Like all parents I teach my kids to always tell the truth. Honesty is important. Very important. At the most basic level, if you always tell the truth, you don’t have to worry about remembering what you said. On another level, if you always tell the truth, then people will trust you in the future, accepting your word at face value. And of course, it’s nice to be able to look yourself in the mirror at night and know you did the right thing.

The media headlines these days are filled with tales of corporate dishonesty. The list is long, and the transgressions differ. But it all boils down to the same thing…important people who wielded an incredible amount of power have lied. Bernie Madoff. Eliot Spitzer. Jeffery Skilling. Kenneth Lay. Arthur Anderson. And for those of you in the tri-state area, Eddie Antar.

These days corporations seem to disclose things in itty bitty print buried in a revised terms and conditions document. My bank did this to me recently. They started charging me for online banking. (I mean seriously. They WANT me to do online banking. It makes me a loyal customer, remember?) I am sure they sent me a notice that I missed somehow.

Regardless, I don’t feel like they looked me in the eye and stated, “Susan, based on the type of checking account you have, we must charge you $4.95 per month to pay your bills online.” Turns out that the type of account that I opened, about 8 mergers ago, was no longer available and wasn’t eligible for free online bill pay.

However, based on my activity, and my relationship with my bank, I do qualify for free online bill payment. The bank had to “upgrade” the type of account I had, which from my perspective meant that they just had to change the name of the account. I’d feel much better about my bank if they had more proactively reached out to me and suggested some changes. Honestly.

Perhaps if banks would clearly and simply state what they are doing, customers would trust them more. After all, isn’t it about the customer?

Thank you to everyone who listened in to my webinar yesterday (July 22): “Beyond the New Normal: The Financial Services Consumer in Today’s Economy.”

I really enjoy presenting Mintel Comperemedia’s information on how people are reacting and changing their habits due to the economy of the last couple years. Many of you asked questions related to consumer trust, which I think is an excellent topic for banks and other financial institutions to think about right now.

If you missed the webinar, you can access the slides and recording here:

- Webinar slides
- Webinar recording

Here are my answers to some of the questions we didn’t get to yesterday:

Q. Is there somewhere that all of the statistics are posted? Some were mentioned that were not on the slides.

A. Please contact your account manager with specific requests for data. I will also be posting some data points from the presentation on the blog over the next few days. If you are not a Mintel Comperemedia client, please contact info@comperemedia.com to learn more about subscribing.

Q. There seems to be a lot of contradictory information – consumers don’t want a relationship with a bank, but that’s the only way we’ll attract customers. If we need to build trust, how specifically do bank marketers do that?

A. Actually…customers DO want a relationship with banks and other financial services companies. I could write a book (actually several books) on different ways that companies could build trust with their customers, but it begins with a longer term focus, rather short-term strategies designed to maximize quarterly earnings, as well as openness with customers – being forthcoming with information about what to expect from the relationship.

As I mentioned during the webinar, it is not necessarily the fees themselves that are the problem, for example. Instead, the problem is that customers feel like banks are being unfair or even “sneaky” about how they charge fees to their customers. Same thing for privacy and the use of personal information.

The best way to think about it is to think about what factors into maintaining a long-term friendship, since customers are looking for the same things from a personal relationship as from a business relationship.

Q. What was meant by “control” in the characteristics people expect from banks?

A. We didn’t define the concept of control when we asked about the 12 attributes. That would actually be a good focus for future studies – to break down those attributes even further to gain an even better understanding of how customers define “trust”.

The question(s) as they were asked were:

“Thinking about what it means to ‘trust’ another person (financial services company), please indicate on a scale of 1-5 how important each of the following is in establishing that trust”

Top 6 for both:
Honesty
Respect
Loyalty
Fairness
Communication
Commitment

Bottom 6 or both:
Reciprocity (receiving an equal or greater amount in return)
Empathy
Predictability
Usefulness
Empowerment
Control

Q. Where will lower income customers turn for credit, given that alternative lenders (e.g., payday, auto title) are increasingly scrutinized?

