The Financial Brand Insights - Fall 2022

#2 banking publication in the world. Nearly 2 million readers, and host of the fastest growing annual conference in banking.




In This Issue






The Right Data Mix Delivers Better Results 61

4 Ways Conversational Banking Boosts Your Bottom Line



The 6 Pillars of Digital Marketing for Banks and Credit Unions How Banking Providers Can Tap Subscription Economy Revenue How Banks Can Use Data to Grow Home Loans with Existing Customers Maximize Return on Bank Tech Investments By Adding a Human Touch

How Banks Can Meet SMB Demands for Omnichannel Payments


The New Community Bank Model: Digital-First With a National Footprint

Is Your Bank’s Overdraft Strategy Letting You Down? 9


What's Trending 37

CX Strategies in Banking:


The Art of Reengaging Dormant Banking Customers 69

How Open Banking Increases Data Value for Banks and Consumers To Compete with Fintechs, Bank Marketers Must Embrace Niche Strategy


How Making UX & CX Work Together Gives Banks a Sustainable Competitive Advantage


Your Data Strengths 73

To Grow in 2023: Leverage



How Credit Card Programs Can Outmaneuver Buy Now, Pay Later

Understand the Challenges of People-based Bank Marketing 45


Financial Services 21

10 Forces Reshaping


Reimagining Payments: Digital Wallets and Push Provisioning 80

Improving Branch Growth and Profits With Prescriptive Consumer Analytics

How Banks Can Emerge from the Pandemic Era Stronger 101

Niching Down: Uncovering Banking's Growth Opportunities 27


How Banks Can Supercharge Growth with Bold Tech Partnerships

Use the Power of Data to Dig Deeper with Banking Customers 57





4 Ways Conversational Banking Boosts Your Bottom Line

A bank’s digital presence is the primary space for customer-facing interactions. In the last half- decade, banks and credit unions have managed to transform many routine transactions into simple, digital self-service tasks. But when the inevitable moment comes for banks to play a more hands-on role, human-led conversations are the first rule of engagement. The ability to have an online conversation with customers is now a baseline requirement for any organization rolling out a digital offering. For most consumers, engagement via messaging channels is a service expectation of any brand. This is an uncomfortable truth for financial institutions. Why? Too many customers have come to associate online conversations about their finances with chatbots that can’t answer complex questions and result in frustrating resolution times. Clearly, banks aren’t leveraging the true potential of conversational customer service. Certainly, these types of interactions have tended to fall into a banking blind spot. While many have capitalized on the value of conversational technology as a way to cut service costs, there is less emphasis on using artificial intelligence (AI) and online conversations as a channel for building better customer relationships. The result is customer

By Lisa Joseph President of the Americas at Unblu

Too many consumers have come to associate bank service with frustrating chatbot 'conversations' that don’t answer anything but the most basic questions. This misses the true potential of conversational banking. Bots play a key role if properly integrated with human agents in a hybrid approach.





two “layers”: the intelligence dimension and the omnichannel dimension . The intelligence dimension functions as a repository of customer data and information, making it possible to offer a personalized experience. The omnichannel dimension comprises applications and traditional channels that enable the fulfillment of transactions. The key offering of this dimension is the element of flexibility, giving customers the option to go into their app, connect to a call center, or even in-branch if they wish. Benefit #2: Adding a Conversational Dimension Conversational banking entails a third dimension that is underutilized by financial institutions. As a set of integrated conversational features, it represents a tremendous opportunity to define a personalized service and build stronger relationships with customers. Leveraging on an omnichannel presence, the conversational dimension could provide anything from AI-led chats to agent-advisor video calls. The real value, however, is that adding a conversational dimension gives banks and credit unions the ability to turn run-of-the-mill transactions into interactions. In the absence of frequent contact with customers by default, this is vitally important. Human conversations are an opportunity to consolidate relationships and personalize service, driving long-term value and revenue.

4 Benefits of a Hybrid Approach to Conversational Banking It’s easy to program a virtual assistant to start a simple conversation, but continuing a conversation is where technology falls short — and people thrive. This is precisely why a hybrid approach is more effective, recognizing that complex conversations require people on both sides, whether on a mobile app, e-banking portal or in-person. In banking, dead-end conversations with chatbots have propagated the false division between quality customer service and cost- effective operations. Done right, conversational banking can stimulate both. A digital ecosystem that relays conversations between bots and human agents saves banks and credit unions time and money, and even adds value by enhancing the customer experience. Hybrid conversational engagement can boost revenue and relationships in four key ways. Benefit #1: Two Key Dimensions of Personal Service The past few years have seen a surge in use of self-service among banking customers. The rise of 24/7 customer service culture has mandated that financial institutions make routine transactions as accessible as possible, while the paradigm of “hyper-personalization” has also put pressure on institutions to actually anticipate customer needs and individualize offers accordingly. This level of customer service, which is now common among major banks, requires

