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Remaining Relevant in a Changing Payments Landscape
Ben Jackson Mercator Advisory Group
Terri Ferrise
Cachet Financial Solutions
Luz L. Urrutia Community & Southern Bank
September 2012
Agenda
Who is up here?
What does the landscape look like today?
Who is the new consumer market?
What is the role of Mobile Technology and RDC?
How did El Banco expanded services to the unbanked?
Where do we go from here?
Your Questions.
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Panelists Introductions
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Ben Jackson
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Who is up here? What does the landscape look like today? Who is the new consumer market?
Forces Changing The Financial Landscape
5
• Bank Customers Close or Lose Accounts • Payments Choices Change Economy
• The Internet Changes Payments Options • Smartphones Make the Internet Mobile Technology
• Durbin Amendment Changes Bank Business Models
• Merchant Payment Preferences Allowed by Law Regulation
Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
The Unbanked and Underserved by the Numbers
Unbanked 7.7% of U.S. households. 9 million households. 17 million adults. 21.7% of black
households. 19.3% of Hispanic
households. 15.6% of Native American
households. 12% of unbanked
households have a GPR card.
Underbanked 17.9% of U.S. households. 21 million households. 43 million adults. 31.6% of black
households. 28.9% Native American
households 24% of Hispanic
households. 16% of unranked
households have a GPR card. Source: FDIC Survey of Unbanked and Underbanked Households, Dec. 2009
6 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
Some Additional Numbers Round Out the Picture
• 93.6% of all consumers have a bank account, according to the Federal Reserve 2009 Survey of Consumer Payment Choice. – Perhaps the unbanked market is smaller than thought
• 32.3% of all consumers have used a prepaid card.
• The average value of a GPR prepaid transaction was $33, according the 2010 Federal Reserve Payments Study.
• 67% of GPR transactions were less than $25. – An indication that Prepaid is displacing cash
• About 1.3 billion transactions were made using GPR cards in 2009.
• These numbers show that interest in and use of prepaid goes beyond the unbanked.
7 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
There Are Many Alternative Financial Services Products & Service Providers
• Money Orders • Check Cashing • Prepaid Financial Services • Remittance / Money Transfer • Bill Pay • Pay Day Loans • Title Loans • Secured Loans
8 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
The Many Outlets For Financial Services
Convenience Stores
Supermarkets Super Stores
Alternative Financial Services Outlets
Pharmacies
Suppliers
9 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
The Alternative Financial Services Market
• 22,000 Pay Day Loan Outlets 1 – 10,000 offer a range of services – 8,000 exclusive to PD Loans – 4,000 primarily check cashing outlets
with Pay Day Loans
• 11,000 Check Cashing Stores 2 – 180 million checks cashed 2 – 1.5 B in fees (2005)
• 148,126 Convenience Stores 3
– $54 Billion in AFS Revenue 4
1 in 2008, as estimated by FiSCA 2 in 2008, as estimated by Synergistics 3 as of December 31, 2011, per NACS/Nielsen Convenience Industry Store Count, 2012 4 Mercator / CSP Research Project, 2010
146,341
22,000
11,000
C-Stores
Check Cashers
10 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
The vast majority of these locations offer Money Orders and Remittance.
Location, Location, Location
- 20,000 40,000 60,000 80,000
100,000 120,000 140,000
Retail Access Locations
Currently providers offer cards in a total of 350,000 locations as well as online. This includes grocery stores, convenience stores, and pharmacies. Mercator research indicates approximately 62% of reloads happen at retail locations (predominantly WalMart & Check cashers).
