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As I stated on Twitter, “everyone” is considered a customer segment also. This “targeted segment” just smacks of laziness. It also makes Bank Of The West sound like almost every other bank and credit union in the market.

They claim they want a specific type of customer, but they really want everyone. Most people don’t want to be a part of something that accepts everyone. Customers are more attracted to something that’s exclusive.

What an 18 year old wants in a bank is different from what a 30 year old wants. What those two want would be different from what a 50 year old wants. From what I’ve seen, if you target a market that has more than a 10 year difference in age, you’re just praying you’ll get lucky.

Now, I don’t think using age as a key criteria is bad, as long as it’s used in conjunction with other demographic segments. But if you’re one of those people that still thinks age is the only indicator that matters, you might want to switch careers from marketing to telemarketing.

Apple will be releasing facial recognition technology in their iOS 5 update.  This means that mobile banking apps for Apple products will be able to implement a new layer of security.  I can imagine that developers will jump all over this feature.  One can only hope that vendors will be aggressive with implementing this also.

You can read more about the update over on ReadWriteWeb.

In case you’ve been sitting on the fence about implementing that mobile strategy, it’s time to go all in.  Android device sales have been keeping pace with Apple devices.  In the near future, more people will access the web from their mobile device than their computer.  You can bet they’ll be looking for that cool mobile banking app also.

Well congratulations.  You’ve been successful with setting up the Twitter, Facebook, Flickr and YouTube accounts for your financial institution.  You’ve also set up a blog that has more than 100 daily readers.  You’ve even run a few Foursquare and Facebook contests.  Your Twitter account is actually used to communicate with customers, not just blast marketing messages.  I’ll bet you’re even looking into get your own special badge on Gowalla.

Looking at your website, you have all your social media icons listed on your home and contact us pages.  They can even be found on the footer of all your pages. And the best part?  Upper management bought in after you proved the business case for why social media is important.

But are you really all in yet?  The next time you’re watching those shows on DVR, watch some commercials instead of skipping them.  Did you notice that some companies mention their Twitter and Facebook pages in their commercials?  Open a few non-industry magazines and look at the ads.  Notice Twitter and Facebook icons there also?

Now look at the marketing material you send out.  I’m willing to bet that you don’t promote your social media sites on anything other than your website.  If you go into your branches, you won’t see any icons listed on your displays either.  But you know what you will find?  The link for your website.

The adoption of social media reminds me of when online banking came onto the scene.  It seems like it took forever for banks and credit unions to promote their website in their marketing materials.  Online banking was the driving force for getting websites promoted by marketing.

I’ve seen some discussion about low numbers of Facebook fans and Twitter followers.  Because these numbers are so low, people question the validity of social media in financial services.  This same argument was used when online banking first became available.  If you build it, people won’t necessarily come.

Yes, most of your online banking customers probably know you’re on Facebook and Twitter.  But that’s just because they noticed it on the homepage when they were logging into online banking.  Besides, that’s only about 25-35% of your customers.  We all know the online banking login screen is the #1 hit page on your website.

You have other marketing channels that you need to use to promote your social media presence.  There is absolutely no excuse for you to not list your links on direct mail, email messages, commercials, and branch displays.  I’m sure they will fit right beside or below your website link.  And if you’re really social media savvy, you’ll create and display a special #hashtag for your customers to use.

Comic from Dilbert

Well that’s so fitting.  The US Women’s Team pulls off a victory in one of the most exciting World Cup games ever and USAA is the #1 Place to Work in IT.  It’s nice to see a financial institution is on top just when you thought the financial services environment was lagging.  What’s even more surprising is they’re #1 for the second year running.

USAA has long been considered an innovator in financial services.  The fact that they are also an awesome place to work is no surprise.  If you give techies an environment where they can continually learn and try out new ideas, great things can happen.  USAA seems to have it figured out.  If you take care of your employees, they will in turn take care of your customers.