Benefit #3: Leveraging Hidden Opportunities The digital world houses countless opportunities for customer conversations. For example, customers often desire the convenience of a digital channel but require the nuance and familiarity of a human conversation if a problem arises. This stage of the customer journey, often referred to as “the moment of truth,” is a hidden chance to deepen the bank-customer relationship by stepping in to assist at exactly the right time. The hidden opportunities for human conversations also add value to a digital offering, which amounts to quantifiable value in terms of revenue. For instance: • Customers served by omnichannel services are a valuable subset of banking clientele, according to McKinsey. Those who interact through multiple channels hold 80% more products with the bank and generate more than twice the revenue as customers who only interact through a single channel. • Digital sales matter, states Deloitte, especially when it comes to complex products. By the beginning of 2021, 61% of total loan sales among U.S. banks were completed on digital channels, up from just 39% one year prior. • More intuitive conversations create savings for financial institutions. Unblu has seen that implementations of conversational digital tools can reduce customer support costs by 50%, and acquisition costs by 60%. The conversational dimension of digital banking is rich with opportunities — for both revenue and relationships. And, as the demand for humanized services suggests, the two are likely to go hand- in-hand.

The Key to Customer Happiness: Nearly nine out of ten people say the customer experience

matters more than both products and services.

experience gaps — and the implication for banks and credit unions is lost revenue. Consider this: 88% of customers say the experience a company provides is as important as its product or services — a jump from 80% in 2020, according to the 2022 Salesforce State of the Connected Customer report. Curbing these outcomes takes a considered approach. To start, financial institutions should

reflect on their use of the chatbot. Why Chatbots Are Not a Catch-All Solution

Problematically, chatbots and conversational banking have almost become synonymous. But here’s the difference: while conversational banking is better defined as an umbrella category, chatbots are only a subset of possible interactions. Furthermore, chatbots often are configured simply as an interactive FAQ page, unable to handle complex questions, which leads many chatbot deployments to get an underwhelming response from users. Despite their limitations, chatbots do hold promise. The key for banks and credit unions is identifying how and where chatbots might genuinely be useful to customers. For simple inquiries, such as branch hours and locations, and other repetitive questions, chatbots can easily alleviate the burden on human support resources. However, for more complex questions, it becomes clear that chatbots need to support seamless integration with human support to deliver better customer experience.

Three dimensions of conversational banking




The Real Value: Adding a conversational dimension gives banks and credit unions the ability to turn run-of-the-mill transactions into interactions.

Omnichannel Dimension

Intelligence Dimension

Conversational Dimension

Benefit #4: Increasing Customer Satisfaction

Branch Web eBanking

CRM Big data Marketing automation Chatbots Transactional

Live chat Secure messenger Video & voice calls Co-browsing

In an environment riddled by fraud, mistrust of institutions and false information, banks today are under pressure to prove they have

Mobile/app Call center






Matt Luhn

Ginger Hardage

Omar Johnson

Duncan Wardle

Daymond John

Magic Johnson

A chatbot can handle the conversation with a customer up to a certain point, and then hand it over to a human agent once the content of the interaction becomes better suited to a conversation. The assistance of a chatbot in the initial interaction — as an interactive FAQ-style system or as a “concierge” that qualifies the customer request — is enormously helpful for administering customer support. Customers will likely be content to resolve basic requests through a powerful AI chatbot that is fit for purpose. Fundamentally, a hybrid conversational banking strategy will ensure that agents are spending valuable time on qualified interactions. Not only does this limit the volume of requests, but it also ensures that every conversation between an agent and customer is meaningful. In the long run, supporting customers with human-led advice should give them more substantive knowledge on personal banking, helping to avoid repeat calls. By freeing up agents’ time and satisfying customer queries with a conversation, banks and credit unions can expect to boost their bottom line. Conversation: At the Heart of Customer Experience In our rush towards technological transformation, the miscalculation made by many has been attempting to mechanize elements of customer service that used to be innately human. It’s time that banks and credit unions dropped the idea that this will save them time and money, and flipped this approach on its head. Automation should be a considered, justifiable decision — and financial institutions should look to humanize their digital offerings as much as possible. For that, conversational banking might be the missing piece of a revenue-boosting digital strategy. ▪

