Helping millennials chart today’s financial waters

21 December, 2015 (14:38) | Blog | By: admin

Written by Banking Tech

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Bassem Bouzid is SVP and managing director, EMEA, at Diebold

Millennials – those highly sophisticated, tech-savvy men and women born between 1980 and 2000 – present enormous opportunities for banks and other financial institutions.

Yet to be successful, these businesses must understand and meet the needs of a generation that grew up having it all, seeing it all, and being exposed to it all since early childhood – and that is no easy task, writes Bassem Bouzid.

First, some numbers to put the Gen-Y crowd, as they’re also known, into perspective:

  • There are more than 160 million millennials in Europe, according to Skydox statistics
  • Technology is central to their lives: 92% of Europe’s millennials are connected on a daily basis to technology. 80% of them sleep with their smart phones next to them, and they constantly report their daily activities on social media, be it Facebook, Twitter, Instagram or several other Internet sites.
  • 41% of those surveyed said they would rather communicate electronically than face-to-face or over the telephone. It’s hardly surprising then that millennials have specific expectations about how technology is used in every day’s life

Financially, millennials have experienced sobering realities in their short lives. These include graduating from leading universities and colleges with high levels of student debt. Moreover, they’ve witnessed serious recessions worldwide and faced very tough job markets. In Europe and North America even advanced degrees can’t guarantee employment at suitable levels, and sometimes at any level.

It’s no wonder, then, that these frustrated 20- and 30-somethings tend to be conservative in their spending habits, wait much longer to marry, delay major purchases and are reluctant to invest in homes. In fact, they’re the ones driving today’s “sharing economy” (think Uber and Airbnb). At the same time, Millennials have lived most or all of their lives with the Internet and on-demand services being readily available. They eagerly absorb new designs and technologies, hence they require products and services that provide a value-added experience, offer mobile-friendly content and present themselves in an honest and transparent manner.

Technology is central to their lives, yet millennials still value relationships, especially with banks. They have access to many financial tools that previous generations did not get, but they say (70% in one study) they wish they had more knowledge and skill in managing their finances. They are, as a result, still very much interested in a relationship with their bank.

Also, as the Apple generation, one could imagine that they would abandon cash to use Apple Pay and other digital means of payment. Another wrong assumption as millennials are actually big cash users.

That said, financial institutions must grasp the banking habits of millennials and rethink their customer experience to better engage with these digital natives who use their smartphones for just about everything. What, therefore, constitutes a millennial-friendly banking experience?

First, millennials have notoriously short attention spans. That means they want speed and simplicity throughout the transaction process. They have a high degree of comfort with self-service, value convenience highly and are accustomed to well-orchestrated experiences across channels. Being able to authenticate their bank’s ATM using their mobile device, which they often carry more than their wallet, is an absolute expectation.

Second, they want tech innovation that keeps up with the dramatic rate of change taking place all around us, yet they are still interested in a relationship with banks. New features and better-functioning networks are delivering better apps in every industry, banking included. Of course, these apps have to be current and in line with constantly evolving phones and phone apps. Bottom line: updates can’t come at three-year intervals.

Third, millennials need and desire education. This most educated generation values learning, both online and in real-time, and wants more knowledge and skill in managing their finances. They don’t have the time or patience to read lengthy manuals or prospectuses; they want to learn while using. Banking-related apps need to be infused with usability, gaming or virtual education. These are all valid options for teaching these highly skeptical consumers how to borrow, save and invest for the future. Banks must provide a holistic set of services across channels that point younger customers toward opportunities and alert them when action needs to be taken.

Fourth, security is a must. Being well-versed in the risks associated with the online universe (think recent hacking incidents), millennials demand protection and security. While they freely share personal details that shock their parents, they value protection for their money, but still crave convenience and speed. As such, they’ll likely be early adopters of biometrics and mobile-integrated security systems. Far from painful, data security could and should become a strong positive differentiator for banks doing business with this generation.

To the above-mentioned requirements, we see the ATM channel as a key part of a bank’s omni-channel user experience. Clearly, this physical touch point is an important outpost for a bank’s brand and experience – and it’s one that millennials use quite a bit. Because of this, Diebold and other companies are working on cross- and omni-channel projects, encouraging user interfaces, updating designs to be more modern and better leveraging the branding and sales opportunities the ATM can provide.

Banks should consider broadening the options and capabilities available through their mobile apps and online sites and realize that by enabling deeper accessibility at one touch point, they’re creating stickier platforms that encourage loyalty. Based on research we’ve conducted, we believe that 40% of transactions will be with millennials – peer-informed, price-savvy and always connected. Our goal is to bridge consumer banking priorities of convenience, security and self-service, with innovative technology-based solutions that satisfy the need for anytime, anywhere services.

Today’s financial institutions face major challenges ranging from paper-thin margins and non-bank competition to shifting customer expectations and deteriorating demand for services. By reaching millennials with the latest solutions for an increasingly mobile world, these businesses will not only remain relevant but will also thrive and prosper by serving this important segment.

