New Market Partners

CUES Webinar: Generating Non-Interest Income

George Hodges — Tue, 20 Mar 2012 13:47:32 +0000

Webinar Date: March 27, 2012

Presenter: George Hodges, Managing Director, New Market Partners, LLC

Can’t solveliquidity problems? You may have an immediate opportunity to expand services to existing members and generate non-interest income.

A dominant theme right now is the absence of lending opportunities. Unfortunately, most credit unions don’t have any control over this, so it begs the question: Are there other opportunities to grow revenue and expand your member relationships outside of lending?

If any of the following scenarios fit your credit union, the answer is probably yes:

35% of your members are not profitable because their only product is a low balance checking or savings account
Your serve a major university or large military base, but don’t seem have a good product fit for the student population or enlisted personnel
You have a youth/young adult strategic initiative, but don’t yet have a strong mobile/card based product to support it
You have an underserved designation with a working class population that is different than your current suburban, mass-affluent member base

What each of these scenarios has in common is a large number of what the regulators call “underbanked” members. In this session you will learn how innovative credit unions are using outsourced technology and risk management to successfully, safely,and profitably compete with both large retailers and traditional check cashers by offering alternative banking products including:

Reloadable prepaid debit cards
Guaranteed check cashing verification
Walk-in bill payment
Person-to-person money transfers

To access CUES website and register for this webinar,click: http://www.cues.org/shop-cues/distance-learning/type/4/id/558

Challenge to banks: Are your “unprofitable” customers really unprofitable? Existing underbanked customers can be your next profitable growth segment.

George Hodges — Wed, 07 Mar 2012 14:43:01 +0000

George Hodges blog post on CFSI’s Compass Principles

Most banks we work with struggle with the Compass Principles value of “profitability and scalability” when looking at financial services for the underserved. Look at the current environment: consumer backlash to increasing fees on existing products and a hostile regulatory environment for small dollar credit products. To reference Arjan Schütte’s recent article, banks would seem to have two equally undesirable choices: be a mercenary or a missionary. He proposes a third path – be a visionary. I don’t know about that, but being a good data analyst and understanding your customer’s behavior is a start. Combining a basic segmentation analysis of your accounts with a look at their “whole wallet” of financial transactions can transform low balance, single account, unprofitable customers into a new profitable growth opportunity.
Here are some scenarios that may fit your financial institution:

You recently completed a segmentation analysis of your customer base and identified that 35% are not profitable because their only product is a low balance checking or savings account.
Your have a major university or large military base in your community, but don’t have a good product fit for the student population or enlisted personnel.
You have a youth/young adult strategic initiative, but don’t yet have a strong mobile/card based product to support it.
You have a growing working class population that is different than your historical suburban, mass-affluent target customer.

What each of these scenarios have in common is what the regulators call “underbanked” customers. According to the FDIC, this represents 23% of the population, totaling 60 million adults in the US. These are typically customers who only have a single savings or checking account with an average balance of less than $1,500 and are not an immediate lending opportunity. At first glance, this is your least desirable group of customers for profitability and growth.

But looks can be deceiving. If you only value their current account relationship, you are losing money on these customers, right? The deposit value of their low balance does not offset the cost of providing them a free account, and they do not generate any other revenue. However, if you were to spend a “day-in-the-life” with these same people, you would find that they make two or three visits every month to another financial services provider to cash their paychecks, pay bills, send money to family members, and purchase reloadable prepaid cards (to avoid overdrafts in their account). This monthly, reoccurring behavior represents an average of $30 per month or more in non-interest fee income, giving these “unprofitable” customers a real value of $360 a year!

So, who is currently capturing your customer’s “whole wallet” of transactions, monthly revenue, and relationship potential? A few years ago, the answer would have been check cashing stores and payday lenders. Now, the list includes Walmart, Kroger, Rite-Aid, and an increasing number of large banks. If you don’t think that serving the underbanked has become mainstream, here are some compelling statistics. Reloadable prepaid debit cards are the fastest growing financial services product, and the two most recent IPO’s in the financial services industry were Green Dot and Netspend, the number one and number two providers of prepaid cards respectively. Or just stop by a Regions Bank branch and check out their NOW Banking product offering, which makes all these services available right at the teller line!

What these large non-financial retailers and banks have figured out is that by bundling “alternative financial services” and using outsourced technology and risk management providers, you can convert previously unprofitable customers into a profitable growth segment, save them money, and expand your relationship for future growth.

So, take a second look at your “unprofitable” accounts, and you may find a golden opportunity to profitably expand services to existing customers and create a “regulatory friendly” new revenue channel at the same time.

