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?
Showing posts with label bank fees. Show all posts
Showing posts with label bank fees. Show all posts
Monday, June 13, 2011
Tuesday, June 7, 2011
Bank CFOs fretting health reform
Posted by Mark Brousseau
While CFOs are becoming bullish on the economy, they are concerned about health care reform, according to a biannual survey of banking and financial services Chief Financial Officers (CFOs) and senior controllers conducted by Grant Thornton LLP.
Nearly half (48 percent) of the banking/financial services CFOs said that they expect the U.S. economy to improve in the next six months and nearly two-thirds (65 percent) are optimistic about their own company; however, 55 percent also report that they plan to increase the prices or fees charged by their company in the next six months.
Regarding health care reform, 49 percent of banking/financial services CFOs said that it will decrease their hiring (compared to 37 percent nationally), 52 percent said that it would decrease their company’s growth (compared to 40 percent nationally) and 58 percent said that it would increase their product pricing (compared to 49 percent nationally).
“Although we are seeing increased optimism in the banking and financial services sectors, firms are also bracing for the increased compliance costs that accompany both financial reform and health care reform legislation,” says Nichole Jordan, Grant Thornton LLP National Banking and Securities Industry Leader. “Unfortunately, this means that increased costs from interchange fees to expanded health care will be passed along to the consumer or will affect how aggressively firms can hire.”
When asked about the business climate in their own state, 61 percent of banking/financial services CFOs said that they are seeing a negative impact on their business due to the financial condition of their state and 66 percent reported that the actions of the political leaders in their state have not created a business-friendly environment. In addition, an overwhelming majority (95 percent) support public-private partnerships that seek to reorganize and improve the function of state and local governments and public services as a means to overcome budget challenges at the state and local level.
“Although much of the industry has focused on the impact of national financial reform, banks also need to understand how the political and fiscal environments in their own states can affect their business,” adds Jordan.
What do you think?
While CFOs are becoming bullish on the economy, they are concerned about health care reform, according to a biannual survey of banking and financial services Chief Financial Officers (CFOs) and senior controllers conducted by Grant Thornton LLP.
Nearly half (48 percent) of the banking/financial services CFOs said that they expect the U.S. economy to improve in the next six months and nearly two-thirds (65 percent) are optimistic about their own company; however, 55 percent also report that they plan to increase the prices or fees charged by their company in the next six months.
Regarding health care reform, 49 percent of banking/financial services CFOs said that it will decrease their hiring (compared to 37 percent nationally), 52 percent said that it would decrease their company’s growth (compared to 40 percent nationally) and 58 percent said that it would increase their product pricing (compared to 49 percent nationally).
“Although we are seeing increased optimism in the banking and financial services sectors, firms are also bracing for the increased compliance costs that accompany both financial reform and health care reform legislation,” says Nichole Jordan, Grant Thornton LLP National Banking and Securities Industry Leader. “Unfortunately, this means that increased costs from interchange fees to expanded health care will be passed along to the consumer or will affect how aggressively firms can hire.”
When asked about the business climate in their own state, 61 percent of banking/financial services CFOs said that they are seeing a negative impact on their business due to the financial condition of their state and 66 percent reported that the actions of the political leaders in their state have not created a business-friendly environment. In addition, an overwhelming majority (95 percent) support public-private partnerships that seek to reorganize and improve the function of state and local governments and public services as a means to overcome budget challenges at the state and local level.
“Although much of the industry has focused on the impact of national financial reform, banks also need to understand how the political and fiscal environments in their own states can affect their business,” adds Jordan.
What do you think?
Saturday, June 14, 2008
BOC Picking Up Momentum
By Mark Brousseau
Although retailers were hesitant to adopt back office conversion (BOC) in its inaugural year, Barry J. Nordstrand (bnordstrand@solutran.com), president and CEO of Solutran, thinks the momentum for BOC is building as retailers are becoming more aware and better educated on the benefits that BOC can provide.
“Approximately 2 percent of US businesses have adopted BOC,” Nordstrand told me, adding that Celent projects the number of businesses utilizing BOC will reach the one million mark by 2009 and 5 million by 2012. “One reason for this projected growth is the fact that general awareness of BOC is increasing in the market.”
As an example, Nordstrand points to a case study recently presented at NACHA’s Payments 2008 conference in Las Vegas. Walgreen’s spoke about its success in implementing a Solutran deferred capture model and discussed its successes thus far. “As additional large retailers continue to deploy BOC as a check conversion alternative, others will be looking to follow,” Nordstrand explained.