In an environment where we hear of banks and credits closing every week, USAA is giving 18% performance bonuses to all 22,500 of their full-time employees.  Notice, it’s not just the executives and top salespeople that are being rewarded.  USAA recognizes that every one plays a part in making the company successful.

They must be doing something right, because every USAA customer that I know is very satisfied with the company.  They also have had accounts there for a number of years.

Typically, you hear executives talk about being like Bank of America, Wells Fargo, or Citi.  USAA, on the other hand, has been laser focused with taking care of the financial needs of our armed forces personnel.  They go to great lengths to make the experience as easy and painless as possible.

USAA understands that this is a service business.  It’s also reflected in how they treat their employees. Hopefully other bank and credit union executives will begin to look at USAA as a model to emulate.

Photo from Denver Post

This sounds very similar to the banking industry.  Decisions are still being made based on what happened in the past.  Ron Shevlin posted a graphic on his blog recently about the declining branch channel.  Yet executives still have increasing branch goals as though branch traffic is going up, not down.  There also isn’t much emphasis on other channels that customers obviously seem to prefer.

Like Tiger, they just want to stick to what they know and what worked in the past.  Well, Tiger now has the lowest ranking he’s ever had in his career.  Banking is going through a similar struggle.

The question is, will executives actually start to make decisions based on the changes in the industry?  Telling the rank and file that “banking has changed” doesn’t mean much when your strategic plan is to do more of what you did in 2002.  Just like Tiger needs to heal and improve his fundamentals, bankers need to do the same.

I think playing new courses could help Tiger, and capitalizing on the changing environment can help bankers.  Going outside your comfort zone is how you grow and become better.

One reason that developers have stayed on the Apple bandwagon is that they make it so easy to get paid.  Apple tries to make everything is simple as possible.  Giving developers tools that help them get paid quickly and view reports about sales is one way to keep them happy.  If only banks and credit unions did the same.

Lately I’ve been working on my secret project, code phrase “Rice Krispie Treat.”  With some of the planned features, I have need of a merchant account.  Every single bank and credit union that I viewed online offers business services.  Unfortunately, I have to call someone and set up an appointment to get started.

Compare this with companies such as PintPay, Chargify, Recurly and CheddarGetter.  In about thirty minutes, I can sign up and be ready to accept payments on my website, all from the comfort of my couch at home.  Actually, it would take that long if I wanted to fully integrate their gateway into my site.  For basics, it’s less time than it would take to open a checking account.

Commercial customers are the lifeblood of a financial institution.  Giving them tools that help them run their business better should be a higher priority.  They need more than online banking.  Besides, if I can sign up my business for online banking while online, I should be able to obtain other services online also.

First, let me say that I do understand where Steve is coming from.  I used to work for a large community bank and I’m also a fan of credit unions.  But I still do a majority of my banking with one of the big four.  There are really only two reasons that I stay there:

1. They have ATMs coast to coast
Years ago, I used to travel a lot.  Now, I anticipate traveling even more.  It’s nice to know that wherever I go in the US, I can find an ATM for my bank.  I do realize that credit unions actually have a larger network (which is something they DON’T play up enough, if you ask me.)  It all comes down to location, location, location. 

With my former employer, as soon as you left the coast (and I mean a county or two over), you were subject to ATM fees.  Actually, that’s no longer true.  There is just a perception that you have to pay a fee.  You can use an ATM if it’s in the MoneyPass network.  However, it’s not really advertised, so they are like credit unions in that regard.

2. Better technology
How many banks and credit unions have mobile banking through the mobile browser?  How many have an app?  How many have text banking?  Now, out of the ones have text banking, how many offer transaction alerts? Let’s be clear, mobile banking through the browser doesn’t have a big adoption rate for a reason.  The FIs that are really growing mobile banking faster than the industry rate have text banking with transaction alerts. 

