

Last, but not least, there's the science of data gathering and analysis. Thanks to technology, marketers now have the ability to gather information about their users, their behaviors, and how those users respond to messaging. This gives you the ability to modify and improve (if needed) your conversations with your customers (and prospects), so that you better understand if and why what you’re doing is working… or not.

Of course, this just skims the surface. There’s lots more to creating effective marketing messaging that I can squeeze into a blog. And, that’s why we do what we do here at Bank Marketing Center; help you to navigate this very complex and critical discipline.

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit BankMarketingCenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com. As always, I would love to hear your thoughts on this subject.

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The Great Resignation. Is your bank resigned to living with it?

“Early in the pandemic,” says American Banker in their recent article, “In the war for talent, bank employees gain upper hand,” “early in the pandemic, the number of job openings at Zions Bancorp. plummeted to less than 200. A year later, the Salt Lake City company has three times as many positions available. Zions is offering certain perks to new employees, including signing bonuses for select positions and the opportunity to enroll in benefits immediately, instead of waiting the standard 30 days. But sometimes those enticements aren’t enough.”

Of course, they aren’t enough. After all, we’re now living in the era of The Great Resignation. By now, you’ve probably heard the term.  If you haven’t, it was first coined in 2019 by Anthony Klotz, a professor of management at Mays Business School of Texas A&M University.  Klotz defines The Great Resignation as “the mass, voluntary exodus from the workforce” which we’ve experienced over the last two years or so.

In their article, “Overwhelming number of Businesses Report Difficulty Hiring Workers and Retaining Existing Employees:” US News & World Report speaks to what the Great Resignation has meant for businesses. “Large U.S. companies” it says, “are finding it increasingly difficult to hire qualified workers while also struggling to retain their existing employees. Citing an April, 2021 survey by the Conference Board, the article goes onto say that “more than 230 human resource executives echoed reports of labor shortages across the economy as businesses and other establishments that had shut down or were otherwise restricted by the coronavirus pandemic rapidly reopen.”

Not only is recruitment an uphill battle, but so is retention. A recent Gallup study found that 48 percent of employees are actively searching for new opportunities. The truth is, the pandemic merely fast-tracked a problem that has been percolating in American business since Henry Ford’s first Model T rolled off an assembly line. What the pandemic did was create an environment where workers who have long felt unappreciated, unengaged, and under compensated could actually act upon those feelings and leave. And between just April and June of last year, over 12 million did.

What’s a bank to do?  Recright, a Helsinki-based firm specializing in recruitment and retention, has the right idea:  Employer Branding.  What is Employer Branding?  “It’s the process of positioning your company as the employer of choice to a target group of potential candidates.”

Jill Castilla, President and CEO, Citizens Bank of Edmond, summed it up pretty nicely in a recent LinkedIn post:

“How in the world does a 1 location, $350 million community bank with 55 team members in suburban Oklahoma City end up on American Banker's 25 Most Powerful Women in Banking list? It's the team! It's the culture! It's the community! It’s the legacy! Culture change is hard. Driving change, encouraging high performance and rooting out negativity, unethical behavior and fixed mentalities should be so much easier. Standing out and being a little different can draw as much criticism as it does praise and it's so easy to let the critics get you down. Our team's focus to not only lead our bank and our community, but to also lead our industry into the next 100 years inspires me every single day. If you like to do big, impactful and sustaining work, Citizens Bank of Edmond should be your partner, your bank, your employer.”

Back to “employer branding.”  This is what it’s all about. If your bank is that employer that inspires, encourages high performance, and roots out negativity, unethical behavior, and fixed mentalities, you need to climb up to the nearest mountaintop and shout it out. If there’s no mountaintop nearby or you’re afraid of heights, you can always get that message out through branded messaging. Toot your own horn a bit, it’s okay. Be the brand that attracts the best and then work hard to get that message out there.  You’ll find that you’ll spend a lot less time looking for top talent… because that talent will be coming to you.

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit BankMarketingCenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com. As always, I would love to hear your thoughts on this subject.

 

 

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The USPS can barely deliver a check, let alone process one.

You may be as weary of hearing from me on these issues as I am writing about them, but unfortunately this stuff is really happening; stuff that can have a significant and “unwelcome” impact on our financial industry. We’re, of course, talking about the pilot program that involves the USPS providing banking services.