their customers’ best interests at heart. Hybrid banking experiences are the clear way to bridge this gap, notes Ernst & Young, and customers are specifically seeking services of this kind. Conversational banking is a key feature of a hybrid customer experience, unifying the digital dimension with the human element of natural, real-time conversation. Equally, a conversational offering taps into the popular appetite for personalized services. By first leveraging the power of data and AI to generate tailored insights for every banking customer, banks and credit unions can then deliver individualized offers in their exchanges with customers — be it via video, messenger or phone call. This represents the customer-centric evolution of the age-old blast email tactic. While a generalized communication is unlikely to get much engagement, a personalized message delivered on the customer’s terms simulates the everyday experience of picking up the phone when a text or call comes through. Needless to say, the outcome will be a more fulfilling client experience that lends itself to long-term value. Optimizing Advisor and Agent Efficiencies So, what about those who have client-facing roles? On the surface, it might seem that conversational banking creates more work for agents and advisors by raising the bar for customer interactions. This is where the value of a hybrid approach to conversational banking comes into its own. Keep in Mind: Without a human-led component of the banking experience, today’s customers are unlikely to grant banks their trust.

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and institutions can eliminate NSF fees because their income is highly diversified — the lost income barely damages their bottom line. In some cases, they never had NSF income in the first place. Take Ally for instance: 2020 Data Est. median ROAA Est. median ROAA (if OD fees are eliminated) Change (%) *Only banks over $1 billion in assets have to report overdraft fees All Banks Reporting Overdraft Fees * Ally Bank 0.890% 0.836% –3.7% 1.10% 1.097% –0.26% The return on average assets for Ally after eliminating NSF fees fell by a quarter of 1% — think about that: It still rounds to the same number! If other institutions (banks holding more than $1 billion in assets) were to follow, their ROAA would fall by nearly 4%. When you’re watching neobanks and megabanks slash their NSF fees to ribbons, remember that they can afford it thanks to diverse income streams. Does this mean that NSF income might disappear for the entire industry? Unlikely. The future of NSF fees isn’t set in stone, but community banks need to plan ahead and examine alternatives. An Eye On The Future: Don’t assume that overdraft fees need to be eliminated completely, but start looking for substitutes to drive profitable behaviors. What Are the Viable Alternatives? One of the most common sources of NII is interchange, or the fee charged to retailers and merchants every time a consumer uses their debit or credit card.

By Patrick Dickson SVP, Chief Research Analyst and Executive Strategist at Kasasa

For most consumers, getting hit with an overdraft or nonsufficient funds (NSF) fee feels like a penalty, even though the bank charging it has funded a transaction beyond the balance in the account. Consumers don’t really see NSF fees as the price for a short-term loan; they see them as a fine that makes a bad mistake worse. And for low-income consumers, an NSF event can trigger a cascade of problems. For community banks, NSF fees represent a significant source of noninterest income (NII). They are an ingrained source of revenue that is not easily replaced. The big question is how they should balance their dependence on fee income against consumers’ annoyance with NSF fees. In this article, I’ll unpack this issue and examine strategies that community financial institutions are using in the real world to grow their NII in consumer-friendly ways. The Double Threat to NSF Income No bank relies solely on NSF fees, but any time net interest margin compresses, bank leaders look for ways to use NII to fill the gap… unless you’re Ally Bank, Capital One, or a handful of other large financial institutions that have found ways to eliminate NSF income and keep their revenue healthy. This competitive imbalance puts community banks in a difficult spot, especially considering the dim view that federal agencies have of overdraft practices. The regulatory threat is real, but the competitive threat is greater and has an immediate effect on consumer sentiment. Many neobanks

Is Your Bank’s Overdraft Strategy Letting You Down?





Here’s a typical breakdown of NII and interest expense from a checking account with an average monthly balance of $4,000.

Which brings up the next question you should ask: “Where will next year’s profit come from?” Analyzing Account Holder Behavior to Find Opportunity In the chart below (bottom of page) you can see data from an actual Kasasa ® client in 2021. We were looking for “what new activity was produced by account holders?” In other words, who was generating transactional income and opening new consumer (auto, home, personal, etc.) loans? These four account holder segments reveal some remarkable findings. If you compare Group 1 and Group 4 you see a high contrast in nearly every metric. While Group 1 is the oldest and holds the most deposits, they also generate the least annual profit — it’s reasonable to assume they’re financially mature and are winding down their economic activity. Group 4 is clearly far more transactional, has high lending needs, and has the most NSF events (not that we’re aiming for that). The answer to where next year’s profit will come from is “younger, more transactional consumers.” The Future of NII Is the Future of Income in General The four-part formula mentioned earlier can be used to transform your approach to generating revenue across the board: 1. Use consumer segmentation and predictive analytics. Broaden your definition of account holder relationships. Understanding consumers and anticipating their needs allows you to deliver a world-class account holder experience. Look at how consumers fit into the entire balance sheet, not just cost of funds

or interest income — include non-interest expense, products per relationship, transaction volume, and loan-balance-to-deposit ratios. Recognize that consumers have different product entry points and it’s your job to communicate all the ways you can help them.