With very little marketing, my former employee blew away Bank of America’s adoption rate because they had text alerts.  However, most FIs don’t offer this feature.  The big four all have text banking.  They also have apps for smart phones and have either launched or plan to launch a tablet app.  Here are some other services they offer:
– Online loan applications
– Online account opening
– External transfers
– Deposit through ATM
– RDC using a smart phone
– PFM

In customer segments, I think I fall into the “tech-savvy and prefer self-service” segment.  I want to perform my bank transactions through any channel that suits me.  I also want to be able to go an ATM without incurring a fee, no matter where I am.

The smaller banks and credit unions aren’t there yet.  Heck, I have a feeling that most of them are still trying to push through the business case for better technology to upper management.  But to most people, a checking account is a commodity.  Although my account doesn’t say “free”, it is free, provided I stay within the required conditions.  For the life of me, I don’t see what is so bad about this.

At the end of the day, customers just care about whether their money is safe or not.  Also, can they get to it any time/way they want?  I have never been charged a fee that I didn’t know about.  But then, I tend to read the fee schedule on my account.  For the times I was charged a fee, I was able to get it reversed most of the time.  For the times that I wasn’t, there was a lesson learned.

I think that as an industry, we need to get past this “no free checking” = “bad bank/credit union”.  There are a lot of happy customers that are willing to pay for peace of mind and multiple banking channels.  Odds are, these are the customers banks and credit unions would want. Offering a free checking account isn’t going to make them open an account.  That’s just one of the many bullet points they’ll be looking at.  They also know that “free” doesn’t necessarily mean better.

RoR is open source, which wasn’t an option for use at work, but I loved the potential of the language.  Now that I’ve started on my magical journey, I’ve decided to dive head first into the language.

Over the years, I’ve built quite a library of books and PDFs on the language.  However, I’m more of a “hands-on” kinda guy.  So last month I attended the Ruby on Rails course offered by Pragmatic Studio.  This class included three days of hands-on training and was taught by Chad Fowler and Dave Thomas.  Considering the contributions of these two to the Rails community, I’m not sure I could have had better instructors.

I highly recommend this course and will be taking Part II once I have a bit more experience under my belt.  The only criticism I had was, there wasn’t an “answer key” given at the end for all the exercises.  It would have been nice to use as a reference.

My friend Tom Wilson, over at Jack Russell Software, also recommended Code School, which is developed by Envy Labs.  There are two Rails courses available on the site, Rails for Zombies and Rails Best Practices. Both are split into five lessons with multiple exercises that you complete in the browser.  If you get stuck, you are able to get hints that will help you complete the exercise.

I went into these courses thinking it would be about basic stuff that I can read in any Rails book.  However, I was pleasantly surprised.  Quite a few of the exercises dealt with material that was more advanced than the material reviewed with Pragmatic Studio.  I think it would be in the best interest of any level Rails developer to go through both of these online courses.  I’m sure you’ll come away with something new that you’ve learned.  Rails for Zombies is free while Rails Best Practices is currently being offered at a discount for $45.

I’ve already started to apply the knowledge I gained from Code School into the project I’m working on.  One thing I’ve learned from the courses at Pragmatic Studio and Code School is, I really need to start digging into the Rails framework.  Also, I need to live on GitHub.  Looking over the code from other people is another great way to learn.  I always seem to find that in Rails, there’s an easier way to accomplish your goal.

If you’ve been thinking about incorporating Ruby and/or Rails into your development environment, you’ll be in good company.  There are quite a few FinTech companies that use Ruby on Rails.  Some examples are The Garland Group, Geezeo, Jwaala, and BankSimple. If things work out, my start-up will be another.

Well, let me amend that.  I hate the current, typical implementation of security questions.  The problem is, all the questions are easy to figure out if you know the targeted customer.  Lately, what I’ve seen is instead of selecting from ten questions, you now have twenty to choose from.  All this means is someone I met after I finished college may not know the answers, but a childhood friend might.

