Thank you everyone for attending my webinar yesterday on 2010 Banking Predictions, and thank you for submitting so many questions. I’ve answered most of your questions below, so let me know your thoughts!

If you’d like to download the slides or listen to a recording, click here.

Also, if you’re interested in learning more about Mintel Oxygen’s Finance Reports, please email Zach Leahy at zleahy@mintel.com. You can see a list of past and future titles here.

Q. Have you noticed a penetration difference between the $15 incentive and the $50 incentive. What is the optimal figure?

A. The $15 and $50 cash incentives were for increasing debit card usage. Typically on an acquisition campaign we see about $100, although amounts are increasing. For loyalty campaigns, the amounts are lower. The optimal figure is dependent on the total cost to increase debit card usage and the long term profit. Each bank is going to differ in that equation.

Q. As it relates to incentives, do these predictions still apply to non-traditional banks, like Schwab bank and other asset managers looking to acquire new clients and assets?

A. Investment firms are struggling right now with an image crisis. As a result, most investment marketing is focused on regaining trust or convincing consumers that the firm is focused on the customer rather than just on selling products or services. Investment firms typically don’t rely on incentives to acquire customers. Instead they rely on free seminars, webinars, education, etc.

Q. Do you predict any differences in these trends between banks, credit unions or other types of financial institutions?

A. Credit unions and smaller banks are less likely to use cash incentives and more often offer merchandise or the offer to buy back unused checks and debit cards. Across the other trends, however, we see similar types of things. We tried to incorporate examples from all types of banks to illustrate that point.

Q. Who’s going to win, regional or big banks?

A. Big banks are always going to win on the national level. However, while it’s almost impossible for a regional bank to compete with Chase, for example, on a national level, they can certainly compete with the Chase branch across the street.

Q. What banks do you see as having best practices in social media at this point?

A. Since banks are doing so little in social media, none of them really have developed a “best practice.” Certainly Chase was successful in its Community Giving Program that it moved to Facebook. It was a program that existed offline, but in an effort to make consumers part of the decision, the company moved it online. More importantly, Chase did it in a way that allowed Facebook members to participate in a meaningful way.

Q. Have we seen debit card promotions targeted at non-customers?

A. Absolutely. Debit cards are being aggressively marketed in acquisition campaigns. We see this mainly through rewards programs, since rewards are earned primarily through debit activity. But we also see cash incentives for opening a new account tied to a debit card and debit usage.

Q. Any predictions on credit cards as stand-alone products outside of a banking relationship?

A. Companies have recently moved away from this, so I don’t expect a return anytime soon. MBNA was bought by Bank of America and Capital One obtained its banking charter so that it could use deposits to fund its lending activities.

Q. Can you explain how the deposit money app works on the iPhone?

A. The feature works through an iPhone application that customers download from the iTunes Store. When the user accesses the application they are asked for their user name and password. To deposit a check, the customer touches “Remote deposit.” The check must be placed on a dark surface. Then the customer takes a picture of the front and back of the check. While in this mode, green lines are visible so the customer can line up the check correctly. Once both sides are captured, the customer clicks submit and the transaction is complete. A video of the process is available here:

Q: Have you developed any predictions for the future of credit cards?

A. My colleague Andrew Davidson conducted a webinar last September titled “Seven Predictions for the Future of Credit Card Marketing.” If you’d like a copy of this presentation, please email press@mintel.com. His predictions were:

1. Direct mail is coming back
2. There will be more integrated marketing campaigns
3. The brand message will become more important
4. The CARD Act will lead to creative new products
5. The national wallet will shrink
6. The subprime segment will redefine itself
7. The card industry will adapt to the environment

Today (Wednesday, May 5th), Mintel Comperemedia is hosting a webinar on “Seven Predictions for the Future of Banking.” Join Susan Wolfe, Vice President of Financial Services, as she explores seven key predictions for banking in 2010, using research and examples taken directly from Mintel Comperemedia and custom consumer surveys.