Paul Merski, the vice president for congressional relations and strategy for Independent Community Bankers of America, emphasized that the Postal Service has not provided anything beyond a few simple financial services in nearly 55 years. Merski, quoted by cnbc.com, said that “this is just a bad idea that doesn’t seem to want to go away. The post office is having trouble keeping up with just the delivery of mail and losing billions of dollars each year for over a decade now. The Postal Service is in no way, shape or form equipped to compete in the financial services space.”

The program is already in the works, with four pilot locations: Washington, D.C., Falls Church, VA, Baltimore, MD, and Bronx, NY. With the new program, customers now have the opportunity to use a payroll or business check to buy a single-use gift card worth up to $500 for a transaction fee of $5.95.

Like the recent controversy over financial institutions reporting transaction information to the IRS and the SBA making loans directly to small businesses, the idea of the USPS competing with banks and credit unions has elicited passionate rhetoric from both sides.

Sen. Kirsten Gillibrand, a New York Democrat, along with Mark Dimondstein, the president of the American Postal Workers Union, for instance, have expressed their support of the program. Gillibrand has said that this program is a great first step toward serving the unbanked and underbanked in both urban and rural communities. Senator Gillibrand points to the roughly 8.4 million households in the U.S. that are "unbanked," and 24.2 million that are "underbanked, according to the Federal Deposit Insurance Corp. Dimondstein sees the expansion into banking “as a win for the people of the country, a win for the Postal Service itself, because it will bring in new revenue, and, of course, a win for the postal workers who are extremely dedicated to the mission.”

Proponents of the plan contend that many people do not have easy access to banks, but most can find a post office. A lack of access, they say, along with the costs associated with banking, and a distrust of the banking system, have discouraged some people from using banks, leaving them out of the system entirely. Banking trade groups, on the other hand, said the pilot program detracts from the industry’s own efforts to bolster financial inclusion. American Bankers Association spokesman Jeff Sigmund said in a statement: “It’s easier than ever to open a bank account in this country and the solution is not a government-subsidized service through the post office.”  In American Banker, Sen. Pat Toomey, ranking member of the Senate Banking Committee, argued that “the idea that the government is going to do a better job at providing banking services than financial institutions is just laughable. You would have to work very hard to come up with a worse idea than having the government become a national bank executed through the post office,” he said. 

Also, and importantly, it’s not like the industry has been simply sitting on its collective hands while millions go without banking services.  According to an August article in bankdirector.com: “To close that gap, (between the banked and un/underbanked) more than 100 financial institutions have certified one of their checking accounts as safe, affordable and transparent” through the Bank On program, which aims to leverage banks as a community partner. The goal? To make it easier and cheaper to bring unbanked and underbanked individuals into the community bank world. The Bank On program pairs certified checking accounts issued by local banks to community programs that support financial empowerment and wellbeing. The account standards were created by the Cities for Financial Empowerment Fund, with input from financial institutions, trade associations, consumer groups, nonprofits and government parties. The accounts must be “safe, affordable and fully transactional,” says David Rothstein, who leads the national Bank On initiative. “These accounts don’t carry overdraft fees or high monthly fees. They have a low minimum opening deposit and the account holder must be a full bank customer, with access to other services.”  Is the program working? Millions of Bank On accounts have been opened in recent years. “The Federal Reserve Bank of St. Louis maintains a data hub of account activity submitted by 10 participating banks, ranging from Bank of America Corp. and JPMorgan Chase to $2.9 billion Carrollton Bank, the bank unit of Carrollton, Illinois-based CBX Corp. More than 5.8 million accounts have been opened at these banks to date; 2.6 million accounts were open and active in 2019.”

Isn’t this the way a problem like this should be addressed?  By those who are qualified to be involved in the discussion, such as “financial institutions, trade associations, and consumer groups.  Not politicians.

Could the USPS use an additional $9 billion per year?  Could those 32 million Americans who are either unbanked or underbanked benefit from convenient, affordable access to bank and credit union services?  Absolutely. And there is nothing wrong with the federal government looking to find a solution. 

But once again, the Fed seems to be looking in the wrong place.

 

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit BankMarketingCenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com. As always, I would love to hear your thoughts on this subject.