There have already been plenty of high profile examples of celebrity online accounts being hacked through security questions.  The generic choices given aren’t that hard to figure out.  A quick search on Facebook (who uses security questions in typical fashion) will answer a majority of them.  All you have to do is dig through a person’s wall posts and their profile.

A simple solution to all this is to let the user come up with their own questions.  There could even be a list of generic questions to use as a guide.  But it’s a lot better if the user types “What is your favorite cartoon episode” instead of selecting “What was your high school’s mascot”.

5. Twitter users are more educated than the general population.
63% of Twitter users have a 4-year college degree or higher, as compared to only 40% of the general population. If your product/service/company is targeting a more educated customer, there’s a good chance they’re tweeting—or will be soon.

6. Twitter users have higher incomes than the general population.
47% of Twitter users earn $50k or more per year; 24% earn more than $75k. Compare that to 33% and 18% among the general population, respectively.

8. Twitter plays an active role in purchasing decisions.
42% of Twitter users rely on this channel to learn about new products/services, and 41% of them share opinions about products/services via Twitter. Soliciting opinions about products/services and seeking out discounts/coupons/sales are also popular Twitter-based activities.

9. 67% of Twitter users are more likely to buy brands that they “follow”.
Whether interaction on Twitter is the cause of this greater allegiance or not is unclear—but it certainly seems that extra Twitter love doesn’t hurt.

10. Companies that use Twitter average 2x more leads per month than those that do not.
This, perhaps, is the most compelling reason of all to invest some time on Twitter—particularly if your target customer is educated, affluent, and tends to be an early adopter.

Read more: 10 Essential Twitter Stats

Well, after 12+ years, I’ve decided to move on.  The time I spent at First Federal was a great experience and I will sorely miss the friends I’ve made these last few years.  Over the years, I’ve developed a very deep passion for the banking industry.  Also, I find the changes that are currently going on exciting and I enjoyed helping the bank adapt to those changes.

However, I feel that in order to grow and accomplish some of my personal goals, it was time to step out on faith.  So although I’m sad about leaving, I’m excited to see what new adventures await me in this magical world.  For now, I’ll take a short break to rejuvenate, and then it will be full speed ahead.

But don’t worry.  Whatever the future holds, I’ll still be blogging about banking and technology.  As I told one friend, I look at these last twelve years as my K-12 education and I’ve graduated.  Now it’s time for my higher learning education.

Image from GoComics

The owners mentioned that because they were so busy trying to keep the business afloat, they were lax in following up on the financial health of their business. Now, I was confused as to why they didn’t regularly meet with the bookkeeper.  They also never had an audit performed by an outside agency.  But their biggest issue? They didn’t have online business banking.

What gave it away was the part about never seeing their bank statements.  With online banking, they would have known within 60 days that something was wrong.  They could have also seen their check images and received alerts about wires and balance thresholds.  Such a simple service could have saved them a lot of heartache and alerted them to problems.

After pondering it for a few minutes, I figured, there’s got to be an easier way.  Then I remembered, “duh, login to Mint to get it”.  After a quick search in Mint, I had all the information I needed and finished putting everything together.

Needless to say, I was pretty annoyed that neither of my banks offered more than 12 months of history (6 months seems to be the standard) and 18 months of eStatements.  Financial institutions are pushing their customers towards electronic services, but there is a time limit on available information.  The question I have is, “Why?”

For the bigger FIs that built their own online banking system, there is no excuse.  If I do a quick search online, I can find an external terabyte hard drive for less than $100.  When I last checked, I had over 7 GBs of space available for use in my Gmail account.  With the abundance of cheap storage, FIs can’t offer more than 12 months of transaction history and 18 eStatement files per account?

I’m willing to bet that if I download all my available transaction history and eStatements, it would take up less than 250 MB.  That is all the information for 15 accounts and 270 eStatement files.  I’m also including all loan history and check images in that number (but who writes a lot checks now-a-days?)

