THE OPPORTUNITY IN PROVIDING BANKING SERVICES

Transcription

1 THE OPPORTUNITY IN PROVIDING BANKING SERVICES Presenter: Bill Handel Vice President, Research & Develpment, Raddn Financial Grup NFCA President s Sectin April 13, 2010 Hllywd, Flrida

2 The RFG Slutin Understanding the needs f the custmer Industry Research (since 1983) Strategic Analysis (since 1988) Understanding the cmpetencies f the rganizatin RFG has been prviding services t the financial services industry since Research & Analytic Prgrams Sftware Marketing Autmatin sftware Leverages RFG analytics and research prgrams Slutins Center (since 2007) Sftware Slutins (since 1997) Data Slutins Enhancing the efficiency f sftware tls Cnsulting Aligning prducts, systems, peple, and prcesses Marketing, sales, and management tls Marketing, prduct design, pricing slutins

3 3 Banking Industry Paradigm Shift 1. Industry cnslidatin is likely t accelerate ver the curse f the next several years. Increasing cst f cmpliance, default risk and interest rate risk will be majr hurdles t vercme. 2. The banking industry has cmmditized the result is significant margin cmpressin. 3. Nn-interest incme is significantly threatened by a Cnsumerist envirnment. The banking industry is lking fr nn-traditinal incme surces. 4. The banking industry is fcusing n acquisitin f cre relatinships husehld grwth, checking accunt grwth, cre depsit grwth and lan grwth is mre imprtant than depsit r asset grwth. 5. Cnsumers are restructuring their persnal balance sheets and lking fr a Trusted Financial Advisr. 6. We are lking at the biggest transfer f generatinal wealth in ur cuntry s histry. Strength with the parents can lead t success with the children. 7. New entrants int the banking space are having significant success by prmting their difference. USAA, ING Direct, PayPal, etc

4 4 Cnslidatin f the Industry Cntinues The number f banks and credit unins have bth declined by ver 36% since By 2014 there is likely t be 6,500 banks and 6,100 credit unins. 12,604 12,201 Prjectin 10,222 10,754 8,976 9,128 8,012 7,794 6,482 6, * Banks and Savings Institutins Credit Unins Surce: FDIC and NCUA; prjectins by RFG

5 5 Small Banks Are Disappearing The decline in the number f banks can be attributed t the very small, defined as assets under $100 millin. The number f institutins with assets abve $100 millin has increased ver this time frame. 9,000 8,000 7,000 8,270 Cmmunity Institutins 6,000 5,000 4,000 3,000 2,846 4,207 5,002 2,000 1, Under $100M $100M t $5 B Over $5 Billin Assets Surce: FDIC

6 6 Small Credit Unins Als Decline Similar t the banking industry, the decline in number f credit unins is attributable primarily t the very small, again defined as assets f under $100 millin. 14,000 12,000 10,000 11,606 Cmmunity Institutins 8,000 6,000 4,000 2, ,315 1, Under $100M $100M t $1 B Over $1 Billin Assets Surce: NCUA

7 Share f Wallet Tends t Be Lw 7 Banks and credit unins typically cntrl apprximately ne-third f the lan and depsit relatinships f their custmers and members. 40% share f wallet is very gd; 50% is exceptinal. 38% 36% 30% 31% Depsit Share f Wallet Bank Credit Unin Lan Share f Wallet Surce: Raddn Financial Grup

8 Segmentatin is Critical t a Successful Strategy $125,000+ Upscale 11% $50,000 - $124,999 Credit Driven 10% Middle Market 18% Middle Incme Depsitr 12% Under $50K Fee Driven 19% Lw Incme Depsitr 31% Segment Age Definitin Incme Definitin % f Husehlds Avg. Age Annual Incme Fee Driven Credit Driven Middle Market Lw Incme Depsitr Middle Incme Depsitr Upscale 18 t t t r Older 55 r Older 35 r Older Less Than $50K $50K r Mre $50K t $124,999 Less Than $50K $50K t $124,999 $125K r Mre 19% 10% 18% 31% 12% 11% $27,172 $88,319 $84,536 $24,355 $84,787 $166,774

9 Average Depsit, Lan and Investment Balances Vary Dramatically by Segment There are stark differences between the cnsumer segments in regard t the depsit, lan and investment balances. Nte that investment and lan balances are an average fr thse using thse services. Nearly all husehlds have depsit balances. $196.7 $244.2 $198.9 Balances ($000) $121.9 $114.7 $57.8 $51.1 $164.1 $66.3 $137.1 $82.5 $58.0 $48.6 $90.2 $78.7 $26.5 $15.0 $3.2 $17.2 $19.6 $18.3 Ttal Fee Driven Credit Driven Middle Market Lw Incme Depsitr Middle Incme Depsitr Upscale Average Depsit Balances Average Investment Balances Average Ttal Lans Surce: Raddn Financial Grup

10 Insurance Prducts Used By U.S. Husehlds Aut 86% Hmewner 66% Nn-Wrk Health Cverage Term Life AD&D Whle Life 40% 37% 35% 32% Disability Insurance 25% Persnal Liability 15% Renter 14% Fld, Earthquake, r ther Disaster Variable Life Credit Life 3% 5% 12% U.S. husehlds tend t be significant users f insurance prducts. The largest categries are aut insurance and hmewners insurance. Surce: Raddn Financial Grup