11 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
Pay Day Check Cash
Prepaid Convenience Retail Outlets in Stockton, CA: Bank of America vs. Green Dot
12 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
Prepaid Card Access Points Dwarf Those of Major Banks
0 outlets 0 – 50 outlets 50 – 200 outlets Greater than 200 outlets SOURCE: Mercator, Green Dot, and Scarborough research survey conducted between February 2009 and March 2010 NOTE: Bank retail outlets and ATMs are as of July 2010 13
55,073 Retail Outlets
17,000 ATMs
12,355 ATMs
6,467 Retail
Outlets
9,812 ATMs
1,036 Retail
Outlets
18,135 ATMs
5,901 Retail
Outlets
15,549 ATMs
5,317 Retail
Outlets
• Additional PFS Penetration:
– Blackhawk – Western Union – InComm – Target / Amex – MoneyGram
13 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
Prepaid Financial Services Liquidity • Faster Access to Cash
– Surcharge Free ATMs at any retail location! • Deposits into the Account
– At any retail location! – Via the Mobile Phone anywhere you are!
• Same Day Bill Pay – Via card payment over phone anywhere you are! – Via mobile account access anywhere you are! – Via electronic bill pay any retail location!
• Money Order measures Bill Pays Failure
• Remittance – Over phone anywhere you are! – Via mobile account access anywhere you are! – At almost any retail location!
• Mobile Check Deposit – Immediate access to cash can be purchased for qualifying checks
14 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
BASIC PROPOSITION: Convenience & Value Wins the Consumer
Source: UNBANKED BY CHOICE: A look at how low-income Los Angeles households manage the money they earn The PEW Health Group, July 2010
15 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
Mercator Prediction
In 5 to 7 Years Prepaid Financial Services Will Have Disrupted Existing Financial Services Channels By
Delivering Improved Liquidity, Convenience, & Price
16 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
Mobile Financial Services
BUT WHICH CHANNEL WILL WIN THESE EMERGING CONSUMERS WITH THE BEST CONVENIENCE, LIQUIDITY, & PRICE?
Merchant, Bank, Check Casher, Mobile Operator, Card Network, Other?
17 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012
Will Deliver Greater Convenience & Liquidity at Lower Cost
Terri Ferrise
18 Copyright 2012, RemoteDepositCapture.com
What is the role of Mobile Technology and RDC?
Explosion of Mobile Usage
19
Sources: CTIA, October 2011, ThinkMobile w/Google April 2011, The Nielsen Company, 2011 Federal Reserve Board, Consumers and Mobile Financial Services Study, March 2012
• Mobile Usage is Ubiquitous & Common
– There are more wireless subscriber connections than people in the US
• Smartphone Usage Transcends Race and Socio-Economic Consumer Segments
– Your customers and your potential customers are using smartphone for every aspect in their lives
– Federal Reserve Board research shows that underbanked consumers have access to mobile phones and smartphones in greater numbers than the general population
New Competitors are Forming Dynamics of changing markets and technology
cause new competitors to arise
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Evolution of Mobile Financial Services
• Balances • Transaction History • Information Services • Transfers • Alerts
Mobile Banking
• Bill Payment • Check Capture • eBills & Invoices • P2P transfers • Group Collections
Mobile Payments
• PoS Payments • Offers & Coupons • Loyalty & Rewards
Mobile Wallet
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Creates the foundation to expose transaction services
Gain consumer confidence and build behavior patterns
Sources: American Bankers Association
Where are you?
• Where are you with your mobile offering?
• Consider what you can do to move forward.
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How to Move Forward
Steps to take to improve your
mobile standing and attract these
emerging consumer segments
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Understanding the Market Needs
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Add Funds ACH Direct Deposit, Mobile RDC Retail Load Account 2 Account
Transfers P2P Transfers
Withdraw Funds
POS/PIN Purchase Bank Transfer, P2P
Transfer Mobile Bill
Pay/Remittance Contactless Payments ATM/Bank Teller
Withdrawals
Going Mobile: Meeting The Emerging Consumer’s Preference for Managing Their Finances
Manage Money Transaction History Balance Information Mobile RDC Status Location Services (ATM,
Load Network)
Manage Account Manage Transaction
Alerts Change PIN/Passcode Update Profile
How RDC Can Play a Role
Consider technology and services that deliver convenience, liquidity and value
– Mobile Remote Deposit Capture – Prepaid Card Programs & Mobile Check Cashing
• Immediate Good Funds
• Delayed Funding
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The Benefits
A mobile deposit capture offering will increase
– Retention – Revenue – Relevance
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Mobile Program Considerations
Key elements to consider when planning a mobile program
– User Experience – Security – Compliance
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Mobile Program Considerations Explore Partnerships to build or expand your mobile offering
– Build relationships with technology partners who are a good fit considering your needs, including:
• Your resources
• Your capabilities & experience
• How quickly you want to get to market
• Status of your current offering
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The Importance of Staying Relevant
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Banks have Consumers’ Trust for now
Luz Urrutia
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How did Community & Southern Bank expand services to the un/underbanked?