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Mobile Banking to Hit 1 Billion Users in 2015

14 December, 2015 (14:42) | Blog | By: admin

 By Kim S. Nash

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A customer uses an Apple Inc. Apple Watch to pay via the Apple Pay system, from their Nationwide account, at the check-out till inside a Pret A Manger Ltd store in London, July 14, 2015. Chris Ratcliffe/Bloomberg News

The number of people accessing bank accounts through smartphones and other mobile devices is expected to reach 1 billion by the end of the year, according to Juniper Research Ltd. But it’s in wearable devices, such as smartwatches, where banks must direct their next digital efforts. The researcher expects wearables to account for 100 million mobile banking sessions by 2020.

Banks hoping to gain customers under the age of 30, or to prime the population younger than that, must expand into wearable devices, as well as develop a substantive social media strategy, said Nitin Bhas, head of research. These consumers don’t want to bank at websites because they “organize most of their lives on their mobile devices,” he said in an e-mail.

However, most banks offer only “rudimentary” features on smartwatches, when they offer any at all, Mr. Bhas said. “Most are restricted to just balance information. This is one reason why [wearable technology in banking] is perceived to be a gimmick.”

Yet smartwatches, such as the Apple Watch, can do more, such as transfer funds, pay bills and make contactless payments, Mr. Bhas said.

Consumers have taken up mobile banking in general faster than Juniper predicted¬¬: That 1 billion number of people accessing bank accounts through mobile devices by the end of the year comes six months earlier than the researcher’s original 2014 prediction of mid-2016. Growth in adoption has been aggressive in emerging markets, he said. But developed markets, too, are seeing mobile growth. In the U.K., for example, the number of mobile banking logins per week exceeded the number of Internet banking logins for the first time, early this year, he said.

While mobile rises, branches fall. Bank of America Corp.BAC -0.52%, for example, has closed hundreds of branches in recent years. Still, CEO Brian Moynihan doesn’t expect all branches to disappear anytime soon. “They’re incredibly important for sales and services,” he told a group of bank executives at a recent conference

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Online Banking Security Depends on Institutions, Consumers

14 December, 2015 (14:40) | Blog | By: admin

By Margarette Burnette

Financial institutions are under constant threat of data breaches, with attacks happening about once a week, according to the Identity Theft Resource Center. And when you consider news about a breach at the Federal Reserve Bank of St. Louis this year and a massive JP Morgan Chase computer hack in 2014, it’s enough to make consumers question the strength of online banking security.

About 74% of U.S. adults use online banking, according to the Federal Reserve. If you’re one of them, it’s important to know the steps financial institutions take to keep your accounts secure and how you can help.

Key takeaways:

• Consumers can reduce risks

• Overall identity theft is decreasing

• Security technology efforts are increasing

Consumers have a role in security.

Data breaches get publicity, but criminals can also work on a smaller scale by going after consumers directly. Fraudsters may use a phishing scam, for example, in which they send an email pretending to be from a financial institution. The email might ask for information such as a bank password or Social Security number. If you reply, the criminal could then use the data to illegally make purchases or withdraw money.

You generally aren’t responsible for unauthorized charges if you report them within 60 days of the transaction first appearing on your bank statement. But the best option is to avoid any unauthorized charges at all.

Try these steps to avoid scams:

• Change your passwords regularly. Use combinations that are difficult to guess, such as a mix of upper- and lowercase letters, numbers and symbols. Passwords that are hard to figure out offer good protection from hackers.

• Make sure anti-virus software is up to date on your home computers and mobile devices to help guard against attacks from hackers.

• Check that the network and website are secure. It’s a good idea to bank online from the security of your private home network. With public Wi-Fi, you can’t really be sure who sees what you send online, unless each page you visit is encrypted. If you have to log in while away from home, consider using your cellular data plan instead of Wi-Fi, or a virtual private network, known as a VPN. However you choose to log in, check for Web page encryption by making sure the address on the browser starts with “https.” The “s” signals that the page is secure.

• Consider using two-factor authentication on your accounts. Many banks and credit unions offer this login process to help you securely access your accounts. Instead of entering only your username and password, you also have to provide a second piece of information. It could be a passcode that the bank sends to your smartphone as a text, or even your own fingerprint.

• Don’t respond to suspicious emails that could be phishing attempts to steal your identity. Instead, contact your bank at a phone number or website address you trust.

Identity theft has decreased.

Hackers continue to successfully access records in high-profile data breaches. But Javelin Strategy & Research reports that cases of identity theft — in which the data was used to harm people financially — were down 3% last year from a 2013 high.

The study’s authors suggest that news of recent breaches has caused financial institutions and consumers to be more careful with security, and this vigilance may have helped lead to the decline. But still, 12.7 million consumers were affected.