11 Insurance Use Prpensities Vary By Segment 100 = An Average Index Insurance usage als tends t vary by segment. While nearly all husehlds use aut insurance with similar prpensity, there is significant variatin fr mst insurance prduct types Aut Hmewner's Term Life Whle Life Variable Life Fee Driven Credit Driven Middle Market Lw Incme Depsitr Middle Incme Depsitr Upscale Surce: Raddn Financial Grup

12 Bank Prducts Used By U.S. Husehlds Sme bank prducts, such as checking and credit cards, are nearly universally used by U.S. husehlds. Other accunts tend t be niche prducts used by segments f the market. Checking Accunt 98% Any Credit Card 83% Regular Checking 62% First Mrtgage 46% Interest Checking 49% Hme Equity Line r Lan 25% Any Savings Accunt 71% New Aut Lan 19% Certificates f Depsit 23% Used Aut Lan 16% Mney Market Accunt 21% Student Lan 15% Surce: Raddn Financial Grup

13 Investment Prducts Used By U.S. Husehlds 36% Slightly mre than ne in three U.S. husehlds has mutual funds beynd what they hld in qualified retirement prgrams. One in five husehlds hlds individual stcks, and ne in ten hld Treasury securities r annuities. 18% 10% 9% 4% Any Mutual Fund Individual Stcks Treasury Securities Annuities Individual Bnds Surce: Raddn Financial Grup

14 Depsit and Investment Prpensities Vary By Segment Which Cnsumer Segments Open Depsits and Investments? Depsit and investment prduct usage als tends t shw great variability by cnsumer segment = Average Mney Market Accunt Certificates f Depsit Any Mutual Fund Individual Stcks Annuities Fee Driven Credit Driven Middle Market Lw Incme Depsitr Middle Incme Depsitr Upscale Surce: Raddn Financial Grup

15 Lan Use Prpensities Vary By Segment Which Cnsumer Segments Open Lans? 250 Lan usage tends t be cncentrated in three cnsumer segments Upscale, Credit Driven and Middle Market = Average Mrtgage HE Lan HELOC New Aut Lan Used Aut Lan Fee Driven Credit Driven Middle Market Lw Incme Depsitr Middle Incme Depsitr Upscale Surce: Raddn Financial Grup

16 Prduct-t-Prduct Crrelatin Indexes Selling Investment and Depsits t Insurance Users 250 Nte that buyers f insurance prducts are much mre likely t use depsit and investment accunts than the average cnsumer. Nte the strng crrelatin indexes fr Variable Life plicy hlders = Average MMDA CD Any Mutual Funds Stcks Annuities Aut Hmewner's Term Life Whle Life Variable Life Surce: Raddn Financial Grup

17 Prduct-t-Prduct Crrelatin Indexes Selling Lans t Insurance Users 250 Insurance users are als much mre likely t use lan accunts than the average cnsumer. Similar t the pprtunity fr depsits and investments, an insurance prvider can have great success in selling lans t its plicy hlders = Average Mrtgage Aut Lan Equity Lan HELOC Credit Card Aut Hmewner's Term Life Whle Life Variable Life Surce: Raddn Financial Grup

18 Hw Cnsumers Prefer t Buy Insurance In Hme with Agent, 13% Internet, 10% Via Telephne, 35% At Agent's Office, 42% The preferred methds f buying insurance are at an agent s ffice and ver the telephne. Only ne in ten cnsumers says the Internet is the preferred sales channel. Hwever, the data n the fllwing page shws hw this differs by segment. Surce: Raddn Financial Grup

19 60% Hw the Segments Prefer t Buy Insurance Prducts Different Cnsumer Segments express preferences in terms f hw they want t buy insurance services. These preferences tend t mirrr clsely their preferences fr buying bank depsit and lan services. 52% 50% 43% 43% 43% 45% 40% 34% 36% 35% 38% 37% 34% 30% 26% 26% 20% 18% 18% 19% 10% 5% 4% 12% 8% 4% 2% 12% 9% 0% Fee Driven Credit Driven Middle Market Lw Incme Depsitr Middle Incme Depsitr Upscale At Agent's Office Via Telephne In Hme with Agent Internet Surce: Raddn Financial Grup

20 Wuld Cnsider Bank as a Surce fr Insurance Services 20% 19% 16% 15% 14% 15% 13% 10% 10% 11% 5% RFG research indicates that there is receptivity n the part f cnsumers t cmingle their banking and insurance relatinships. Expect mre banks t get int the business f insurance as they search fr nn-interest incme. 0% Ttal Fee Driven Credit Driven Middle Market Lw Incme Depsitr Middle Incme Depsitr Upscale Surce: Raddn Financial Grup

21 1. Utilize target marketing tls Keys t Success Use prduct-t-prduct crrelatin data t sell depsits and lans int yur insurance base Cnsumer segmentatin will refine targeting effrts 2. Fcus n building cre depsit and lan relatinships Checking / debit card / nline banking Mney market accunts Credit cards key t a strng relatinship Equity lines f credit 3. Enhance yur rle as Trusted Financial Advisr Differences with the large banks shuld be stressed Affinity can trump lcatinal cnvenience and interest rates 4. Fcus n trans-generatinal marketing Utilize yur strength with lder segments t sell int yunger segments 5. Braden yur marketing and delivery channels Internet marketing is critical fr the yunger segments

22 Thank Yu! Bill Handel Raddn Financial Grup Lmbard, Illinis