 

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Here we go again! First the IRS. Now, the SBA.

 

Uncle Sam wants you… to stop making SBA loans to small businesses!

It’s hard to believe that twice within as many weeks we’re again talking about government overreach, but here we are.  Last week we talked about the push for banks and credit unions to morph into the enforcement arm of the IRS in its effort to reduce tax fraud. Today, we’re talking about what Alex Sanchez, President and CEO of the Florida Bankers Association rightly characterizes as yet “another zany idea” that’s been floated out by the current administration: The idea that it’s a good idea for the government to start making direct loans through the Small Business Administration (SBA) directly to small businesses.

“Legislation approved by the House Small Business Committee last week,” says Mr. Sanchez in recent correspondence from his office, “included an option for the SBA to originate small 7(a) loans through partnerships with third parties — which presumably could include some banks. At the same time, the bill would authorize SBA to originate and disburse direct loans.”

The recent American Banker article, “Proposed SBA expansion into direct lending irks banks, credit unions,” quoted Ian McKendry, a spokesman for the American Bankers Association. “With details still in short supply,” he said, “his group wants to better understand why it makes sense to create a direct lending program to compete with banks that are already meeting demand for 7(a) loans. This could have the unintended effect of making it more difficult for some lenders to continue participation in the 7(a) program.”

Yes, there may be details that are still in short supply, but I do think that some details are abundantly clear: Banks and credit unions are vehemently opposed to any federal proposal to let the Small Business Administration make 7(a) loans directly to businesses.  This detail is clear as well. The Biden administration’s $3.5 trillion spending package would give the SBA nearly $4.5 billion to make 7(a) loans of $150,000 or less directly to borrowers.  And while I appreciate Mr. McKendry’s gentility and even-handedness in expressing his thinking on the matter, it does seem pretty clear what the intent here is why. We know the intent… now for the why.

Some pretty vocal elected officials are making it known that they feel that banks have done, well, a crappy job of managing SBA money.  According to American Banker, Sen. Ben Cardin, chairman of the Senate Small Business Committee, and Rep. Nydia Velazquez, chairwoman of the House Small Business Committee, stated that “not enough of that record 7(a) funding is reaching the smallest small businesses. Both Cardin and Velazquez said smaller businesses also struggled to obtain loans last year during the initial phase of the Paycheck Protection Program, in large part because banks — which provided most of the funding under PPP — favored borrowers seeking larger, more profitable loans.” Velazquez went on to express her disappointment at the fact that despite their best efforts, smaller businesses were simply “left behind” when the loans were given out for the simple reason that they “didn’t have preexisting relationships with the banks and because those types of loans are not profitable.”

Conversely, legislators on the other side of the fence are, of course, taking a much different view. Rep. Blaine Luetkemeyer of Missouri, the ranking member of the House Small Business panel, said he is dead set against any direct lending option for SBA. "Private-sector lenders are far better equipped to handle direct lending — that is what they do,” Luetkemeyer said Wednesday. “Any attempt to expand the SBA’s direct-lending capabilities is extremely irresponsible and will put the American taxpayer dollar at increased risk.” 

Well, I suppose that one might try to argue that community banks simply weren’t getting SBA money out to small businesses as effectively as they could have… then again, over $30 billion in loans in the first 11 months of 2020 is nothing to sneeze at.

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit BankMarketingCenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com. As always, I would love to hear your thoughts on this subject.

 

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Community Banker or Tax Collector? Can the IRS tell the Difference?

There’s a bit of news that’s floating around out there that’s been getting quite a lot of interest (pun intended) from folks in banking, and their customers. If you’re a community banker, I’m sure you know what I’m talking about. It’s a provision of the proposed American Family Plan that seeks to shrink the tax gap by requiring banks to report on their customers’ withdrawals and deposits. I’ve been following the news with great interest and concluded that while the proponents of the proposal are seeking to address a legitimate problem, they’re going about it in entirely the wrong way.

