Category Archives: Commercial Banking

Mobile banking reaches critical mass for big banks

The 4Q11 financials from both JPMorgan Chase and Wells Fargo underline the extent to which mobile banking has emerged as a key banking channel, while also indicating that online penetration may have reached a ceiling.

  • Chase:
    • Between 4Q10 and 4Q11, Chase grew its active mobile banking customers by 57%, while during the same period active online banking customers increased by 3%
    • Active online banking customers as a percentage of total Chase checking customers rose from 62% in 4Q10 to 65% in 1Q11, but has remained at 65% for the three subsequent quarters.  Active mobile customers as a percentage of checking customers rose from 20% in 4Q10 to 32% in 4Q11
    • Active mobile customers as a percentage of active online customers rose from 32% in 4Q10 to 48% in 4Q11
    • The rate of growth in active mobile customers does not yet show signs of abating.  The quarterly growth rate fell from 13% in 1Q11 to 9% in 2Q11, but then increased to 10% in 3Q11 and again to 16% in the most recent quarter

  • Wells Fargo:
    • Active mobile customers increased 55% between 4Q10 and 4Q11.  During this period, active online customers rose 8%
    • Active mobile customers as a percentage of active online customers rose from 26% in 4Q10 to 37% in 4Q11

Brighter outlook for small business lending

In recent quarters, there has been significant growth in U.S. commercial lending, with many leading banks predicting that this strong recovery will continue in 2012. And now the small business lending market, which has been in the doldrums since the onset of the financial crisis in 2008, is starting to show some signs of life.

JPMorgan Chase reported today that it grew EOP business banking loans for the fifth consecutive quarter in 4Q11.  Business banking loan originations increased 24% in 2011 (although the stop-start nature of the recovery is seen in the fact that business banking originations were down 4% y/y in 4Q11).

Other positive signs in the small business loan market:

  • The most recent issue of the Federal Reserve’s Beige Book highlighted a pickup in business loan demand (some leading banks have claimed that weak demand, rather than more restricted access to credit, has been the main impediment to small business loan growth).
  • There are signs of improvement in the broader economy (notably a decline in unemployment rate) , and these macroeconomic factors tend to have a strong impact on consumer and small business optimism.
  • And small business optimism is indeed recovering. The National Federal of Independent Business’s Index of Small Business Optimism rose 1.8 points to 93.8 in December, which is still below the key 100-point threshold, but up from a low of 81 in March 2009. Signs of an improved outlook can also be seen a recent TD Bank small business survey.

So, banks have significant opportunities to build their small business franchises.  However, many banks need to recognize that they have suffered reputational damage in recent years, and should focus on developing an integrated sales and marketing strategy to re-position themselves as a trusted provider of financial products, services and advice to U.S. small businesses.

Role of social media in growing bank revenues

At last month’s Financial Services Marketing Symposium, a question posted by Tim Spence of Oliver Wyman to kick off the conference reflected an issue on attendees’ minds: where does the financial services industry find revenue growth?  This is top of mind in the industry, as the lower loan-loss provisions, which boosted bank profitability in 2011, are expected to tail off in 2012, so financial institutions are now looking to the revenue side of the ledger to maintain and grow profits.

According to the top 25 banks’ recent forecasts, all 25 plan to increase revenue by growing their market share – which means that some of these institutions will fail do to so.

In an environment characterized by increased competitive intensity, technological advances and renewed focus on customer relationship optimization, banks are investing in a range of new service and sales channels, with social media prominent among these emerging channels. A survey of the FSM conference audience revealed that 67% of attendees’ banks have a presence on Twitter, Facebook and LinkedIn. A recent report by FIS Global shows that many top banks have a social media presence on these three main social media platforms:

What was notable about the social media discourse at the conference is that none of the speakers explained how participation in social media channels improves revenue for their organization:

  •  Paul Kadin of Citibank focused on the fact that Citibank’s social media presence has helped to improve its Net Promoter Scores
  • Julie Berkun Fajgenbaum of American Express OPEN discussed the organization’s social media goal: active participation by message recipients
  • Tim Collins of Wells Fargo emphasized that social media is not the right channel for pushing products; rather, it is a forum for authentic, relevant messages to customers

Given the current environment, what is it about social media that allows financial institutions to justify spending resources on developing a presence in this channel? Many speakers emphasized the value of using social media in a genuine way to add value to customers’ lives; some pointed out the opportunity to make customer service more effective through social media. Perhaps the biggest opportunity of all is to differentiate a company from the pack, since no one has really figured out the “secret sauce” to financial services social media strategy – differentiation that will be crucial in the fight for market share during 2012.

For now, financial institutions see social media as an increasingly important customer service channel, and are now focusing attention on addining new social media functionality, as well as integrating social media with other channels in order to optimize relationships.  Over time, as customers become more comfortable with using social media to interact with their financial institutions, opportunities to leverage social media for new customer acquisition, as well as customer cross-sell and upsell, should begin to emerge.