Confidential R. C. Giltner Services February 11, 2014 1 Companion Card Strategy to Serve Customer...
Transcript of Confidential R. C. Giltner Services February 11, 2014 1 Companion Card Strategy to Serve Customer...
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R. C. Giltner Services
February 11, 2014
Companion Card Strategy to ServeCustomer Security and Transaction Needs
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Contents
• Introduction
• Market Drivers of the Consumer Need for a Companion Card
• Companion Card Branding and Features
• Sales Approach
• Payoff and Next Steps
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Community and regional banks can serve a growing market through a companion card, added to the current debit card, to enhance transaction security and functionality.
Introduction
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The Companion Card is simply a checking account with a “opt out” debit card linked in online banking.
PaySoundSM Companion Card
– Checking account set up.– Debit card only.– No bill pay or ACH debits.– No NSF/OD fees;
mandatory opt out.– $1.00 fee per check if
written.– Fee for ACH; checks
Introduction
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Key market drivers for consumer demand for a “companion card” are:
a) New capability to transact with alternatives that settle to a bank account.
b) Concerns about security and compromised cards with shopping risk.
c) Growth of mainstream prepaid for specialized use.
d) Growth of online shopping.
Introduction
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We are losing revenue from our customers using alternative payment methods that settle to our accounts.
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FI Checking Acct • Revenue • Relationship• Risk• Regulatory Compliance (ID)
Aggregators (BillFloat, PinPoint,
Mint, BillMyParents, Banno)
Billers and Services (Online/Phone Payment;
Manilla, Doxo, Volly)
Payment Networks: (PayPal, Google, Dwolla)
Merchants (Walmart, Target,
Home Depot)
Telephone (Isis, Boku, Verizon, AT&T (de-
coupled debit)
$
$
$
$
$
Acct Contextual Value
a) New Payment Capabilities
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Banks need to think of providing payment methods for specific transaction types.
“In-store payments are PayPal’s to lose…” Don Kingsborough, PayPal
3. “Payment Context” Drives Revenue
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The alternatives are growing for settlement, creating a leaky account. Today we tell our customers, as do others, where to not use their debit card, the primary transaction device we provide.
$ % # %Checks $ 5,400$ 67% 14.5 21%Debit Card 1,563$ 19% 39.8 56%PayPal & Alt. 225$ 3% 5.6 8%PrePaid 250$ 3% 4.8 7%Web/ARC/POP ACH 590$ 7% 5.8 8%
Total 8,028$ 100% 70.5 100%
Checking’s Leaky Account
Source: Our Analysis, Industry and NACHA Data
Remember, losing a debit transaction costs more than just interchange:• Interchange loss (net, exempt banks) $.26• NSF/OD fee (2% of transactions) $.60
Total $.86
a) New Payment Capabilities
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Use of alternative payment methods, such as prepaid or PayPal, are already used as a “companion” to checking.Prepaid Card User
Survey
a) New Payment Capabilities
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68% of consumers are concerned by card use compromised by fraud and identity theft.
Source: Unisys Corp.
b) Concerns About Security and Shopping Risk
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GPR prepaid use is growing 30%+ a year and penetrating all
segments, serving over 10% of households.
Source: The Wall Street Journal
c) Growth in Mainstream Prepaid for Specialized Use
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Prepaid Cards
c) Growth in Mainstream Prepaid for Specialized Use
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The benefits driving the growth of “prepaid” can be provided in a checking account:
• No overdraft fees ever. (73%)* (positions Reg E opt out as a benefit)
• Control over spending. (58%)*
• Retail access for loading.
• Second chance options where CheckSystems scores are low.
* Analysis of GPR Branded Prepaid Cards, Bretton Woods, 2012
c) Growth in Mainstream Prepaid for Specialized Use
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Online retail sales are growing rapidly.
d) Growth in Online Purchases
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Consumers need a second or companion card for specialized transactions.
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Consumer Needs
Online Shopping
Transaction Segments
Shopping/ Travel Control
Youth Spending
Partition Funds for Target Payment
• Protection if card stolen• Spending control• Avoid Overdraft fees
• Protection if card stolen• Spending/charge control• Avoid Overdraft fees
• Card for youth • Avoid Overdraft fees
• Separate account
Payment Methods
• Credit Card• PayPal, Alt.• Prepaid
• Prepaid
• Prepaid
• Prepaid
The Need for A Companion Card
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The Companion Card with payments branding serves customer needs or a small business payroll card for $5.95 per month.
Companion Card Branding and Features
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“Payments” branding should be employed rather than checking branding.
Payments Services
Checking Accounts
Companion Card Branding and Features
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A premium companion card for $14.95/ mo. includes:
• Multiple companion cards.
• Higher spending limits.
• Lifelock identity theft protection (see their program at http://www.lifelockbusinesssolutions.com/introduce-lifelock/texas-bank-chooses-lifelock-to-protect-customers-and-attract-new-ones/)
Companion Card Branding and Features
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The bottom line
Protect yourself for less. Monitor your financial statements and credit reports for suspicious activity that can lead to identity theft. At $120 a year, it's just not worth it
Companion Card Branding and Features
FIs should be aware that some authorities doubt the benefit of LifeLock and others.
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A better approach may be to provide the Companion Card so the customer can protect their main account, and access to credit information and management.
Companion Card Branding and Features
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The sales approach fits with your current approach by adding a question:
Would you like to customize your account with a companion card that allows you to:
• Shop without concern that your card information could be stolen.
• Shop online.• Use for travel, for youth or to hand to your domestic
service providers.• No overdraft fees ever.• A card to load and unload quickly and easily from
online banking.
Companion Card Branding and Features
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The revenue model shows growth in service charge revenue of 9%.
Companion Premium TotalMonthly Net Fee 5.95$ 7.95$ Annual Fees 71.40$ 95.40$ Added Inchg/Fees 26.00$ 26.00$ Total Fees/Card 97.40$ 121.40$ Penetration 8% 3%Added Fees/Acct-All Accts 7.79$ 3.64$ 11.43$ Industry Average Svc Chg Fees/Acct $128% Increase 9%
Companion Card Fee Revenue Increase
Payoff: 9% Service Charge Growth