Banks are underutilizing the potential for selling emerging financial services to their customers. This is an advance finding from a consumer study currently being conducted by Market Rates Insight. The study found that, on average, only 14% of bank customers currently have any type of emerging financial services, yet 57% of current bank customers indicated that such services are important and valuable to them.
For the purposes of this study, “emerging financial services” included products relatively new to the banking scene, such as identity theft alerts, credit score reporting, same-day bill pay and location-based couponing. For all 13 of these services, we measured the percentage of bank customers currently using them compared to the percentage of customers who expressed an interest in them. The study shows that banks can attain, on average, a 71% penetration of their customer base if they offer the right type of emerging services.
The level of current and potential penetration varied by service type, with identity-theft alerts showing the greatest appeal, achieving a total penetration level of 93% consisting of 23% of current customers who have this service plus 70% of current customers who desire this service. Other high potential services include overdraft transfers (85% total service penetration) and low-balance alerts (81%).
Services with the greatest future growth potential include eldercare services, currently utilized by less than 1% of consumers although 48% of bank customers find it important and valuable, and prepaid reloadable cards, which only 2% of current bank customers have but 45% say they would consider using.
These findings are significant because they come in a time when banks are experiencing a decline in fees on traditional services such as nonsufficient funds (NSF) and interchange fees due to new regulatory provisions and greater scrutiny by the Consumer Financial Protection Bureau. Additionally, banks are now facing competition from non-banks, Walmart for example, for financial services such as prepaid reloadable cards.
The good news is that banks have ample room for growth and revenue enhancement by providing the emerging financial services that their customers desire.
Mr. Geller is the executive vice president of San Anselmo, Calif.-based Market Rates Insight, which provides competitive research and analytics to financial institutions. He can be reached at [email protected].
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