A. Lower income customers have definitely borne much of the burden of the declining availability of credit. The regulatory changes will probably only exacerbate that situation. This is a huge market, however, and eventually (as always happens), new ways of mitigating risk, or new ways of offering credit that to these segments that have regulatory approval, will appear.

One way that this market may open up again is through the use of better risk assessment tools – above and beyond the traditional Fico or other type of risk score. That would allow lower income customers, who are not necessarily higher risk, to have access to credit because lenders will have better and more detailed ways of assessing credit worthiness.

Q. How do you see Bank of America’s move to eliminate ODP (overdraft protection) fees in the context of your presentation?

A. One of the best marketing moves a bank can make is to be proactive about eliminating or restricting something ahead of the game. It is a tremendous differentiation strategy that helps establish trust. The same is true for entire industries.

About three years ago I wrote a piece for the Mintel Oxygen website titled “Self regulate or be regulated,” suggesting that the credit card industry, which has historically suffered from a tremendous lack of consumer trust, might want to be proactive in limiting fees across the industry to improve general perceptions of the entire industry. That of course never happened, and sure enough, the CARD Act has accomplished much of that restriction of fees for them.

The result? People are still highly distrustful of credit card companies/issuers/networks, and their fees have been restricted anyway. It might have been better to get ahead of the game and at least have the additional bonus of somewhat improved customer relations.

This relates to my points about a short-term focus on quantifiable returns, rather than the longer term focus on building a relationship that improves perceptions of a brand.

Please join Mintel Comperemedia’s, Susan Menke, Ph. D and Economic Psychologist, on July 22, 2010 for a free webinar entitled “Beyond the New Normal: The Financial Services Consumer in Today’s Economy.” The webinar will start promptly at 2pm CT.

You can register HERE.

Over the last two years, the banking crisis and the “great recession” have caused a dramatic shift in consumer’s attitudes and behaviors. Consumers are now asking for different kinds of products and services from their financial services providers, and the most successful companies will listen to what they are saying and act accordingly.

A few of the questions to be discussed in this webinar include:

– How is the consumer mindset changing as they place more emphasis on asset accumulation and less on consumption?
– What are the similarities and differences in the ways Gen X, Gen Y and Baby Boomers have been affected?
– What specifically is driving the level of trust (or lack thereof) in the financial services industry? How instrumental are concerns about privacy and security?
– What is the current status of financial reform legislation, and what does the consumer think about it?
– What is currently driving consumer satisfaction with the financial services industry? How does this relate to the “emerging under-banked” trend that Mintel has been discussing for the last several years?
– How important will social media be to the future of the industry?

The webinar will last 45 minutes with 15 minutes of Q&A. All attendees will receive a copy of the presentation and the slides following the webinar. Also, you can check back here on the Comperemedia Blog to see answers to questions submitted during the webinar from July 23, 2010 on.

Want to learn more about Susan Menke, VP of Mintel Comperemedia? Read her bio or contact us_marketing@mintel.com to get in touch with her.

In a recent blog post I mentioned that I didn’t feel as though I had a relationship with my bank. Instead we have a “transactional history.” To figure out how my bank can really help me, I’ve started talking to various people about what it is I want from my bank. (My colleagues are interested. My friends and family think I am a bit crazy.)

I really need my bank to offer me services and products that will Keep My Life Running Smoothly. For me that means keeping me organized and on top of things. I struggle with organization. It just doesn’t come naturally to me. And with a husband, an elderly dog that requires almost weekly trips to the vet, three young kids, a job, and 10 caterpillars that I’m raising to become mature, independent adult butterflies, I need all the help I can get.

In my statistically non-valid sample, I’ve determined that most people can use help in getting more organized. Except for my neighbor. She is a natural organizer. In fact, it’s what she does for a living. She is starting a project for me this weekend, so hopefully by next week I will be a Truly Organized Person.

And that brings me back to What I Want From By Bank. I think there are a lot of things that banks could do that they are not currently doing, but would greatly help customers – specifically me. So here’s my wish list:

1. I want all my bills sent to my bank electronically.
2. I want a calendar that shows when they are due.
3. I want emails to remind me to pay a bill.
4. I want budgeting ability.
5. I want to track special things like my Christmas spending and how much I spend on my kids’ birthday parties.
6. I want remote deposit.
7. Sometimes I want to do it all through an app on my phone.
8. Other times I want to be able to do it on my computer.
9. Ideally my phone and my computer would sync everything together for me.

