Novantas Review Vol. 6 No. 3 | 2015
Letter From the Editor
Branch-to-digital migration is well underway, but transition economics continue to bedevil retail bankers. Despite an outpouring of expense on online and mobile banking, the correlation with revenue generation has been loose at best. Meanwhile the branch network is at risk of becoming the world’s most expensive customer retention tool, soaking up capital but with uneven returns and an uncertain future.
This issue addresses both sides of the question. With digital, there are three focal points for improved retail financial performance, as detailed in our cover story, “Digital Investment: Success Driver or Bottomless Pit?” One is boosting online/mobile marketing appeal to win share in new-to-bank checking acquisition. Another is leveraging analytics for improved cross-sell in the digital space, and a third is capitalizing on channel substitution to reduce physical capacity and the total cost to serve.
On the branch side, one saving grace is that customers are apparently becoming more tolerant of consolidation as they shift more everyday banking activities to alternative channels. This presents a major opportunity to condense and re-sculpt physical distribution. But as discussed in “Building the Sales-Justified Branch Network,” the decision process needs to be firmly centered on the future revenue stream.
Turning to small business banking, regional players are especially challenged in the banking market for small and medium-size enterprises (SMEs). One essential is to sharply improve the precision of marketing and sales efforts, as discussed in “Capturing Share of SME Revenue Potential: What’s in Your Model?”
Fresh Novantas research is included in this issue as well. In “Checking Overdraft and the Voice of the Consumer,” we present a feature-length summary of findings from a national survey of checking customers who use overdraft services.
Two articles on pricing round out the lineup. Continuing this year’s review and discussion of the home equity line of credit, our authors examine industry practices on fixed rate balance conversion. A rising rate environment could prove unkind, as discussed in “HELOC Fixed Rate Options: Overlooked Exposure?” Lastly, the stages of progress in deposit pricing are recapped in “Reaching the Next Level in Deposit Pricing.”
For sound planning decisions, the financial contributions of digital banking need to be evaluated within the context of all the bank’s channels and capabilities.
Not only would many of the proposed new regulations on overdraft run counter to consumer choices, but they also would likely reduce the availability of service options.
In the race for growth in small business banking, many regional banks are operating with broken compasses. Improved analytic tools are needed for prospecting and cross-sell.
Many HELOC lenders have given borrowers too much of an escape hatch from rising rates, in the form of loosely-designed fixed rate options. It is time to review pricing.
With tons of former branch transaction activity shifting to alternative channels, the decision framework for branch consolidation shifts more solidly to sales.
Deposit pricing analytics offer substantial opportunity in banking, but each management team faces the challenge of establishing a clear developmental path.