Annual marginal income/expense

Super generic account

Average balance Debit card txn/mos. NSF events/year Interest

$4,000 15 1.5 0.10%

2. Implement flexible retail products. Select products and tools that drive

$55.80 $45.00 [$4.00]

engagement (such as interchange). Products that are tailored to consumers’ needs can give you control over your balance sheet when the economy is in flux. Financial literacy has its place, but it’s far more effective to offer products that lead consumers into beneficial behaviors. The best products deliver a win-win for your bank and the consumer. 3. Continuously monitor and optimize programs. Engage with new relationships from the start and monitor for the behaviors that you want — you can even incentivize behaviors that fit into your goals. The ability to analyze and respond quickly to shifts in consumer behavior will help you improve profitability and long-term growth. 4. Leverage consulting and enterprise tools that drive results. Armed with micro and macro perspectives on the industry as a whole, as well as enterprise tools, you can stay ahead of your competition. You can also improve marginal engagement with existing relationships through communication, especially 1:1 tools such as SMS text and customized email campaigns using behavioral triggers. As you examine your institution’s strategy for generating NII, you should aim to make your account holders feel as empowered as possible. Recall that consumers often feel frustrated and overwhelmed by NSF fees. How can you turn that service into something that feels like a value-add instead of a penalty? What products and services can you offer that help account holders reach their financial goals and feel good about their money? While I can’t answer these questions for you, if you follow the four-part formula outlined above, you’ll uncover the answers that fit your account holders and your goals as an institution. ▪

You would need to double the monthly debit card transaction volume of that account in order to offset lost NSF fee income. Consumers might use their debit cards more if you ask them really nicely, but they’re not going to double their point-of-sale purchases overnight. Seems like interchange isn’t a very sustainable option then, right? Not so fast. Let’s look closer.

Free Report:

What NII Strategies Are Community Banks Using to Succeed?

Getting the Most Out of Marketing Automation

The road to a more diverse income stream isn’t paved with a single solution. It takes a comprehensive strategy with four primary components: 1. Use consumer segmentation and analytics. 2. Implement flexible retail products. 3. Continuously monitor and optimize programs. 4. Leverage consulting and enterprise tools that drive results. The trouble that many banks find themselves in comes from looking too narrowly at their account holders and underestimating the potential of products that drive profitable behaviors.

As a financial marketer, you may face several challenges, including relying on legacy systems, poor technology integrations, changing compliance and regulations, and a lack of access to important data. This 17-page research report from Act-On tells you what you need to know to make the most of your marketing automation software.

Account segment Group 1 Group 2 Group 3 Group 4

Avg. deposit balance

Account profit quartile

Avg. annualized NSF events

Avg. monthly debit card txn

Avg. loan balance*

Avg. age

$32,798 $12,049 $8,241 $6,558

66.6 51.6 45.4 41.8

4 [lowest] 3 2 1 [highest]

0.0 0.0 0.0 1.3 $0.00 $0.17 $0.69 $18,310 *New loans opened in the time frame after the launch of our products 1.6 0.9 11.9 49.1






understand their finances and make smarter financial decisions. Assembling a complete picture of consumer finances also allows financial institutions and fintechs to uncover new revenue streams and analyze consumer behaviors to deliver better experiences. However, the reality is most consumers are not yet taking advantage of the value a single view of their finances can deliver. A recent survey conducted by MX on trends in digital banking found that 50% of respondents say they have not used digital tools to bring different financial accounts into one view, such as a mobile app or online account.


How Open Banking Increases Data Value for Banks and Consumers

The promise of open finance — the ability to access and act on financial data — provides an incredible opportunity for both consumers and businesses. We live in an era when consumers expect effortless digital experiences across all their applications and devices, and open finance can help financial institutions deliver on those expectations. For financial institutions and fintechs, greater access to financial data enables them to innovate and create more personalized products and services to meet unique customer needs and expectations. For their customers, permission- based data sharing through open finance provides more control over their financial data, enabling them to choose who has access to this personal information. In this new ecosystem, financial data belongs to the customer, not the companies with which that customer does business . The message to the

Keep in Mind: Your customers may not

understand the benefits of open finance yet. But it's part of the experience they're craving.