My bank will probably say that all this is impossible. But I know it is possible, because other banks are doing it. For example, First Internet Bank of Indiana allows customers to have all their bills sent to the bank. I know this because a friend of mine has an account with them. She is amazed that my large, national bank doesn’t provide the same type of service. To make sure I wasn’t missing something, I double checked my banks’ website. If they provide the service, I certainly can’t find it.

We all know that USAA has an iPhone app that allows remote deposit. Bank of America allows remote deposit through a scanner. (Industry experts are expecting the bank to launch its own remote deposit app for phones, given some public comments made by the CEO.) I think all banks should offer remote deposit.

Then I found out that Zion’s bank offers a great budgeting tool called eZBudget. The tool allows anyone (not just customers) to set up monthly, project, event and gift budgets. For some reason banks don’t seem to be eager to move into this space and they’re letting outside players such as Mint.com own online budgeting.

So, I don’t really want a “relationship” with my bank. I have relationships with the people in my life, not the businesses. Instead, I want to be treated as a valued customer and be offered the products and services that help me manage my financial life.

For me the highlight of the Digital Marketing Days Conference held in New York this week—Mintel Comperemedia was a sponsor—was listening to Thomas Hoehn, Director, Interactive Marketing and Convergence Media at Eastman Kodak. In his session entitled “Your Brand Deserves More Conversation,” Thomas showed how Kodak is a leader in social media marketing. As financial services companies grapple with social media, they could do themselves a big favor by looking at Kodak for an example of best practice.

Kodak has transformed itself, in recent years, from being a traditional “film” company into being a “digital” company. This was primarily an issue of consumer perception. After all, when we think of Kodak we think of a “Kodak Moment” – a phrase first used in 1961 which was meant to represent a special memory captured on Kodak film.

However, not many people know that Kodak was a pioneer of the digital camera business and actually invented the first digital camera in 1976. Fewer people know that, because of Kodak’s digital technology, it was able to provide the only television pictures of the Tiananman Square Protests in 1989.

A key part of the Kodak strategy involves social media, and the company stands out as one that has truly welcomed social media into its marketing mix. Kodak produces four blogs—it has been blogging for four years—and is always seeking new and creative ways to utilize the full range of social media tools.

Thomas Hoehn passionately believes that the worst thing consumers can say about you is nothing. Positive and negative comments about your brand, products or category abound in social media and both can provide marketing opportunities.

He handed out a color booklet entitled “Social Media Tips” which has been produced as a guide for vendors and partners of Kodak. The booklet includes Kodak’s social media policies as well and an outline of the company’s “Convergence Media Tactics.” It provides fascinating insight into Kodak’s approach to social media. He also handed out a booklet entitled “Mobile Marketing Tips.” You can download both booklets and review Kodak’s social media marketing efforts at http://www.kodak.com/US/en/corp/ourCompany/index.jhtml?CID=go&idhbx=followus.

To see how Kodak has recently updated its “Kodak Moment” campaign for social media, go to http://www.youtube.com/watch?v=HA9puP2f6Fs.

I like my bank. Through online banking I tell the bank which bills to pay and the bank pays them. Once a month my bank wants my mortgage payment, so I submit it electronically. Both sides seem relatively happy.

And to be honest, I think I’m a great customer. We have two checking accounts, three savings accounts, a jumbo mortgage, a line of credit, and a credit card account. I pay almost all my bills online and use the ATM for my deposits and withdrawals. I go to the teller once a year around Christmas time. Every once in a while I make a mistake and the bank kindly transfers money from my savings account to cover my oversight. They happily charge me a $10 fee for this service. I don’t begrudge the fee, after all, I’m the one who made the mistake. Clearly I’m a perfect customer – I have multiple products with them, I don’t cost them a lot, and every once in a while they can assess me a fee. I’ve also been with them for 13 years. Loyal and profitable, what more could you want?

