Regulatory and cost pressures on revenue are forcing banks to rethink their product offerings. Financial institutions now know the final Federal Reserve ruling on debit card “swipe-fees” and can anticipate the potential multi-billion dollar loss to the industry as a result of the new rule, which goes into effect October 1^st. Banks must also account for the cost of the branch network and rising technology needs. In this current environment, firms need to react quickly to ensure their product choices remain relevant and attractive.

The Council on Financial Competition is committed to helping you stay ahead of the curve by offering a number of regularly updated resource and research topic centers.

• Learn about new and innovative deposit products showcased in our Global Product Innovation Library.
• Track new deposit product trends and learn how to optimally price checking products through our Deposits Topic Center.
• Understand emerging technological shifts for consumer banking and prepare for new customer expectations and new competitors by reading our recent research study.

Confronted with intense and sustained regulatory uncertainty, the banking industry has spent much of the last 24 months in a period of “muddling along”. Rather than guess early or guess wrong on any of the big issues, that will mean big change, most institutions have decided not to “guess” at all – let someone else be the “first mover”, let someone else take all the risks.

Yet today, with the much anticipated Consumer Financial Protection Bureau (CFPB) established, and the Senate having rejected another proposed delay on debit card fees, the grid lines of change seem clearer than ever before. The lobbying effort will of course continue, but based on the seismic shifts we’ve already seen, key questions emerge: Where will we turn for revenue? Can innovation and regulation co-exist? What are the principles that should drive our business in an age of regulation?

How We Can Help:

As members think through these difficult questions, the Council has assembled, and will be continue to update, a range of decision support materials, including:

• A Wolf in Sheep’s Clothing? Managing Risk with a Compliance Mentality – From our sister company, TowerGroup, this webinar explores how firms can overcome the challenges of managing both risk and compliance while simultaneously advancing strategic objectives.
• The Regulation Opportunity: Competing Effectively Amidst Regulatory Uncertainty— This brief thought piece articulates a likely trajectory of change based on what The Council sees as the four principal drivers of reform.
• Consumer Financial Protection Bureau: Observations, Challenges and Opportunities – Based on 40 interviews with senior executives, this White Paper drills down on the much anticipated CFPB, exploring likely areas of focus,  expected impact on FS firms and consumers, and how leading institutions plan to respond.  
• Reg E Overdraft Opt-in: The First 100 Days (and Beyond) – This TowerGroup study explores what steps, and what success, banks have had in seeking to regain fees, and what new issues have surfaced on overdraft coverage.
• Financial Regulatory Reform Resources – Updated weekly, this resource center provides an overview of all the latest regulatory developments worldwide.

Retail banking has reached an inflection point, where prevailing assumptions  begin to lag emerging realities. Customer behavior, competition, and business models are changing. Perhaps at no other time in the history of finance has the business model for retail banking been under such pressure. Branch traffic is declining. New entrants into financial services–from start-ups to Google–are prepared to challenge every bank activity. Meanwhile, as the graph to the left shows, many banks have built their networks on fee income that is now being stripped away by regulation.

To succeed over the next 3-5 years, banks must step back, examine their strategic positions, and question the assumptions that drive their businesses. To meet the challenges ahead, banks need a clear picture of the emerging competitive environment and the strategic steps necessary. To this end, we offer our members ”Rethinking Retail Channel Strategy.”

Will new regulation lead to the demise of “totally free checking?”  Most executives think so. 

As banks focus on re-pricing their portfolio of checking products, many will miss the opportunity to generate non-traditional fee income.  In particular, bancassurance provides a unique opportunity to capitalize on customer risk adversity while increasing fee-based product sales in the branch.

Retail banks have struggled for years to sell insurance, failing to gain customer share of mind and equip staff to recognize opportunities.  In partnership with the Insurance Advisory Board, the Council has identified four common principles for successfully selling insurance in the branch:

1. Get the timing right:  The window of time in which customers are open to purchasing insurance is brief, so link insurance cross-sales to a primary asset purchase or life event.
2. Ensure it’s easy:  Insurance products are complex and the sales process often places a significant burden on unsure customers, so narrow product sets and limit coverage ranges to ensure the underwriting process, benefits, and terms are straightforward.
3. Use Information:  Cross-business silos prevent banks and insurers from sharing information to uncover cross-sales opportunities. Banks have a unique asset:  checking, savings and loan accounts help them uncover customer life events or major asset purchases.  Mine this data (e.g. customer demographics, change in transactions, or complementary purchases) and share it with the insurance side of the business.
4. Make only relevant offers:  Insurance-related interactions are not a part of customers’ day-to-day lives, so when making an offer, ensure that it’s relevant and positioned in such a way that the customer understands how it links to their lifestyle. Offering identify theft protection, for example, when a customer calls to report the loss of a debit card, is highly relevant.

CFC Members, see how other institutions implement the four principles to successfully sell insurance in the branch.  Executives interested in this topic, may also be interested in the Council’s resource center on fee-base deposit products.