You can register and learn more here: http://www.mintel.com/us-email/compere_sevenpredictions.htm

This presentation will examine:

–The return of banks to “relationship banking” and how they will promote this
–Incentives and their importance in acquisition marketing campaigns
–Use of financial literacy programs by banks as they rebuild from the financial crisis
–Mobile banking as the “new” online banking
–Use of social media among financial institutions

Date and Time: Wednesday, May 5th, 2010 2:00pm-3:00pm CST (45 minute webinar, 15 minutes of Q&A)
Cost: Free

Just seven months after a global recall of roughly 8.5 million vehicles, Toyota is enjoying increased car and truck sales. At the end of March, sales were expected to be 30-35% higher than they were last year. In the first ten days alone, sales surged a whopping 40% compared to early March 2009. Various incentives previously unheard of from Toyota, coupled with their effective catering to loyal customers have helped the company bounce back quicker than expected.

Some notable incentives include:

• Zero-percent financing for the first five years on its top-selling models
• The introduction of the “Toyota Auto Care Premium Package” that includes oil changes and other maintenance services for free over two years for the purchase or lease of any new vehicle
• Cash rebates ranging from $500 to $3,000 depending on the vehicle

Toyota made all the right moves to regain customer confidence and attract first-time buyers. The company admitted fault and was openly communicative with the press. They then made restitution with the aforementioned incentives to quickly resolve a crisis that might have left other competitors in dire straits. A crisis that could’ve ruined the Toyota brand and image seems to have only made the company stronger.

Discover has certainly been busy since the start of the New Year. On January 4, the credit card issuer announced the launch of a national sweepstakes called, “It Pays to Discover Everyday Giveaway.” Every purchase made with a Discover card, through the end of 2010, will qualify for a chance to win up to $1 million. Cardholders will also earn extra sweepstakes entries by using their Discover card in targeted categories such as restaurants, salons & spas, and dry cleaners.

In January, Mintel Comperemedia witnessed the sweepstakes campaign as a direct mail insert, with customer communications promoting a 0% teaser rate for purchases. The communication represents a multi-pronged effort to drive up share of wallet for new charges, ahead of the next phase of CARD Act regulations.

Some communications I’ve seen promote a 0% purchase APR on all new purchases for seven months. Discover’s message is that “this promotional APR is just another way that Discover helps you stay in control.” Other communications also promote a seven-month introductory period but only for purchases made between January 15 and March 15 in specific categories of spend.

Many card issuers have yet to reveal how they will adapt their marketing campaigns in the post-CARD Act environment. The Discover communications state that any payments above the minimum amount due will be applied to balances with high rates prior to balances with low rates. This suggests that Discover is ahead of the curve in terms of CARD Act compliance.

Discover’s high penetration among the wallets of US cardholders means that a grab for wallet share represents a threat to most other players. Discover cardholders tend to use their cards more and are more satisfied than other cardholders due to the card’s cash-back program and its long history of customer service. This latest campaign builds on Discover’s strong reputation at a time when other issuers are holding back in their marketing and sweepstakes campaigns.

With the turn of the New Year and news about potential banking legislation, I’ve been thinking about how the banking industry will change this year. We just put out a press release with five of my predictions, but here are some more things I’ve been thinking about for banking in 2010:

Prepaid cards could be a good alternative to checking accounts
The prepaid industry claims that, for some lower-income consumers, prepaid cards can be cheaper than traditional bank accounts with overdraft protection. This will certainly be true if banks begin to institute monthly fees or fees for bill payments and other types of transactions that are currently free. In a sign that there is more interest in prepaid cards, MasterCard reported it is looking at ways to market prepaid cards to the affluent.

Banks will seek to create “financially literate” customers
Much has been said about how the ongoing economic situation was caused—in part—by a lack of consumer knowledge about financial matters. The “Great Recession” been a wake-up call for every generation. According to Mintel consumer surveys, each generation is reacting differently, but young Echo Boomers have a strong desire to learn more about financial matters. Wells Fargo is tapping into this with its Virtual Island on Facebook.