“There are many reasons why retailers are considering implementing a BOC solution,” Nordstrand added. “BOC allows retailers to reduce costs without making any changes to the existing POS process. The checkout process is not impacted allowing consumers to get through the lane in an expedited manner. BOC also eliminates the need to provide additional training for a position that experiences high turnover.”
Nordstrand said these are all important issues for large retailers who understand that changes to the checkout process create unnecessary operational risks.
By converting check transactions to ACH debits, retailers are able to reduce their banking fees and processing costs, extend their deposit cutoff time frame, and eliminate trips to the bank while improving speed of returns and funds availability, he added. It also enables them to consolidate their banking relationships and establish a centralized account for checks.
“Having gotten off to a slow start, the increased market awareness and ability for retailers to study the success of early adopters will have BOC rolling in no time,” Nordstrand said.
Although retailers were hesitant to adopt back office conversion (BOC) in its inaugural year, Barry J. Nordstrand (bnordstrand@solutran.com), president and CEO of Solutran, thinks the momentum for BOC is building as retailers are becoming more aware and better educated on the benefits that BOC can provide.
“Approximately 2 percent of US businesses have adopted BOC,” Nordstrand told me, adding that Celent projects the number of businesses utilizing BOC will reach the one million mark by 2009 and 5 million by 2012. “One reason for this projected growth is the fact that general awareness of BOC is increasing in the market.”
As an example, Nordstrand points to a case study recently presented at NACHA’s Payments 2008 conference in Las Vegas. Walgreen’s spoke about its success in implementing a Solutran deferred capture model and discussed its successes thus far. “As additional large retailers continue to deploy BOC as a check conversion alternative, others will be looking to follow,” Nordstrand explained.
“There are many reasons why retailers are considering implementing a BOC solution,” Nordstrand added. “BOC allows retailers to reduce costs without making any changes to the existing POS process. The checkout process is not impacted allowing consumers to get through the lane in an expedited manner. BOC also eliminates the need to provide additional training for a position that experiences high turnover.”
Nordstrand said these are all important issues for large retailers who understand that changes to the checkout process create unnecessary operational risks.
By converting check transactions to ACH debits, retailers are able to reduce their banking fees and processing costs, extend their deposit cutoff time frame, and eliminate trips to the bank while improving speed of returns and funds availability, he added. It also enables them to consolidate their banking relationships and establish a centralized account for checks.
“Having gotten off to a slow start, the increased market awareness and ability for retailers to study the success of early adopters will have BOC rolling in no time,” Nordstrand said.
Monday, May 5, 2008
Bank On Mistakes
Posted by Mark Brousseau
An interesting article from yesterday's Mail Tribune newspaper:
When banks mess up, consumers often pay, and the costs can be steep
By Gail Libermanand Alan Lavine
MarketWatch
May 04, 2008
PALM BEACH GARDENS, Fla. — The price tag of one recent bank error: At least $2 million. The bank mixed up the account of 49-year-old Benjamin Lovell with the account of a different person with the same name.
Lovell, accused of spending the money without notifying the bank of the mistake, faces a hearing Thursday in Brooklyn's Kings County criminal court. The charge against him: Grand larceny.
Lovell's attorney argues that Lovell didn't intend to steal, but believed he was entitled to the funds.
The case is just one example of the growing problem of bank errors. While most consumers likely won't face charges of grand larceny, there may be other financial pitfalls in store for those who don't carefully monitor the accuracy of bank transactions, including:
Steep, ricocheting bounced check fees — not only charged by your bank, but also by merchants — if a bank error leads to an overdrawn checking account.
Late fees and default interest rates on credit cards if credit card payments aren't properly credited.
Undetected fraud
The Office of the Comptroller of the Currency, regulator of national banks, said complaints of bank errors rose to 2,217 in 2007, a 10 percent rise from 2006. By contrast, total complaints rose 7 percent to 28,362. Of course, the data likely are limited to those customers who detected banks' mistakes.
But how many errors go undetected by those who are too busy to check every detail of their account transactions? After careful scrutiny of her own accounts, one reader says she caught thousands of dollars in bank errors, including:
A check debit for $400 should have been a deposit.
A $3,000 credit card payment was applied to someone else's account.
Despite an ATM withdrawal of $40, no cash actually was provided.
"These items were entirely in my responsibility to fix," the reader complains. "The financial organizations provided little, if any, help, though it was their mistake and if I hadn't pursued it, would not have recovered the money."
More errors, or is it fraud?
Tomas Norton, a Princeton, N.J.-based fraud consultant, says the problem may not necessarily be more bank errors. (One sign that bank errors have been around for years lies in a comical "Beverly Hillbillies" video, dubbed "Before identity theft there were bank errors," at CrazyAboutTV.com/video.)