Let’s start with some of the reasoning behind this proposal. The nonpartisan policy institute, the Center for American Progress (CAP), says that the United States will lose an estimated $7 trillion over the next decade from people and corporations who cheat on the taxes they owe and that the richest 1% percent of American taxpayers are responsible for an estimated $163 billion in unpaid taxes each year. Then, I came across this interesting article from CNBC, which provided some decent background on how this came about: “IRS chief tells Elizabeth Warren: More transparent bank data can fight tax evasion.” In it, IRS Commissioner Charles Rettig, states that “relying on banks to report basic information about their customers’ deposits and withdrawals could put a big dent in annual tax evasion” and believes that “more rigorous disclosures from the nation’s banks could help recoup billions in owed revenues.” 

Okay. While I agree that the federal government, and all of us, could benefit from the IRS successfully collecting taxes owed, relying on banks is not the solution. This is where the IRS and I — along with the banking industry, banking customers, and many elected officials — see things very differently.

This past May, a coalition of industry associations — including the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Credit Union National Association, Independent Community Bankers of America, National Association of Federally-Insured Credit Unions, and the National Bankers Association — made this argument to the U.S. Senate Committee on Finance: “The costs and other burdens imposed to collect and report account flow information would surpass the potential benefits from such a reporting scheme. New reporting would appear to require material development costs and process additions for financial institutions, as well as significant reconciliation and compliance burden on impacted taxpayers.”

As you are no doubt aware, the Independent Community Bankers of America (ICBA), has also jumped in with both feet. They’ve even launched a “Send a Letter to Biden”  campaign. “If community bankers weren’t busy enough continuing their heroic economic response to the pandemic, a recent proposal to impose new IRS reporting mandates on customer bank accounts has become a major advocacy priority.” The proposal, the site goes onto say, “is a threat to consumer privacy, will increase taxpayer complexity and confusion, channel more information into the IRS than it can process,” and more. 

GQ Magazine, in a piece entitled, “The IRS Admits It Doesn’t Audit the Rich Because It’s Too Hard,” actually summed up beautifully… and you needn’t even read beyond the article’s title.  But, reading the first paragraph is well worth your time:

“The Internal Revenue Service is in a bind. The agency's job is to collect the taxes that fund everything else in the government, from Social Security to the Post Office to Medicaid. But the IRS is struggling: Americans owe a cumulative $131 billion in unpaid taxes. The bulk of that money is owed by the wealthiest people in the country, yet the IRS isn't attempting to collect it from them. Instead, as IRS Commissioner Charles Rettig confirmed in a letter to Congress recently, the agency literally can't afford to audit the rich, so it's pursuing the poor instead.”

How, and why, did this happen?

Over the past few years, the chance of getting audited has grown slimmer and slimmer.

For most Americans, the chance of getting audited is less than 0.5 - 0.6%. For reasons pointed out by GQ, it’s those who make little that are most often the IRS’s audit targets. “This,” says GQ, “is because many of these taxpayers (those with incomes of $25,000 or less) claim the earned income tax credit and the IRS audits them to ensure that the credit is not being claimed fraudulently.”  What we’re seeing now is the lowest audit rate among high income individuals — those earning between $1 and $5 million annually — since 2004. What happened? With less funding and an increase in workload, the IRS simply isn’t equipped to do the job on its own.

Who can help? The banking industry!?

I agree with Forbes Magazine’s assessment in Under Biden Plan, The IRS Would Know A Lot More About Your Bank Accounts”:

“…the IRS will know about all of your bank accounts, whether you earned income on that account or not, how much is in the account in a given year, and how much was transferred in and out of the account. It is unclear how this would work, but what is clear is that this new reporting obligation will create a massive compliance effort on the part of financial institutions and eliminate a massive blind spot that the IRS is currently enduring.” This is both an invasion of privacy and an unnecessary burden on financial institutions.

The proposal is facing serious opposition not only from the banking industry and banking customers, but from state legislatures across the nation, as well. And rightfully so. In Maine for instance, according to Forbes, Representative John Andrews called the proposal “an unprecedented Federal intrusion into the financial lives of every day Americans.” As strongly worded and on-the-money (as it were) his statement is, Andrews only gets halfway to the finish line. Not only is this proposal an intrusion; it’s big-hand-of-government over-reach that the fed wants to fob off on community bankers who, as the ICBA pointed out, are “busy enough” doing what community bankers should do.

I’ve been working in the banking industry for decades now. I like it. I have no interest in working for the IRS.

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit bankmarketingcenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com. As always, I would love to hear your thoughts on this subject.