Mobile banking is here to stay
The success and ubiquity of smart phones is driving banks and investment firms to develop applications that allow mobile banking and payments. User demand will be the reason that mobile banking succeeds. With teenagers and young adults relying on their phones in ways never imagined, mobile banking will become an expected service for the younger generations. At the same time, banks must carefully consider how they’ll engage mobile banking customers to ensure a long-term relationship.

Banks will begin to figure out social networking
Banks have struggled with how to embrace social networking sites such as Twitter, Facebook and You Tube, but 2010 will see them finding new and better ways to get involved. Jwaala, for example, recently announced technology that allows customers to receive alerts through social networking sites rather than through email.

Overall however, 2010 won’t be about financial services companies setting up pages and groups on social networking sites. Instead, banks will start developing applications for use in social media and creating a presence that says something about their brand. They will begin to use social media to network with new groups of customers.

The National Retail Federation (NRF) continues to forecast that this season’s holiday sales will decline 1% from last year. With tighter budgets and consumers looking for discounts, credit card issuers’ battle for holiday share of wallet is fiercer than ever.

Issuers have been gearing up for the holiday season by mailing a range of seasonal promotions to existing customers, including discounts on merchandise, accelerated rewards and additional cash-back. A look at some of the more interesting pieces we’ve seen this year:

• Discover sent some customers a holiday card, offering the opportunity to sign up for a Double Cashback Bonus on up to $1,000 of holiday purchases through the end of December
• Bank of America, Chase and U.S. Bank are three issuers promoting Visa card usage for the holidays. Visa cardholders can receive a 20% discount on purchases of $50 or more at Gap, Banana Republic and Old Navy between December 1 and December 24
• MasterCard has Citi and RBS in its camp. Some Citi MasterCard and RBS Citizens MasterCard customers received a “Holiday Savings for You…to help you prepare for holiday entertaining, gift giving and more”
• Additionally, some card issuers are promoting their own gift cards in seasonal promotions, like State Farm Bank describing its Visa Gift Card as the “perfect gift”

As usual, holiday shopping is intensifying this week and will continue through next week with returns, exchanges and self-gifting. There is a lot more seasonal shopping to be done and card issuers continue to fight for their share.

A bit of shameless self-promotion this week. I’ve got a webinar coming up on Thursday, December 17th. It’s free, the content is valuable, and I’d love it if you could attend.

“Navigating the CARD Act: Evolving Acquisition Strategies”

The CARD Act’s regulations go into effect in just a few short weeks, so I’m going to explore its implications on the credit card industry. We’ve already seen issuers respond with new direct marketing campaigns and strategies, and we expect even more innovation next year. Join me to look at what’s happening now, what will happen in 2010 and which specific challenges will still face the nation’s leading card issuers.

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?

It seems banks have finally gotten the message: people are tired of the traditional “gifts” that come along with new checking accounts. Rolling coolers, free toasters, baseball caps with matching XXXL T-shirts… they’re not incentives worth seeking out.
But cold hard cash? I’ll toast to that. With competition for new checking customers hotter than ever, banks have realized they need to spend some to get some. Cash is the new king of checking account incentives, and the cost of entry isn’t cheap. Recent direct marketing campaigns offer as much as $300 for opening a new account! I’ll concede, that’s more the exception, but $100 is the most commonly promoted incentive.
These cash incentives, desirable as they may be, do come with strings attached. At a minimum, banks require that new customers set up direct deposit within a certain timeframe after opening the account. Sometimes customers have to satisfy stricter requirements, including electronic bill payments or a pre-determined number of non-PIN debit transactions each month.
Even with the requirements, cash incentives are the hottest trend in checking right now. Banks are eager for more deposits and their aggressive push for new customers may drive cash incentives even higher in coming quarters. Do you think this is the right strategy?