When consumers are asked why they don’t aggregate their accounts into a comprehensive view, the challenges and opportunities come into sharper focus. Consumers either don’t yet see the value of account aggregation, or they don’t know how to create that single view. Consider these findings: • 28% say they don’t know how to connect their accounts in one place • 27% say they don’t care about seeing all their accounts in one place • 11% are concerned about sharing their user name and password with a third party • 10% cite concerns about sharing their financial information with a third party • 7% say their financial services provider has not offered the option to connect accounts These objections translate into opportunity and underscore the need for financial institutions

consumer is one of empowerment. Creating a Single View of the Customer

The ability to bring together financial accounts into a single view enables consumers to better

By using open banking to provide simple connectivity and data sharing between a consumer's bank accounts and the third-party apps they use, both the consumer and their financial institution will see a more complete data picture. That will enable greater personalization and an improved customer experience.

A Hard Pill to Swallow: Every financial institution wants to protect customer data, but consumers need — and deserve — access to their own financial data.





Know Your Customers While They’re Still Your Customers

Schedule a FREE Consultation and Demo

and fintechs to educate consumers on the value of open finance. The advantages are myriad, and it is up to financial institutions and fintechs to help their customers see how they can benefit from having a consolidated view of their finances. Why Should Banks Institute Open Finance? Ultimately, financial institutions must drive home the ways in which having a comprehensive view into their finances offers customers greater functionality. Among the benefits to communicate about open finance are that it: • Enables better customer experiences Open finance gives companies greater access to consumer financial data, enabling them to innovate and create more personalized products and services to meet customer needs. This means that companies — financial and otherwise — can build and offer consumers and businesses digital products that help them understand and manage their financial lives better. • Supports financial inclusion With the unique access that open finance gives into consumers’ financial lives, financial institutions can create tailored products and services built FOR underbanked groups by someone who understands them. It also enables greater insights beyond a credit score to make decisions on loans, mortgages and credit cards — ensuring those who are unbanked or underbanked can access financial services when they may otherwise have been denied. • Helps mitigate fraud and risk Greater insights into consumers’ financial lives also mean it’s easier to spot anomalies and potential fraud, reducing risk for both the organization and customer. • Drives smarter financial decisions Better visibility into their financial data allows consumers to make more informed financial decisions, while enabling financial providers to make better lending decisions. As a result, open finance is significantly positive for the economy

in the form of healthier lending, decreased default rates and smarter financial decisions. How Open Finance Resonates Across Different Demographics While many customers have yet to connect different accounts into a consolidated view of their financial picture, 44% of respondents have already done so. Not surprisingly, younger “digital native” customers are further ahead. Among Millennials (those born from 1981 to 1996), 59% of customers have used account aggregation tools. Among Gen Z (born from 1997 to 2012), the figure already stands at 60% and it can be expected to increase as the children who make up a large swath of Gen Z grow up and begin managing their own money. The data also show that minority groups are ahead of the curve. Customers who have already brought their accounts together into one view include: • 63% of Asian or Pacific Islander respondents • 62% of American Indian or Alaskan Native respondents • 61% of Hispanic, Latino or Spanish-speaking respondents • 56% of Black respondents • 40% of White respondents While those who have connected accounts total only 44% today, the survey found that more than half of respondents agree that being able to see all accounts in one place is important. Financial institutions and fintechs have a tremendous opportunity to pave the road to open finance by enabling seamless connectivity and data sharing between financial accounts. ▪ About MX: MX powers the open finance economy by unlocking the value of financial data with the most secure and reliable financial APIs. MX is enabling trusted access to financial data and making it actionable for intelligent decisions and personalized money experiences.



In a recent survey*, 75% of bank customers said they’re attracted to the cost-effective, seamless services offered by your competitors. For 20 years, IFM has provided financial institutions the data-driven solutions they need to build stronger relationships and help their customers thrive. If you can’t give your customers what they want, they’ll find a competitor that can.

Talk to us. We have all the tools you need to give your customers everything they need.

Customer Retention | Deposit Growth Home Equity & Mortgage Leads | Data Management Life Event Identification | Private Banking Prospects





* Source: World Retail Banking Report 2022

formed through trust, which grows when you solve problems. And you know you can creatively solve problems better than your competitors, right? Show that off in your messaging. As your message or offer gets more specific, it will resonate more with specific customer groups, whose excitement will go through the roof. Shift Your Focus: People can get a checking account anywhere. It's the value of your entire financial institution, and its ability to solve problems, that will attract (and retain) consumers. Curb Your Enthusiasm and Learn What Excites Customers Let’s take the general “We now have online account opening” ad. Of course you’re excited about this new process for your bank. But how many customers or potential customers are out there thinking, “I really need to open a checking account, I wish that XYZ Bank would let me do that online?” Hint: very few. While online account opening is important, keep in mind that big banks have been doing this for a generation. (No joke: Wells Fargo is celebrating their 27th year of online banking!) If a customer needed an account opened quickly, they either have come into the bank already, or they went with a competitor. This is not to say that you shouldn’t promote your new online account opening abilities — you should absolutely let customers know you have it — but keep in mind that it’s table stakes, something that people expect, and do not get excited about like you do. It should be a box on your website, not the focus of your largest paid advertising campaign.