With online storage solutions like Amazon Web Services, there is no excuse for the larger FIs to not offer unlimited history and storage.  The smaller FIs have their vendor to blame.  They aren’t completely off the hook, however.  Their vendor will implement a larger storage solution as soon as a few FIs start complaining loudly and/or switching vendors. (With all their hype, I fully expect BankSimple to offer unlimited storage.)

So I hope you all start complaining to your FI, and they start complaining to their IT department or vendor.  If they want us to go the self-service route, then they need to enhance the service.  Otherwise, there’s always Mint.

Small businesses seem to love what PFM can offer them.  PFM offers a better way to see the financial health of their business.  Interestingly enough, I haven’t heard anything about banks and credit unions offering a PFM solution to their business customers.  And business customers are proving that they are more than willing to pay for this type of service.  Just ask inDinero and 60mo.

Once again, banks and credit unions are missing out on a market that is interested in paying for a needed service.  Fortunately, customers would prefer to use their FI for this service.  However, they won’t wait forever for their FI to make up their mind and offer the service.

Photo by RambergMediaImages

One thing that I’ve noticed about these three companies is, they all seem to be customer-centric.  While every bank and credit union talks about their great service, these three seem to back it up.  USAA and TD Bank especially seem to offer products that allow their customers to bank the way that is most comfortable to them.  Unlike their peers, these institutions don’t follow the crowd.  They lead the crowd and let everyone else pay catch up.

This follow the crowd mentality has always been something that has bothered me.  Especially when you realize that following everyone else is what brought us to this crisis in our industry.  But I think there are other issues at play here.  In the past, bankers were the ones that controlled the flow of money.  Without much work on their part, bankers could just wait for customers to come to them with requests.  Now, with disruptive technology, one does not have to rely on a bank to get access to capital.

I believe this “wait and see” approach is one reason there has been a lack of innovation in banking.  Here’s one example: everyone tends to agree that mobile banking will play an integral part in the future of banking.  But I’ve seen comments on blogs where executives were reluctant to offer mobile alerts because it will reduce NSF fees, so they were just holding off on mobile altogether.  Not very customer-centric is it?  Never mind that offering mobile alerts could drive up customer acquisitions and increase income.  They’re more focused on the “potential” loss of fee income.  But as competitors begin to offer mobile, they reluctantly look to add the service.

Now, the biggest reason for the lack of innovation?  That would be fear.  Particularly, the fear of losing entrenched power.  If you think about it, most bank and credit union executives view IT as a cost center.  Therefore, they don’t look at it as a competitive advantage.  Also, they don’t understand it, and really don’t want to understand it either.

Over the last few years, there have been articles about the purpose of physical branches changing.  Branch traffic has been steadily declining for years.  This means that the opportunities for cross-selling have gone down also.  But online usage is trending up.  Which means online account openings, bill pay, mobile, and other online services are also trending up.  Also, customer acquisitions are cheaper online.

So in order to survive, the people that currently have the power have to deal with those IT people.  Which means they’d have to give up power.  But more importantly, if the branch isn’t as important and online is, what will their future purpose be?  They don’t know that much about online banking, but they know a whole lot about branch banking.  Better to keep their head in ground and ignore the change that is happening around them.  Just maintain the status quo at all costs.

We all know that people that ignore change and try to stay the same are just spectators.  Spectators aren’t in the game.  If you’re not in the game, that means you can’t possibly be winning.  Which means you’re losing.

When I read this story, I thought this would be a great idea for banks and credit unions.  We’re constantly looking for ways to bring in more deposits. A contest like this with an emphasis on savings or CD accounts could be a winner.  This would have been cool here in Charleston, SC, since we actually got over three inches of snow in the month of December.  You could also base the contest on a sporting event.  The Superbowl and March Madness offer great opportunities.  For instance, if a customer picks all of the Final Four, the CD they opened in March for $5000 is doubled.

I think this would be way more effective than the usual newspaper CD teaser.  And I’m sure there is an insurance agency that would offer a policy for something like this.  Of course, I wouldn’t suggest using the bank-owned insurance company…