Recently I’ve read a lot about how banks are trying to develop “relationships” with their customers. I also see a lot of offers in the Comperemedia database about “relationship accounts.” (I’ve presented on this topic – see the Seven Predications for the Future of Banking Webinar.) In thinking about this, I’ve realized that I don’t have a “relationship” with my bank. At least not from my perspective. Instead, we have a “transactional history.”

Case in point…I recently discovered that my bank was assessing an “inactivity” fee on my checking account. To be frank, my position is that the value of all my accounts should trump an activity fee of $6. Typically, in a “relationship” there is a natural back and forth communication process which allows the relationship to evolve and continue. If we truly had a “relationship” I feel the bank would have called, emailed, texted, mailed, or posted something on the site when I logged in as me. Something along the lines of, “Dear incredibly valued customer: We are concerned about the lack of inactivity on your account. Because we love you as a customer, we would like to suggest some ways to avoid an inactivity fee. Please, dear customer, call, write, email or text us back so we can mutually address the issue.” Instead, I took the time to call the customer service department. When I pointed out the size of my relationship, the rep responded by reading me the terms and conditions of that particular account. After doing this twice, I asked to speak with a supervisor.

I’m happy to report that all fees are now refunded. The supervisor convinced me to establish automatic deposits on the account, which solves the inactivity issue, but also builds the balance. I’m happy to report that both bank and customer are satisfied. But I’m still not sure we have a “relationship.” Maybe we just need to get to know one another better.

I recently bought a new cell phone. I previously had a phone that let me do my email and instant messaging, but wouldn’t allow me to do much else. I learned a lot of important things during the process of buying a new phone. Most importantly I learned that I only TALK on my phone for about 83 minutes every month. (My husband, who supposedly hates cell phones, uses our other 1,317 minutes each month.) But I’m getting off topic…

When I realized how little I talk on my phone, I realized that I needed a newer phone that would allow me to do more STUFF on it. What else I needed to do on it wasn’t exactly clear, but how else could I justify the $219 we pay each month for our cell phones? (Two phones, both with data and 1,400 minutes.)

After the agonizing process of trying to find the perfect phone, I now own an Android Incredible. I’m still learning how to use it. In fact, I’m learning really important stuff about it every day. So far it’s helped me navigate to strange places across town and find a restaurant in the mall. I also now always know the five-day forecast. Yesterday I bought my first app for the phone. It is going to organize my entire life and I know it will be life changing. I have a long list of other apps that I want to find.

I didn’t grow up with a cell phone. I didn’t grow up with a computer, let alone email or the Internet. I didn’t grow up with a scanner, a fax machine, a color printer, or an iPod. I grew up with Trim Line phones, typewriters and record players. But in this day and age I use my phone to run my life. I use it for my email, instant messaging, my entire calendar, my grocery list, my to do list, Facebook updates, GPS navigation, the weather forecast, to name a few.

And that brings me—albeit in a roundabout way—to my point. Mobile banking. Clearly mobile banking is going to happen – it needs to happen. It’s a question of when, not if. Right now mobile banking isn’t on my list of things to do on my phone. For me to do mobile banking, I need my bank to receive all my bills electronically. And I want to be able to use my bank to do all my budgeting. Those two things would make mobile banking work for me. But right now I don’t want to pay bills remotely because all my bills are at home in a folder. Is there an App for that?

Nothing annoys consumers more than paying for things that used to be free or feeling that they are being nickel and dimed. As the banking industry struggles with how to recoup money lost to overdraft fee income, they are wise to take some lessons from the airline industry.

The airline industry attempted to stem huge financial losses by charging a wide variety of fees. Flyers now pay to book the ticket, redeem frequent flyer miles, make a particular seat choice, change a ticket, check bags, obtain a pillow or blanket, and for food and drinks.

Unfortunately, added fees haven’t propelled the travel industry into profitability. AMR, parent of American Airlines, posted a $1.5 billion loss. US Air, Continental, United and Delta also posted losses. Combined, the industry lost $3.4 billion in 2009.