Click here to access CFSI’s Compass Principles

http://compassprinciples.com/bankchallenge

Recapturing Revenue From AFS Providers

George Hodges — Tue, 06 Mar 2012 17:48:28 +0000

George Hodges post on CUES Skybox

I had the opportunity to speak with a number of credit union CEOs and board chairs at CUES Symposium in Bonita Springs earlier this month. The dominant theme was liquidity and the absence of lending opportunities. Unfortunately that’s not a problem most credit unions have any control over at the moment, so it begs the question: Are there other immediate opportunities to grow revenue and expand your member relationships outside of lending?

If any of the following scenarios fits your credit union, the answer is probably yes.

You recently completed a segmentation analysis of your member base and identified that 35 percent are not profitable because their only product is a low-balance checking or savings account.
You serve a major university or large military base, but don’t seem to have a good product fit for the student population or enlisted personnel.
You have a youth/young adult strategic initiative, but don’t yet have a strong mobile/card-based product to support it.
You have an underserved designation with a working class population that is different from your current suburban, mass-affluent member base.

What each of these scenarios has in common is a large number of what the regulators call “underbanked” members. According to the FDIC, this represents 23 percent of the U.S. population, totaling 60 million adults.

If you do a segmentation analysis of your member base, these are typically the members who only have a single savings or checking account with an average balance of less than $1,500 and are not an immediate lending opportunity.

At first glance, this is your least desirable group of members for profitability and growth. But looks can be deceiving.

If you only value their current account relationship, you are losing money on these members, right? The deposit value of their low balance does not offset the cost of providing them a free account, and they do not generate any other revenue.

However, if you were to spend a “day in the life” with these same members, you would find that they make two or three visits every month to another financial services provider to cash their paychecks, pay bills, send money to family members, and purchase reloadable prepaid cards (to avoid overdrafts in their account). This monthly, reoccurring behavior represents an average of $30 per month in non-interest fee income that these “unprofitable” members are paying another provider!

So who is taking away your member’s transactions, $360 a year in revenue, and relationship potential? A few years ago, the answer would be check cashing stores and payday lenders. Now, the list includes Wal-Mart, Kroger, Rite-Aid, and an increasing number of large banks.

If you don’t think that serving the underbanked has become mainstream, here are some compelling statistics. Reloadable prepaid debit cards are the fastest growing financial services product, and the two most recent IPOs in the financial services industry were Green Dot and Netspend, the No. 1 and No. 2 providers of prepaid cards respectively. Or, if you are in the southeastern U.S., just stop by a Regions Bank branch and check out NOW Banking, which makes all these services available right at the teller line!

What these large non-financial retailers and banks have figured out is that by bundling “alternative financial services” and using outsourced technology and risk management providers, you can convert previously unprofitable members into a profitable growth segment, save them money, and expand your relationship for future growth.

So, as you look beyond lending, you may find a golden opportunity to expand your services to existing members and create a new revenue channel at the same time.

George Hodges is managing director of New Market Partners, College Park, Ga., a CUES Supplier member and strategic provider of Cash Banking Solution in partnership with CUES.

Click here to access CUES Skybox

http://cuesskybox.squarespace.com/

CUES CEO/Chairman Exchange

George Hodges — Fri, 27 Jan 2012 20:08:07 +0000

February 2012

New Market Partners is sponsoring and participating in the CUES CEO/Chairman Exchange. January 29 – February 2, 2012 in Bonita Springs, Florida.

Click here for more information.

http://www.cues.org/professional-development/conferences-and-networking/symposium

CBA’s Non-Bank Competition: New Players,Competitive Strategies featuring John Owen from Regions Bank

George Hodges — Fri, 27 Jan 2012 20:07:09 +0000

March 2012

New Market Partner’s Cash Banking solution will be featured in a session entitled: Non-Bank Competition: New Players, Competitive Strategies featuring John Owen from Regions Bank. Regions rolled out “Now Banking” in late 2011 utilizing New Market Partners Cash Banking strategy to reach underbanked customers. NOW Banking is a bundled product set including a reloadable prepaid card, check cashing and money transfer and bill pay services from Western Union.

http://www.cbanet.org/content.cfm?ItemNumber=18901&navItemNumber=19621

7th Annual Underbanked Financial Services Forum

George Hodges — Fri, 27 Jan 2012 19:49:06 +0000

June 2012

New Market Partners is a proud sponsor, speaker and participant in the 7^th Annual Underbanked Financial Services Forum, presented by the Center for Financial Services Innovation.

http://www.americanbanker.com/conferences/cfsi/

Learn more about the Center for Financial Services Innovation (CFSI):

http://cfsinnovation.com/

The Value of Deep Customer Knowledge: Understand Your Customers

George Hodges — Mon, 31 Oct 2011 19:40:22 +0000

George Hodges’ post on CFSI’s Compass Principles.

Submitted by CFSI guest blogger on October 31, 2011 – 12:46pm

By George Hodges, Managing Director, New Market Partners.
New Market Partners works with financial institutions to provide alternative banking solutions and is a Sponsor of CFSI’s Underbanked Solutions Exchange.

