ABA Banking Journal - February 2008 - (Page 44)

RETAIL BANKING gets customers to switch banks and stay,” he says. Tom Farin, president and CEO, Farin Associates, Fitchburg, Wis., believes that in the future banks will need to rely on non-CD products with a palette of interesting features. “Generation X and Y doesn’t understand or gravitate toward CDs the way previous generations did,” he says. “And in the short run, we advise our clients not to chase the hot money. We tell clients that can go to the Home Loan Banks or other wholesale sources to do so, because it will be cheaper, at a current rate of 3.95% than having to pay 4.50% or 4.75%,” Farin adds. Beyond current rate fluctuations, banks will need to evaluate customer segments and price accordingly, setting up rules that reward customers with basis points if they keep balances, for instance. “In an ideal world, you’d price each retail deal one at a time, like you do with business accounts,” says Farin.“While the volume of retail customers makes it impractical to work this way, definitely reward your most valuable customers as part of an overall deposit retention strategy.” The consultant advises banks to look at holes in their product set and devise offerings that fill those gaps to reach a new segment of the market or sell more to existing customers. “Set up, for instance, a rewards checking account that has a minimum debit transaction requirement,” says Farin. “You’ll pull in some interchange as a way to shave off some of the expense.” Retention counts Not everyone agrees that such rulesbased accounts can do all that much for banks, but nearly all the sources who spoke with ABA BJ agreed that as a general rule, banks need to think about the basics of execution and communicate to the market how they add value to attract and retain clients. Gwenn Bezard, an analyst at Aite Group, Boston, issued a report this summer called Why Money Can’t Buy Love, which studied how the best performers went about growing deposits, based on Harland Financial Solutions Benchmarking Database. “The most effective achieved deposit growth through retention and cross selling an existing customer base,” says Bezard. In this case, the numbers gleaned from transactional data supported conventional wisdom touted for the last decade: It’s costly to replace today’s customers with tomorrow’s, so leverage relationship. BJ 44 FEBRUARY 2008/ABA BANKING JOURNAL www.ababj.com/subscribe.html http://www.farin.com http://www.farin.com http://www.aitegroup.com http://www.aitegroup.com http://www.harlandfinancialsolutions.com http://www.aba.com http://www.aba.com http://www.ababj.com/subscribe.html

Table of Contents Feed for the Digital Edition of ABA Banking Journal - February 2008

ABA Banking Journal - February 2008 Contents On ABABJ.COM: Have You Visited Our Brand-New Website? Editor's Column "That's Edutainment" Snapshot: Tier 1 Ratios Stable so Far 100th Anniversary: Then and Now ABA Resources ABA Chairman's Position Don't Despair Pass the Aspirin Cover Story: Socially Responsible Banking Profitably - Incoming America's Community Bankers Council Chairwoman, Dorothy Bridges Demonstrates the Way A True "Rags-to-Banker" Story Retail Banking: On the Money Hunt Community Bank Management: The Ugly Truth About Board Relations Does Core Really Matter? Security 2.0: Not Just a New Kettle of Phish A Personal Case of Mal-Serendipity DOD Credit Regs Demand Attention Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - February 2008

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