By Dan Novalis CEO of 2Novas

Most financial institutions marketing campaigns do two things that hurt them: First, they talk about things that the bank is excited about such as online account opening and the ability to bank from anywhere — things that big banks have been doing for years or decades — and they don’t focus on what the customer is excited about. Typically customers are interested in finding an easy resolution to financial problems, not having to talk to a person, and in general not having to think about their bank. Second, they try to be everything to everyone. In the face of intense competitive pressure from megabanks and fintechs, attempts to appeal to everyone tend to mean that the message isn’t all that exciting to anyone. So how should banks and credit unions adjust their marketing strategies to better stand out? Become a problem-solver, not an advertiser. Think about the customers that you want, and what problems they’re having. Your institution, not a specific product, is the solution to their problems. Yes, they might need a checking account today, but they can get that anywhere. The fact that your bank has a checking account is not enough for them to come to you. What you’re both going for is a long-term relationship — and long-term relationships are Most bank marketing campaigns fall short because they try to be everything to everyone or miss what customers actually care about. To compete against fintechs and megabanks, banks and credit unions need to address very specific customer problems. Here's how.





If you can get very specific with problems, you’ll get much more excited customers. That means more heavy lifting for marketing — you’ll have to craft multiple messages for different types of customers and problems, rather than just saying “We have online account opening.” But think through all the different benefits of online account opening for specific customer groups, and you can create different campaign messaging for each one. Emulate Fintechs and Their Laser Focus on Microniches It’s hard to run many campaign messaging variations at once. Fintechs actually don’t do this – because when they get started, they’re laser focused, typically, on one small sliver of the market. Their messages are naturally very specific and very exciting to their target customer group. Think of Chime and people who want their paychecks a day or two earlier. Consumers see thousands of ads a day, so the default is to tune them out rather than pay attention. But they’ll pay attention to something that speaks specifically to them. This is not a niche — it’s far more specific than that. The word “niche” makes you think of Millennials, Gen Z, or other demographic groups. What I’m talking about here is a combination of a group and a specific problem, like Millennials who want to buy their first home in the next one to three years, and are saving for a down payment and learning about the process. That’s a microniche, and a startup like can completely own it because they are laser-focused on it.

Most traditional institutions already offer mortgages and would love the first-time Millennial homebuyers — but banks and credit unions typically advertise general mortgage products, not the ease of applying or working with the bank. Why does a borrower choose versus even calling you in the first place? On, they can find customized rates in about three clicks, compared with the perception of having to call the bank, talk to a person and then deal with follow up sales calls for weeks afterwards. It’s not enough today to have a great brand message that you target to broad demographic groups. Financial institutions that have successful marketing today are breaking through the noise by solving specific consumer problems, rather than offering products. Their message is not “We offer a mortgage,” but “We can get you a mortgage in three clicks without having to talk to anyone.” Four Ways to Find Suitable Microniches Any established bank or credit union could have several or even dozens of possible microniches. Your marketing team’s mindset needs to shift from “everything to everyone” to “next best offer.” Here’s a process to find one or more microniche segments: 1. Identify your opportunities What are your goals for the next three to five years? Increasing product adoption, or growing your loans, credit cards or merchant services business? Pick the top few that will enhance your bottom line. Then, conduct a brainstorming workshop with your department heads. Give them five to ten minutes to write down as many super- specific growth opportunities as they can. Perhaps there’s opportunity in debit card holders who haven’t used their cards in several months, a line of credit customer who hasn’t taken a draw this quarter or a high-balance depositor who doesn’t use your wealth management services. Refine the list and prioritize it.

When you start, it might be enough to pull a new email list once a week or even once a month. But you should take advantage of automation features in an email tool — platforms like Constant Contact and MailChimp have automation flows and customer journeys that can be set up against triggers. They won’t connect directly to your core banking system without some custom software development, but as you pull the data, you can tag the email addresses and cause actions to take place. As you progress and see results for certain microniches, it might make sense to do some custom development to regularly (even daily) pull data changes over to your automation tool so the whole flow is automated. Realistically, you’ll always be adding new microniches, so you’ll want to start thinking about a process for how to manage it over time. Bottom line, your marketing needs to not be everything to everyone. Instead of winning 1% to 2% of a large market, more specific messaging and targeting can help you win 30%, 40% or more of a microniche market. Do this across several niche markets and that 1% to 2% of the larger pie will start to look pretty small. ▪