Who do we serve?
What are their needs?
Product solutions
Company Overview: Community & Southern Bank
1. State Chartered Bank established in January 2010
2. Assets totaling $2.5 billion – 38 branches in North, East, West and Metro
3. One of the Best Capitalized Banks in the State of Georgia
4. Acquired El Banco de Nuestra Comunidad in 2010
Jose’s Profile: • No previous banking experience • 8 years in US • Family in home country • 1 ID - including Matricula Consular • Only uses alternative financial services • Uses prepaid card
Alternative Financial Services Unbanked - Jose
“At CSB I feel safe and at home. They make me feel accepted. I can cash my checks, send money to my family in Mexico using the IDs that I have, pay my bills, use my prepaid card anywhere and save some money too.”
Existing Account Holder: Store Manager - Sue
Sue’s Profile: • Store manager for locally owned business • Husband recently got laid off, no savings • Gets paid with hand signed check every two weeks • Uses check cashing store to cash check and pay
utility bill • Deposits remaining cash in checking account for
mortgage • Has a prepaid card for day-to-day spending
Small Business Owner – “Jefe” Contractor
Luis’ Profile: Self-employed with employees – Construction Personal Bank Account used as dba for business No access to business credit with other banks 2 valid ID’s, ITIN and Matricula Cashes large checks from general contractors Deposits spending money in prepaid card Deposits remaining cash in his bank account for
safety 5 checks per month, $5,000 per check, $25,000 total
Latino Middle Market Business Value Proposition “CSB” is the banking relationship that really serves my financial needs. They understand my most important point of pain: paying my employees who need to cash their checks and keep their money in a safe place either in a prepaid card or a bank account. Because they solved my payroll problem, I chose them as my business banking partner.
MIDDLE MARKET BUSINESS
• Retail Business, with 3-10 locations • More than 15 employees with no bank account • Permanent resident or naturalized citizen • Typically incorporated with EIN • Already have a commercial relationship with a bank • Access to commercial credit • Mostly underserved by mainstream banks
Integrated Product Solution to Build Relationships
Money Remittances
Bill Payment
Low Cost Money Orders
2. Use card for basic transactions
Guaranteed/Not Guaranteed Check
Cashing
Direct Deposit
Cash Load (Retail Network
& Kiosks)
1. Load Money onto Card
ATM Cash Withdrawal
PIN/Signature Purchases
3. Use card for cash and retail purchases
Small Dollar Loans
Coming in 2013
4. Use card to access credit
• Reloadable Branded Prepaid Card (immediate funds) • Bank Account (delayed availability)
Cash Load (Mobile App)
Online/Mobile Account Access
5. Acct Access
Kiosk Delivery Platform
37
Products/Services Check Cashing (Chexar) Remittances Bill Payment Money Orders General Purpose Reloadable Card Cash dispenser
Customer Service Model Enrollment Operated by 1 Customer Service Rep Extended hours of operation Adjacent to CSB Branches, commercial businesses, shopping centers, gas stations, colleges/universities
Questions?
38 Copyright 2012, RemoteDepositCapture.com
About The Presenters Ben Jackson • Mercator Advisory Group • [email protected] • www.mercatoradvisorygroup.com
Terri Ferrise • Cachet Financial Solutions • [email protected] • www.cachetfinanical.com
Luz Urrutia • Community & Southern Bank • [email protected] • www.mycsbonline.com
39 Copyright 2012, RemoteDepositCapture.com