Because of identity-theft fears, some consumers, like Bruce Brown, a marketing consultant in Los Angeles, simply don’t bank online.

“I’m a former private investigator, and in that line of work I met a lot of computer hackers,” Brown says. “Talking to the hackers and seeing how they were able to get into accounts made me sufficiently paranoid about online banking.” Instead, he banks in person at branches, ATMs and over the telephone.

Experts suggest if you take steps to protect your accounts, the risk of identity theft decreases. But even so, some people shy away from banking online because of security concerns.

Banks are increasing security technology.

According to American Banker, a bank technology publication, more than 70% of technology executives plan to boost their budgets next year. Many of the increases will go toward strengthening and expanding security technology.

Standard measures include firewalls, anti-virus protection on bank computers, fraud detection systems and website encryption, which scrambles data so only the intended recipient can read it.

If you plan to bank online, ask your financial institution about its security measures to be sure it’s using best practices.

Online security is important for banks and consumers alike. It’s important to take steps to protect your accounts while making sure your bank uses industry-standard security technology. Then you can enjoy the convenience of online banking while also reducing the risk of fraud.

Margarette Burnette is a staff writer at NerdWallet, a personal finance website.

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Faceless Gimmicks Won’t Help Banks Keep Wealthy Clients

14 December, 2015 (14:39) | Blog | By: admin

By Kevin Tynan

Kevin Tynan is senior vice president of marketing at Liberty Bank in Chicago.

Satisfaction and loyalty scores of high-balance account holders are the lowest of any customer segment and have been for years. But banks should avoid the temptation to rely on rewards programs and other perks to keep their wealthy customers happy. A better strategy is to focus on what many high-net-worth clients say is most important to them: better customer service.

The industry’s failure to please those with the highest profit potential is nothing new. In 2010, Bain & Co. surveyed 89,000 bank customers nationwide. Respondents from households with investable assets of $1 million or more reported significantly lower loyalty scores than those with investable assets between $100,000 and $500,000. Loyalty scores averaged just 2% for affluent households and 16% for more moderate households.

As recently as last year, J.D. Power’s annual banking survey for 2014 showed an overall satisfaction rating of 771 for affluent customers, which was 14 points below the average of 785. The market research company’s 2013 survey showed an even wider gap — 744 for affluent customers versus 767 for nonaffluent customers. (The 2015 survey did not break out statistics on the satisfaction of affluent customers.)

The difference affects banks where it hurts: on the bottom line. Only one-quarter of affluent customers said they would definitely purchase the next financial product from their bank. Compare that result with nearly one-third of nonaffluent customers saying they would, according to the J.D. Power 2013 study.

Affluent customers deserve special attention, but the attention banks are currently providing doesn’t appear to be building relationships or winning new business. A new strategy to woo the wealthy must get built.

Sure, a bank’s first inclination is to offer affluent customers CD rate bonuses, mortgage discounts and other financial perks. A Wall Street Journal article earlier this year lists a few of the programs currently offered to high-value clients. Bank of America promoted higher interest rates on savings accounts and lower rates on auto and home-equity loans. Regions Financial, meanwhile, offered similar bonuses and discounts. Qualified customers must have a Regions checking account and a mortgage with the bank or at least $50,000 in deposits.

But financial discounts and bonuses aren’t working. Deep-pocketed account holders won’t turn down such benefits, but banks are not engendering loyalty or deriving greater profits from this customer segment.

Another benefit that is dangled in front of affluent clients is mobile banking features. As heavy users of online services, affluent customers are thought to appreciate advanced mobile features. However, a focus on technology underscores perceptions that banking relationships are merely transactional. Giving customers no more than a smartly executed deposit or bill payment doesn’t embellish the brand. On the contrary, it affirms that the relationship is all business.

The 2010 Bain & Co. survey pinpointed a solution: Affluent respondents cited service as what they most wanted from their bank. They mentioned the word “service” more than six times as much as “rates and fees” or “branches” as their top reason for recommending a certain bank. The survey concluded that service delivery has the greatest potential to set a bank apart for good or for ill.

Customers wanting good service shouldn’t be news to bank CEOs. It is the advantage that community banks have long claimed differentiates them from rivals. But that so-called advantage isn’t working. We don’t take customer service seriously enough.

Nothing replaces a personal relationship with a customer. Marketing programs can deliver products, campaigns and website traffic. But client relationships must be built the hard way — one interaction at a time.

Banks take shortcuts. They substitute rates and bonuses and mobile wizardry for building relationships. Instead of innovative marketing campaigns, we need to focus on innovative relationship-building. We need to ask: how can we do a better job of solving customer problems? How can we get in front of clients? What can we do to increase our value when electronic banking pushes us to more impersonal transactions?

If we don’t find innovative ways to serve customers, we will be in danger of becoming faceless back-room processors for anonymous clients.

Kevin Tynan is senior vice president of marketing at Liberty Bank in Chicago.

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