2. Go to the data Pull customer data regarding the top three to five ideas. If you have a data analytics tool, great — but when you’re starting, just dump the data into an Excel pivot table. The goal here is to understand how you can identify those opportunities in the data – e.g., how do you generate a list of email addresses of customers who haven’t tapped their line of credit this quarter? 3. Find the action trigger Often, having a specific message isn’t even enough — you have to also create the sense of urgency for your customer to take action now. It’s not enough to remind customers about your lines of credit — you’ll do far better by triggering an email or phone call to them just after they make a big purchase. Think about what trigger makes the most sense for the customer group and the problem you’re solving. 4. Rinse and repeat The trick with triggered campaigns is that they need to be set up to send repeatedly. In the line of credit example, every day you could have new customers making large hardware store purchases. How do you keep up with it – especially if you’re doing this for multiple microniches?

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Personalization Needed:

Attempts to appeal to everyone inevitably mean that the message won't be exciting to anyone.


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Forces Reshaping Financial Services 10

By Theran Colwell VP, Corporate Strategy at CUNA Mutual Group

Like many industries forced to reinvent themselves for digital consumers, financial institutions are weighing their options for change. With no shortage of choices for retooling the business model, traditional financial services providers must place their bets smartly, and most importantly, in areas likely to have the greatest value for them and their members or customers. To learn how credit unions are prioritizing their responses to various trends in banking, CUNA Mutual Group conducted a survey of 82 credit union executives between March 1 and March 11, 2022, regarding the forces reshaping U.S. financial services that were identified in collaboration with McKinsey & Company. The goal of the survey was to better understand how credit union leaders view the external forces strategically impacting them and what actions they plan to take to address those forces. Due to the use of convenience sampling methodology, the survey findings are directional in nature. A survey of 82 credit union executives uncovered how these leaders view the external forces strategically impacting them and what actions they plan to take to address those forces. High on the list of trends to act on: harnessing technology and data and identifying new revenue sources amid economic pressure.





No. 1: Broad Macro-Economic Trends With inflation at its highest level since the 1980s and the cost of labor increasing, credit unions – like their members – are facing rising expenses in multiple categories. Layer on a dynamic interest rate environment and currently higher savings balances, and it’s clear that now is a critical time to balance managing the margin with driving the mission.

named changing member expectations as a top-three trend which will have a high impact over the next three to five years

said it’s a top-three trend to act on 1



of credit unions listed the need for new revenue sources as a top-three trend in the next three years

No. 4: Fintech Synergy & Fintech Competition To date, fintechs have captured little U.S. retail banking revenue. However, McKinsey says they are starting to win a larger share in select areas. The pandemic appears to have been a strong catalyst for this momentum.

listed new revenue as the No. 1 trend to act on 1




of retail banking revenue has been captured by fintechs

of new checking accounts were captured by neobanks in 2020


No. 2: Auto and Home Lending Market Swings Increased demand and supply shortages are driving auto loan origination balances up sharply. According to Experian, in 2021, banks and credit unions owned a 53% share of the auto loan market. 2 In contrast, the mortgage market is cooling, coming off a record high driven by a prolonged period of low interest rates. Winning borrower business across all loan categories is naturally top of mind for traditional financial services companies, especially as they compete with fintechs, captive finance companies and other lenders. In the CUNA Mutual Group survey, credit unions reported making investments in several areas to draw in more business. These included enabling digital loan applications, interest-rate and no-fee promotions, new indirect partnerships and new home loan types. 1

No. 5: Changing Role of the Branch Over the past several years, and especially since the outbreak of COVID-19, we’ve seen the physical branch decrease in importance to consumers. As a result, the largest financial institutions are making enormous, at-scale investments in the overall customer experience, distributions channels and partnerships. Credit unions that shared their branch evolution strategies with CUNA Mutual Group mentioned the following strategies: Increasingly, financial institutions are viewing fintechs as potential partners, rather than just another category of competition. The largest credit unions to participate in the CUNA Mutual Group survey, each with assets exceeding $1 billion, indicated they are tackling fintech trends via partnerships . Goals in doing so range from maintaining relevance with consumers to growing loan volume. Smaller credit unions (between $100 million and $200 million) are interested in doing the same. However, many remain in exploratory mode at this point. These partnerships offer financial institutions the ability to address consumers’ shift to digital channels, access a wider pool of borrowers, grow loans and increase productivity, especially if the fintech partner has access to artificial intelligence (AI) underwriting technology.