Rather, more of those errors may be due to fraud, Norton says. That problem is compounded by the fact that it's increasingly difficult to get bank errors fixed.
"The problem with the errors is that no matter how it occurs, whether it's an error or deliberate, the bank is always protected," Norton says.
"If your payment doesn't get to the bank on time, even though there's a plausible delay in the mail, they don't take those excuses," he says. With a credit card, not only could you lose your attractive 7.99 percent rate, but your account balance retroactively can be charged 31 percent!
Also, banks have come to view checking and savings account operations as ways to generate income, Norton says, so fees for customer missteps have escalated dramatically, and your bank may be less willing to quickly fix errors that trigger those fees. In addition, customers often must deal with frustratingly bureaucratic call centers.
Meanwhile, the time period for you to notify your bank of an error — often overlooked in deposit agreements — has been slashed. The latest deposit agreements give you only 60 days to notify your bank of an account error, Norton says. Fail to meet this deadline, and even though an error is your bank's fault, the price tag for the mistake, including accompanying fees, could be yours.
"Billing disputes and error resolution" represented the top consumer complaint among the 4,451 filed with the FDIC in 2007. The same problem also led the 2007 roster of complaints at the Office of Thrift Supervision.
An interesting article from yesterday's Mail Tribune newspaper:
When banks mess up, consumers often pay, and the costs can be steep
By Gail Libermanand Alan Lavine
MarketWatch
May 04, 2008
PALM BEACH GARDENS, Fla. — The price tag of one recent bank error: At least $2 million. The bank mixed up the account of 49-year-old Benjamin Lovell with the account of a different person with the same name.
Lovell, accused of spending the money without notifying the bank of the mistake, faces a hearing Thursday in Brooklyn's Kings County criminal court. The charge against him: Grand larceny.
Lovell's attorney argues that Lovell didn't intend to steal, but believed he was entitled to the funds.
The case is just one example of the growing problem of bank errors. While most consumers likely won't face charges of grand larceny, there may be other financial pitfalls in store for those who don't carefully monitor the accuracy of bank transactions, including:
Steep, ricocheting bounced check fees — not only charged by your bank, but also by merchants — if a bank error leads to an overdrawn checking account.
Late fees and default interest rates on credit cards if credit card payments aren't properly credited.
Undetected fraud
The Office of the Comptroller of the Currency, regulator of national banks, said complaints of bank errors rose to 2,217 in 2007, a 10 percent rise from 2006. By contrast, total complaints rose 7 percent to 28,362. Of course, the data likely are limited to those customers who detected banks' mistakes.
But how many errors go undetected by those who are too busy to check every detail of their account transactions? After careful scrutiny of her own accounts, one reader says she caught thousands of dollars in bank errors, including:
A check debit for $400 should have been a deposit.
A $3,000 credit card payment was applied to someone else's account.
Despite an ATM withdrawal of $40, no cash actually was provided.
"These items were entirely in my responsibility to fix," the reader complains. "The financial organizations provided little, if any, help, though it was their mistake and if I hadn't pursued it, would not have recovered the money."
More errors, or is it fraud?
Tomas Norton, a Princeton, N.J.-based fraud consultant, says the problem may not necessarily be more bank errors. (One sign that bank errors have been around for years lies in a comical "Beverly Hillbillies" video, dubbed "Before identity theft there were bank errors," at CrazyAboutTV.com/video.)
Rather, more of those errors may be due to fraud, Norton says. That problem is compounded by the fact that it's increasingly difficult to get bank errors fixed.
"The problem with the errors is that no matter how it occurs, whether it's an error or deliberate, the bank is always protected," Norton says.
"If your payment doesn't get to the bank on time, even though there's a plausible delay in the mail, they don't take those excuses," he says. With a credit card, not only could you lose your attractive 7.99 percent rate, but your account balance retroactively can be charged 31 percent!
Also, banks have come to view checking and savings account operations as ways to generate income, Norton says, so fees for customer missteps have escalated dramatically, and your bank may be less willing to quickly fix errors that trigger those fees. In addition, customers often must deal with frustratingly bureaucratic call centers.
Meanwhile, the time period for you to notify your bank of an error — often overlooked in deposit agreements — has been slashed. The latest deposit agreements give you only 60 days to notify your bank of an account error, Norton says. Fail to meet this deadline, and even though an error is your bank's fault, the price tag for the mistake, including accompanying fees, could be yours.
"Billing disputes and error resolution" represented the top consumer complaint among the 4,451 filed with the FDIC in 2007. The same problem also led the 2007 roster of complaints at the Office of Thrift Supervision.
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