Southwest, however, was one airline to post a sizeable profit. The company heavily advertised “Bags Fly Free,” and that strategy may have paid off. The company’s Chairman and Chief Executive Gary Kelly attributes the success, in part, to the fees that its competitors are assessing. In a January conference call with Wall Street analysts, he was quoted as saying, “I hope they charge $100 a bag. That would be terrific. We’ll have 100 percent load factors.”

Going beyond the fee

With customer satisfaction, loyalty, and brand image on the decline over the past few years, banks can hardly afford to alienate customers. Rather than focusing on what fees to charge, the industry should focus instead on innovating services and products that give people confidence. It’s not that fees are never justified – it just might not be wise to assess fees on previously free services. In fact, a recent JD Power study indicates that high customer satisfaction rates are possible to maintain as long as consumers perceive that they are receiving sufficient value in exchange.

At the end of the day, customers know that it’s their deposits that fund the banks other, more profitable, activities. So while consumers need a place to bank, the banks need consumers just as much. Shouldn’t there be recognition of the mutual need from both parties?

I just attended my second Federal Reserve conference of the month – this one was all about payments. If there is anything remotely close to innovation happening in banking right now, this is where it is. There were a number of good speakers, including Dave Evans of pymnts.com, who addressed the significant amount of innovation going on in the payments industry.

To summarize, innovation in payments has traditionally happened slowly, but the pace has accelerated substantially in the last year or two, and it will accelerate even more with the advent of cloud computing. This is because changes will no longer need to be made to lots and lots of individual terminals but can be made all at once in the “cloud” and loaded onto all of the separate devices. Payments will also eventually be bundled with other things such as advertising.

Apps for payments are also appearing, such as Square for iPhone. Paypal already has about 25,000 apps. Lots of apps means more users, and everyone is racing to develop the most successful platform because they will, in effect, own the app store. Basically there will be a small number of software platforms that “runs the rails” (i.e. use the existing payments networks), and those will support all of the apps.

Ultimately, payment apps will dramatically reduce the cost of innovation, and the innovation will move from the incumbent players out to the edges of the competitive landscape, or to the smaller players. It will be difficult to take payments “off the rails” because there are compliance and security issues, but that will ultimately happen as well. Look to companies like Apple and Paypal for interesting developments in the near future.

If you’d like to know more about what Mintel Comperemedia is seeing in direct mail and email regarding payment apps and innovation, please contact info@comperemedia.com or visit www.comperemedia.com.

I attended the Chicago Federal Reserve’s “Future of the Financial Services Industry” conference last week. A number of interesting presentations, but I had to keep looking at the cover of the program to make sure it was the future we were supposed to be talking about. In typical economist fashion, most of the discussion revolved around what had been done wrong in the past.

That aside, most of the topics that were presented revolved around the fate of the Government Sponsored Enterprises (GSEs)—particularly Fannie Mae and Freddie Mac—and, a related topic, what was to become of the securitization markets. Fed Chairman Ben Bernanke said that securitization would make a comeback, but that transparency, liquidity, and incentives reform are all needed. As regards the GSE’s, he stated that the biggest problem is unintended consequences due to the implicit guarantee. Because of this they are insufficiently capitalized and therefore, unsustainable. His answer is to privatize them, perhaps with a “deep backstop” provided by the government.

In a more “freemarketarian” manner, Alan Greenspan addressed both issues—saying that securitization should be allowed to “flourish” since it is not the primary issue in our current situation (but rather how it was employed). He also stated that the GSE’s should be broken up.

Austen Goolsbee (a U.C. economist who currently serves on the Council of Economic Advisors and as Chief Economist for the President’s Economic Recovery Advisory Board) made the statement that the way things are currently structured, we are basically “encouraging households to speculate in the derivatives market.” His suggestions included:

• Eliminate the tax advantages of second liens
• Don’t encourage mortgages that are prepayable
• Charge higher fees to refinance

There seems to be a consensus that securitization is good and should be encouraged (the question is how and how much?) and that GSE’s are bad and should be discouraged (again, how and how much?).

One thing is for sure, since the government is currently involved in 90% of US mortgages, and 95% of mortgage originations go straight to Fannie and Freddie, a break-up won’t be happening any time soon.