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.

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 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.

AIG recently reported a 4th quarter 2009 loss of $8.9 billion. Though this is substantial, it is a significant improvement from the $61.7 billion loss reported at the end of 2008.

American General Financial Services (AGF), the company’s lending operation, reported a 4th quarter 2009 operating loss of $309 million compared to an operating loss of $248 million in 2008, resulting from “a decline in finance charge revenues reflecting lower average net receivables and a higher provision for loan losses.”

In its quarterly earnings report the company goes on to state that AGF anticipates that its primary source of funds to “support its operations and repay it’s obligations” will be customer receivable collections and additional on-balance sheet securitizations and portfolio sales.

As a result, AGF has stepped up its efforts to acquire new customers. In January, US consumers received more than 8 million mailings for new personal loans from AGF, up from less than 1 million a year ago. This accounted for 26% of all personal loan mail volume during the month. In contrast, Discover, the second largest mailer in January mailed 5 million mailings and Citibank mailed 3 million.

AGF faces an uncertain future. The AIG earnings report states that the company is exploring “strategic restructuring opportunities” for AGF. However, indications from the mailbox in January suggest that AGF is determined to build up its loan portfolio and strengthen its position in the marketplace.

In December 2009, Advanced Financial Services changed its name and rebranded as Embrace Home Loans. This was a significant move for a company that has been in operation since 1983. Advanced Financial Services used direct mail as its primary marketing channel and in Q4 2009, we began to track the first direct mail offers branded as Embrace Home Loans.

Advanced Financial Services actually remained profitable despite the downturn so, therefore, the rebranding is more about tapping into its potential for future growth. Commenting on the name change in a press release, Kurt Noyce, President of Embrace Home Loans, said, “we now find ourselves in an enviable position with many opportunities for future growth, but our name hasn’t kept pace with that growth. We have not been available in all markets and were easily confused with many other financial services companies. So we decided to make a change with a name that defines not only what we do, but also what we care about.”

The launch includes a new website that promises to “help customers feel comfortable and secure every step of the way.” The site features customer testimonials from the 46 states Embrace operates in, as well as video recordings of staff explaining how they have helped customers.

Most of the offers from Embrace Home Loans in Q4 2009 utilize a black-and-white version of the orange Embrace logo and the same creative that was mailed under the Advanced Financial Services brand.

Some offers, however, reveal a new orange logo and the message, “embrace the possibility.” These offers tap into Embrace’s new values. For example, in one marketing piece, a Post-it note adds a personal touch and the text is customer centric in its focus. The offer explains how Embrace wants to save its customers money because rates are at historically low levels.

The Embrace rebranding follows the launch of the Bank of America Home Loans brand in April 2009. These two firms are currently the top two direct marketers in terms mortgage acquisition mail volume. The rebranding efforts are encouraging because both lenders are re-positioning themselves to take advantage of a potential recovery in the mortgage market.

I spent the weekend crafting answers to the many great questions people sent during and after our “2010 Financial Services Trends” webinar. If you’d still like to check out the presentation slides or watch the webinar recording, click here.

Also, please don’t hesitate to use the comments field below to post more questions or to add to my answers. I’m very eager to hear what you think about our predictions and to get a dialogue started about major financial services trends for this year.

Without further ado… the answers.

Q1: Why do you equate saving with simplification?

This is a continuation of discussion we had in webinars last summer about how consumers are simplifying their lives. The basic premise is that saving money = buying less stuff = simpler lifestyle. Consumers generally save more during recessions, but in this case, it is part of a more general and longer-term trend that encompasses simplification.

Q2: Please expand on how social marketing provides “highly measurable ROI?”

Social and digital media tracking can provide a tremendous amount of behavioral data that can be used to determine ROI (return on investment). In terms of measurability, social marketing compares favorably to other marketing channels, such as TV or direct mail. For example, online data like click trails can show how well the social media strategy is driving visitors to the company website.

Q3: What was presented as a reasonable alternative to traditional banking during your research?

We often use examples in our survey questions, but in this case we didn’t. We simply wanted to measure the degree of consumer dissatisfaction with banks, not the degree of attraction to specific banking alternatives. However, some alternatives we could have mentioned would be accounts at brokerage or mutual fund firms, or perhaps prepaid cards with online bill pay services.

In a survey Mintel conducted in September of 2009, 5% of respondents said they “would leave my current bank if Walmart offered all the same financial services that my bank does”. In this case, Walmart could be considered a bank alternative.

Q4: Can you further explain Blippy? We do not understand the way it works.

Check out their website at http://blippy.com/. The site is basically a social media site that posts financial transactions so that everyone can see what you are buying. You can either designate a primary credit card or you can share your information at Amazon.com or iTunes for instance. People are calling it the “Twitter of personal finance.” This indicates that the trend of all our behavior being shared online is continuing.

Q5: Isn’t P2P lending a legalized version of loan sharking?

It is if the fee structure is exorbitantly high. However, our data indicates that many consumers don’t pay as much attention to fees as one would think. And the convenience of P2P will probably be a draw for a certain portion of consumers.

Q6: You indicated that 29% of people tend to ignore FS companies on social networking sites. How does this compare to other industries?

That’s a very interesting question, and it will certainly be included in our next round of consumer surveys on the subject of social media. Stay tuned!

We had a successful webinar yesterday; thanks to all who attended! Sorry about the sound difficulties at the beginning of the webinar.

Those of you who tuned in submitted tons of great questions about our financial services trend forecasts for this coming year. I’m crafting answers today and this weekend, so I hope to have them up on the blog by Monday. Please of course, feel free to use the comments field here if you’d like to submit more questions about our predictions.

In the meantime, Mintel Comperemedia’s fabulous marketing team has created a link to the webinar recording. You can either listen to it again (or for the first time if you missed it yesterday!) or you can download the slides to peruse at your own leisure. Click here to do so.

The recent PBS Frontline documentary, “The Card Game,” broadcast on November 24th, included a critical report on payday lenders. There are approximately 23,000 payday lender outlets in the US, despite payday lending being illegal in 15 states. As PBS put it: “there are twice as many payday lenders as there are Starbucks, lending out more than $40 billion a year.”

Payday loans are generally used by lower income consumers who have checking accounts. The loans are typically for just a couple of weeks, in advance of a paycheck, and they almost always incur high fees.

From what we’ve seen, email is the most popular channel for payday loan marketing. In fact, the majority of unsecured loan acquisition emails are from payday lenders or third parties looking to connect consumers with lenders.

The FDIC has recently instigated a program encouraging banks to offer short-term, small dollar loans of under $2500 to compete with payday lenders. Do you think this will work? Or do you think payday lenders will continue to bombard consumers with email offers and dominate the market?

An incentive just for having (and paying, of course) a mortgage? Well that’s one way to make today’s dim economic picture a little brighter. In August, Chase announced a new program offering 1% cash back on mortgages held by Chase checking account customers. We started seeing offers for this appear in direct mail in October.

Mortgage incentives aren’t new, but an on-going cash back program is something we haven’t seen before. “Chase Exclusives”, which the 1% cash back program is part of, rewards checking customers for using other Chase products. It’s a great loyalty builder; tapping into the ongoing consumer need to get more for less and really delivering on the promise of an “incentive” for working with Chase.

Customers receive the 1% cash back if they follow certain criteria on new or existing Chase checking accounts. They can receive the rebate either in cash or apply it towards the mortgage principle.

Is 1% back enough to prompt mortgage-holders to refinance with Chase, especially with lending standards tightened? How else can financial institutions innovate to get more out of the customers they have?