"Underserved" market is opportunity for banks

Posted by Mark Brousseau

The “underserved” market is considered one of the fastest growing segments in the United States and represents significant potential for banks willing to develop new products and services -- with the appropriate risk safeguards -- and channels to distribute them, according to a study from KPMG.

The KPMG study characterizes the underserved market -- the unbanked (consumers without a transaction account) and underbanked (those without access to incremental credit) -- as having grown significantly in the United States during the economic downturn. The market represents about 88 million individuals with nearly $1.3 trillion in income, according to the KPMG study. Based on forecasts, as many as six million people could be classified as "underserved" in the next two years.

"As banks transform their business models to address a new marketplace, they need to examine the potential of the underserved market as new revenue streams are necessary due to increasing compliance costs and various fees coming under pressure as a result of regulatory reform," said Carl Carande, national account leader of KPMG’s Banking and Finance practice. "In the current environment, we see heavy competition among banks chasing customers with high credit scores, with decreasing margins, leaving the underserved market for those willing to invest in it."

Carande also says that banks, before moving forward, need to ensure that appropriate risk-protections are built-in for the bank and customer. "Risk management is a key element of the early opportunity assessment phase, as banks review their current state and design a portfolio of business opportunities for both the near-term and short-term," said Carande. "From there, it is a matter of creating a target operating model before moving to the end game of deploying a multi-generational plan."

According to the KPMG study, banks can pursue a range of key target segments among the underserved, ranging from those who do not use a bank to young adults with little knowledge of financial products.

"Customer segmentation is critical to serving the underserved market and each target segment requires a disciplined and strategic approach," said Timothy Ramsey, managing director in KPMG LLP’s Performance and Technology Advisory group. "Those banks that carve out a niche that makes sense -- and can successfully market and brand themselves accordingly -- will distinguish themselves from the competition."

"When serving this market, banks also have an opportunity to establish customer loyalty by helping these customers more effectively manage their personal finances and develop better saving and investing habits through educational, financial literacy programs," said Ramsey.

What do you think?

BAI attendees look for new approach to fighting fraud

Posted by Mark Brousseau

Combating fraud -- and more efficiently and precisely identifying suspect transactions -- was the hot topic at last week's BAI Payments Connect conference in Phoenix, said US Dataworks (www.usdataworks.com) Product Manager Leilani Doyle (ldoyle@usdataworks.com).

"Here is the issue: financial institutions have fraud systems that send alerts each time a suspect transaction is idenitified," Doyle explained. "Seventy-five percent of these suspects prove to be false positives. Financial institutions need a better way to prune out the false positives with a higher percentage of accurately identified fraud."

"By using an enterprise fraud hub -- which consolidates payments and related data from various channels -- banks can reduce the number of false-suspect alerts they receive by more than 50 percent, without the risk of letting a higher number of fraudulent transactions slip through," Doyle said. "One bank did a presentation at the BAI conference explaining how breaking down payments silos would allow banks to more easily 'connect the dots' to identify systematic fraud. If payments silos do not share information, the ability to identify organized fraud is far more difficult -- if not impossible."

Another bank did a presentation at BAI Payments Connect on how it has used modeling to monitor a higher number of transactions while reducing the staff required for this function by over 30 percent.

Beyond fraud, another theme of the event was how banks can regain a competitive advantage in the payments space. Doyle noted that Federal Reserve Bank executive Richard Oliver gave an insightful presentation on how banks have lost their edge in transaction processing to non-bank competitors. Banks have been too slow to react to changing market demands, and this dawdling could eventually cause them to be lose further ground to nimble competitors with more compelling products, she said.

The good news: Oliver said businesses still have tremendous trust in banks -- something that should not be discounted. But banks will likely have to partner with other entities to bridge their product gaps.

What do you think?

A Growing Opportunity for Banks in Healthcare?

Posted by Mark Brousseau

The banking industry has been an integral part of the healthcare world for decades, providing back-end financial administration services to health plans, ranging from processing premium payments and the financial part of the claims payments through medical lockbox services.

For banks, growing opportunities exist in the healthcare market, and revenue potential is apparent, according to Aite Group. To this end, banks are developing new products and services by applying business rules from existing products and services to cater to the healthcare space. With increased consumerism in the healthcare space since the beginning of the consumer-directed healthcare (CDH) movement, banks have been leaning on the core strengths and capabilities they have mastered in the retail environment in order to develop new product strategies, Aite Group says.

“Banks are in the unique position to be able to leverage their existing relationships with various stakeholders, including health plans, clearinghouses, healthcare providers, and healthcare vendors,” says Kunal Pandya, senior analyst with Aite Group. “Although banks’ overall focus in targeting the healthcare market is similar across the board, their approach to targeting specific areas varies widely based on their understanding of the space, relationships in the space, and overall corporate strategy.”

What do you think?

Maximizing RDC Payback

Posted by Mark Brousseau

Not getting the labor savings you expected from your bank's remote deposit capture solution? Wally Vogel, founder and CEO of Creditron, Inc. (wvogel@creditron.com) is not surprised.

"In instances where checks come in and are posted to accounts receivable, scanning the checks for the bank saves a trip to the bank, but does nothing to aid in reducing data entry, balancing, or exception handling," Vogel explains. "These are the time-consuming parts of posting and depositing payments, and they are not addressed by a remote deposit scanner from the bank."

Vogel adds, "What will save significant time is a complete remittance processing solution which can: scan remittance documents and checks, automatically recognize data to reduce key entry, balance the transaction, and perform look-ups and validity checks to handle exceptions quickly. Of course, a complete remittance processing solution also can update the accounts receivable system and deposit items remotely as well, without requiring the user to re-scan or re-key the checks."

The bottom line: the trick to saving time with remote deposit capture is to handle both sides of the transaction with a single automated solution, Vogel says.

What do you think?

Remote Deposit Capture Video

Posted by Mark Brousseau

Take a look at this neat one-minute video from National Bank of California about their remote deposit capture product.

http://www.youtube.com/watch?v=XCUP-O9wN4M

Remote Channels Drive Growth

By Mark Brousseau

U.S. bank transactions are expected to grow at a compound annual rate (CAGR) of nearly 10 percent between 2006 and 2010, according to Needham, MA-based TowerGroup. Driving this growth are remote channels, with the fastest rates coming from online (27 percent) and the call center (7.1 percent), followed by the branch (still kicking at 1.4 percent) and the ATM (0.5 percent).

Is this what your bank is projecting? E-mail me at m_brousseau@msn.com.

The Secret to RDC Adoption

By Mark Brousseau

Ease of enrollment (implementation and training) is the key to the mass adoption of remote deposit capture, Jane Darga, vice president, product development, at Comerica said during a presentation at TAWPI's Payments Automation: Beyond Capture & Clearing Conference last week in St. Petersburg, FL. What do you think? E-mail me at m_brousseau@msn.com.