To quote Steven Covey’s perennial best seller 7 Habits of Highly Effective People, “Seek first to understand, then to be understood.” The foundation for a “win-win” customer relationship, right? Easier said than done when dealing with underserved financial services customers. Even the terminology is a barrier. We have conducted extensive primary research with these consumers, and I’ve never heard anyone say, “heh, I’m underbanked.”

If you want do some quick consumer research for yourself, try it out on a young adult, which I did last week with my college age daughter. Ask what they need to be “fully banked?” They probably won’t understand that, so follow with “how do you want to be able to use that debit card you carry around with your iPhone?” The answer I got was, “Well, when I get some money, like a check from you, I need it right away, and it has to be available immediately, just like cash, but on my card. Then I like to check my balance from my iPhone before trying to pay for something so I won’t be embarrassed if my card is rejected, and I usually wait to pay my bills until I get the check because I don’t have any extra money, and you know I HAVE to reload my iPhone or my life would end. Then I say, “great, you are clearly underbanked! I happen to be an industry expert on this, let me explain how we can solve that problem. First of all, you need to find $1,500 and give it to the bank, like a security deposit. That’s the key to a fully banked relationship. After that, you won’t have to pay $12 a month just to carry your card, and with the bank holding your extra money, you will feel safe signing up for free on-line bill payment. Now, about those checks you get. When you deposit them into your account, your mobile App will probably say you have the cash available like you want, but there is this thing called Reg E, which means it is really a pending item, so you might overdraw, which your bank may or may not cover, depending on whether you decided to opt in, and then debit card transactions work differently….” Just as I am getting warmed up I realize I lost her at having $1,500. She looks at me and says, “that seems pretty complicated; maybe I’ll just go to Wal-Mart.” Just kidding about her last response, but you get the idea.

The primary barrier to retail financial institutions serving the “underbanked” is a mis-perception of the market. Maybe we need a new term to describe this market segment. According to Webster the word under means inferior or beneath, so translated literally underbanked means “beneath banking.” That traditional perception of the market is probably not the best starting point for deeply understanding the needs of the next major growth opportunity for your financial institution.

Consumers have a rapidly expanding number of options to access financial services. The clearly-defined barriers between an “underserved” consumer who does not “qualify” to be banked in the traditional way, and the young/tech savy/mobile/just-in-time consumer who is simply looking for other ways to access their financial services has blurred. Only by spending the time to really understand the needs of your (Alternative Banking/Banking 2.0/Just-in-Time/whatever you want to call them) customers can you get past those narrow definitions and move on to the real opportunity of fully serving your customers in a profitable way with products that meet their needs.

Click here to access CFSI’s Compass Principles

http://bit.ly/vzGgJL

Evaluating the Compass Principles for your Financial Institution

George Hodges — Wed, 26 Oct 2011 18:18:28 +0000

George Hodges post on CFSI’s Compass Principles.

Submitted by CFSI guest blogger on October 16, 2011 – 10:32pm.

By George Hodges, Managing Director, New Market Partners.

New Market Partners works with financial institutions to provide alternative banking solutions and is a Sponsor of CFSI’s Underbanked Solutions Exchange.

Why start with a set of defined values? Why a value statement for “relationship focus?”

Let’s assume that your financial institution is evaluating the “underbanked” as a potential growth market and new source of non-interest fee income. Think about the Compass Principles as a framework for creating a value proposition that serves the customer, is profitable for your institution, and provides a pathway to a sustainable long-term relationship. Given that, why start with a set of values? To use the founding of our country as an analogy, the Declaration of Independence put on paper our American values of personal liberty and the right to self-government. It took ten more years to get our constitution, but the “values” in the Declaration motivated the colonies to fight the revolution, and defined what we were fighting for. The Declaration is our set of values, and the constitution lays out a framework for how to make those values work as a system of government. Values represent who we are, and/or aspire to be. Treating the underbanked as both a mainstream and profitable customer segment is a major change in thinking about “who we are” for most financial institutions. When you look at these value statements, do you think about the “underserved” as non-customer transactions and a new source of fee revenue, OR as people you can build a loyal long-term customer relationship with. If you don’t, the principles become a set of how-to’s that are not likely to get any traction in your organization. Maintaining long-term relationships with your customers or members is a basic part of “who you are.” One of the hurdles to overcome in serving the growing mainstream “underbanked” market is the perception that you have to make a choice between profitable transactions or an unprofitable relationship. The Compass Principles, and your opportunity, are about more than the underbanked.

Click here to access CFSI’s Compass Principles

http://bit.ly/vzGgJL

George Hodges to join panel at CBA Live

George Hodges — Wed, 30 Mar 2011 00:11:23 +0000

George Hodges will participate in a panel discussion at CBA Live on the impact on the underbanked from new pricing strategies for “post free checking” deposit accounts, including new prepaid card options.

June 12 - 14, 2011
Hyatt Regency Grand Cypress
Orlando, Florida

http://bit.ly/gK63Z5