No. 3: Changing Member Expectations According to McKinsey, consumer preference for digital engagement has reached an inflection point. The increasing willingness to purchase financial products in digital channels is most pronounced in 3 :

Savings and/or term deposits (up 10%)

Investments (up 15%)

Cash loans (up 11%)




Across the financial services industry, a digital mindset is driving the creation and enhancement of three specific types of business models: 1. Big brands offer digital-only platforms • Laurel Road by KeyBank NA • Light Stream by SunTrust Bank • Marcus by Goldman Sachs 2. Big Tech/fintech partnerships with financial institutions offer digital lending and payments • Peloton, Apple, Amazon 3. Branch-light models focus on target segments • First Republic • PurePoint Financial

• Implementing new branch models that are less transactional and more consultative and educational • Deploying universal teller machines, video teller machines or chat capabilities • Reducing square footage • Adding new technology at the drive-thru

of those surveyed indicated the changing role of the branch was a top-three trend to act on 1

20% ONLY





No. 9: ESG for Offense and Defense As more stakeholders, including regulators, board members, employees and members, monitor brands for their environmental, social and governance (ESG) efforts, credit unions are considering changes. An increased focus on diversity, equity and inclusion (DEI) is one of the early areas of focus. Credit unions admit to having low levels of knowledge around ESG, however. Very few (1%) claimed to have expert-level knowledge of the issues surrounding ESG, while 69% said they had some or almost no familiarity with ESG. 1

No. 6: Increasing Importance of Technology and Data One of the most pertinent benefits of technology is access to data.

The window of opportunity for financial institutions to win the data war with Big Tech is narrowing, says McKinsey. Whereas banks and credit unions may have greater access to information around financial transactions and creditworthiness, Big Tech has insight into many more and growing slices of the data pie. They know location and device information, preferences and opinions, good and bad purchase experiences, online interactions and social network activity. With Big Tech’s foray into financial services, they are amassing highly structured transaction and credit data. With this much data and the ability to marry it with technology, Big Tech threatens to create a business model that will deliver a superior customer experience, drive operational efficiency and dramatically shift market share. It’s no wonder that:

claimed to have expert-level knowledge of the issues surrounding ESG

said they had some or almost no familiarity with ESG 1



listed the increasing importance of technology as a top-three trend to act on in in the next three years

with the largest number saying it is the No. 1 trend to act on 1



No. 10: Nontraditional Lending Consumers are taking advantage of new forms of lending, such as buy now pay later, small-dollar loans/ payday alternative loans, solar loans and other forms of point-of-sale financing, and cash advances offered by large employers (e.g., Walmart). To compete, traditional financial institutions are looking for opportunities to power their digital loan growth through partnerships. Below are some actions steps CUNA Mutual Group recommends for doing just that: • Identify and close any internal digital lending capabilities gaps

No. 8: Emergence of Decentralized Finance (DeFi) Credit union leaders are paying close attention to the rise of digital currencies and blockchain as potentially disintermediating forces. While DeFi is capturing a lot of attention in the press, and financial institution leaders are thinking about the opportunities it presents, it doesn’t appear to be a top priority for strategic action. No. 7: Changing Workforce The war on talent and high front-line turnover are the area’s most impacting the credit unions that participated in the research. To respond to changing expectations of employees, multiple credit unions told our researchers they are embracing work- from-home and hybrid models, reviewing compensation packages (especially benefits), changing hiring processes to find higher-quality staff and using technology to drive efficiency. listed acting on shifting workplace trends as the top trend to act on 1 15%

• Create a dedicated collaboration team focused on the success of the partnership • Start small – utilize pilots or targeted rollouts before scaling up • Vet potential partnerships thoroughly • Evaluate and adjust the approach as necessary

• Weigh pros and cons and decide on your approach to fintech lending partnerships • Align on success metrics so expectations are set from the start

Conclusion One thing is certain: Financial institutions are competing in a complex and dynamic market, and it would be nearly impossible to discuss all the forces shaping financial services in one article. Perhaps a participant in the CUNA Mutual Group research put it best when they said, “In order to compete, we will need to increase investment in technology that members not only want but expect from their financial institution. If you don’t keep up, you get left behind.” 1

CUNA Mutual Group will continue to work with partners like McKinsey & Company to monitor and analyze external forces. The insights help us advise our credit union constituents on everything from strategy and business planning to product refreshes and other strategic initiatives. ▪ 1 CUNA Mutual Group, “CU External Forces Research,” Apr. 2022 2 Experian, “State of Automotive Finance Market Report,” 2021 3 CUNA Mutual Group and McKinsey & Company, “Ten Forces Shaping U.S. Financial Services,” June 2022

of credit union leaders surveyed ranked the emergence of DeFi as a top-three trend to act on.


ranked it as the No. 1 trend to act on 1






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