Six Tips for Banks to Develop a Small Business Content Program

October 18, 2016

In a recent EMI blog post, we discussed ways that banks could re-engage with the small business market. One of these ways was to develop content of interest to small businesses. The development and distribution of targeted content can enable banks to re-establish credibility, act as a proof point of banks’ commitment to small businesses, and reposition banks as a key source of advice for small business owners.

The following are six tips for developing a content program aimed at small businesses:

Conduct due diligence. Survey small businesses and company stakeholders to develop insights into what content topics small business owners are interested in, how they consume content, and how they perceive banks as content providers. In addition, banks should study competitors’ content development to identify best practices as well as approaches to avoid. And banks should also assess content topics and styles deployed by dedicated business media, such as Inc. and Entrepreneur.
Develop a content portal. Large banks—such as Bank of America (Small Business Community), Capital One (Spark Business IQ), JPMorgan Chase (Chase for Business Resource Center), U.S. Bank (Connect), and Wells Fargo (Wells Fargo Works for Small Business)—have all developed small business portals. These portals publish a regular stream of small business-related content, which aim to drive small business awareness, interest and engagement. Establishing content templates and guidelines—covering content length, styles, colors, fonts, logo treatment, images and graphics, and approval processes—facilitate timely content development and publication.
Focus on topics of interest to small businesses. Content developed for small business owners tends to be focused on key business life stages (e.g., starting a business, growing, selling), and related business challenges and financial needs. Such content positions the bank as a trusted advisor for small businesses at different stages of evolution, and can act as a catalyst for small business engagement.
Utilize a range of content types. Banks have a range of different content types at their disposal, each of which offers specific advantages in terms of developing and presenting content. These include articles and blog posts, case studies and success stories, podcasts and webcasts, videos and infographics. Wells Fargo has a dedicated “Wells Fargo Stories” section on its website, which include thumbnail summaries, which link to additional detail, including video. Content should be presented in easy-to-consume formats for small business owners who are bombarded with information on a daily basis.
Promote content across multiple channels. Banks should aim to present this content across a number of channels, including social media (in particular LinkedIn and Twitter), the company website, small business media, and small business-oriented events. In addition, this content should be adapted for use by the bank’s small business bankers in branches or on the road. Some banks that maintain small business content and advice portals extend this branding into social media. A standout example here is the @WellsFargoWorks Twitter handle, which mirrors the bank’s Wells Fargo Works for Small Business portal.
Carry out small business surveys. Many of the large banks now conduct and publish regular (annual, quarterly or even monthly) surveys that track business sentiment and key challenges. These surveys help demonstrate the banks’ commitment to the small business market. And findings from the surveys provide fodder for content development that can be used across a range of channels. Many of these have been in place for more than a decade (PNC has published a semi-annual PNC Economic Outlook since 2003), and some include a metric that is tracked over time (e.g., the Bank of the West Small Business Growth Index). A number of banks create market-specific versions of these surveys (U.S. Bank publishes versions of its annual small business survey for 11 markets in its footprint), which help raise the bank’s profile in these markets. Banks have also conducted one-off surveys of current hot topics (e.g., the TD Bank EMV Survey in November 2015) or focused on targeted segments (the August 2016 Bank of America Women Business Owner Survey).

Developing relevant and engaging content across multiple media enable banks to position themselves as aware of small business ambitions and needs, and committed to partnering with small business owners to develop pathways to business success.

Banks’ Branch Strategies Must Involve More Than Just Closing Branches

September 30, 2016

According to the FDIC, U.S. banks have been cutting branches steadily in recent years. Offices in FDIC-insured institutions reached a high of 99,500 at the end of 2Q09, but have declined by almost 8% since then, to less than 92,000.

Bank branch reductions are primarily driven by two factors: cutting costs in a low-revenue-growth environment; and the belief that customers’ increase use of electronic channels for everyday banking needs means that banks need fewer branches. According to the American Bankers Association, 73% of U.S. adults identified the Internet and mobile as their preferred banking methods, with only 14% naming branches. However, customers remain committed to branches. According to a March 2016 Accenture survey, 87% of North American banking customers expect to still use bank branches two years in the future. A branch strategy that simply consists of branch cuts fails to take into account customers’ ongoing branch affinity, as well as ignores the significant role that branches can play in helping banks meet sales and service goals. Here are four strategies that banks can follow to optimize their branch investments:

Create specialist branches. Some banks are opening offices to target specific segments, such as commercial clients or high-net-worth individuals. For example, BMO Harris opened a commercial banking office in Dallas in June 2016, while Wells Fargo opened a Middle Market Banking office in Albany in August 2016. These branches are located, designed and staffed to cater to the characteristics and unique financial needs of these segments. Unlike traditional branches that tend to form part of a network, these specialists branches can operate on a standalone basis, thereby ensuring that costs stay under control.
Use branches to promote digital services. Recognizing the transition to electronic channels for everyday banking transactions, banks can leverage their branch network to demonstrate the ease-of-use and value of these digital services to customers who are slow to embrace technology, while also showcasing innovations to early adopters of new technologies. Bank of America has deployed 3,800 ‘digital ambassadors’ in its branches who help customers understand and use its online and mobile banking services.
Overhaul branch staffing. Smaller branches require fewer personnel, but the staff must be comfortable with performing a range of service and sales activities. Embracing this model, PNC plans that half of its branches will have converted to ‘universal branches’ by 2020 (18% have done so to date)
Scale down the overall branch footprint. As they seek to reduce branch costs, banks need to take into account the benefits of having a physical presence in markets. This can involve using smaller branch formats (one extreme example is PNC’s portable 160-foot “Tiny Branch” on the West Virginia University’s Morganstown campus), reducing branch density, replacing a series of existing branches with one big flagship store, or even opening new branches in high-growth/high-potential markets. Decisions on the number, location and format of branches should be based on analyzing a number of key factors, including: competitive intensity; market size, growth and composition; current branch usage; short-term costs; and longer-term savings.

Credit Card Issuers Focusing Growth on Different FICO Score Segments

May 24, 2016

The Wall Street Journal recently reported that credit card outstandings may reach the $1 trillion threshold in 2016, for the first time since before the 2008 Financial Crisis. This is mainly due to overall economic growth and the rise in employment. Issuers are now increasing their focus on growing outstandings by making aggressive acquisition-and-activation offers (American Express is currently offering a bonus of up to $300 on its Blue Cash Everyday Card), promoting lengthy introductory offers, and increasing credit lines for existing cardholders.

A big question for issuers is, should they concentrate efforts on particular FICO score segments, or seek to drive growth across the FICO score spectrum? In the aftermath of the Financial Crisis and the resulting huge spike in charge-off rates, many leading issuers narrowed their focus, concentrating on the high-FICO score affluent segments, and ignoring subprime and low-prime consumers. However, as the economy has continued to recover, at appears that some issuers have renewed interest in the lower-FICO score categories.

EMI’s analysis of leading issuers’ 1Q16 SEC filings reveals that issuers are following different approaches:

1. Growing outstandings across all FICO score segments. Regional bank card issuers like Wells Fargo and Regions have relatively strong growth across all FICO score segments. It is notable that the <600 subprime segment accounts for 9% of Wells Fargo’s outstandings, a higher percentage than for other issuers. Wells Fargo issues a subprime card and recently incorporated a free FICO score into its mobile banking app.

2. Generating stronger outstandings growth in low-FICO score segments. Capital One, Discover and SunTrust all have markedly strong growth rates in outstandings for low-FICO segments. 35% of Capital One’s outstandings come from the <660 FICO segment, whereas this segment accounts for only 18% of Discover’s outstandings. Discover grew <660 outstandings by 12% (to $10.0 billion), and it is worth noting that Discover launched the Discover it Secured Card in January 2016. SunTrust grew its <620 FICO portfolio by 39%, although this was coming from a low base of just $45 million.

3. Continuing to focus outstandings growth on higher FICO score segments. The three largest issuers—Chase, Citi and Bank of America—all continue to experience declines in outstandings in their lower FICO score segments, which is offset by growth in higher FICO score categories. Regional bank card issuer PNC also follows this pattern.

As issuers look to continue to grow outstandings (and appear to be willing to let charge-off rates rise from their current low levels), they will need to develop approaches to target the different FICO score segments, including:

Ensuring they have products in place to target different FICO score—and demographic—segments.
Developing messaging, pricing, acquisition/activation offers and ongoing incentives to both attract new cardholders and encourage existing cardholders to increase their spending and borrowing
Creating tools (such as free FICO scores) to educate consumers on understanding how their credit scores are determined and how they can practice good credit management