Remaining Relevant in a Changing Payments Landscape

Transcription

1 Remaining Relevant in a Changing Payments Landscape Ben Jackson Mercator Advisory Group Terri Ferrise Cachet Financial Solutions September 2012 Luz L. Urrutia Community & Southern Bank

2 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. Copyright 2012, RemoteDepositCapture.com 2

3 Panelists Introductions Copyright 2012, RemoteDepositCapture.com 3

4 Ben Jackson Who is up here? What does the landscape look like today? Who is the new consumer market? Copyright 2012, RemoteDepositCapture.com 4

5 Forces Changing The Financial Landscape Economy Bank Customers Close or Lose Accounts Payments Choices Change Technology The Internet Changes Payments Options Smartphones Make the Internet Mobile Regulation Durbin Amendment Changes Bank Business Models Merchant Payment Preferences Allowed by Law Source: Mercator Advisory Group Copyright Mercator Advisory Group

6 The Unbanked and Underserved by the Numbers Unbanked Underbanked 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. Source: FDIC Survey of Unbanked and Underbanked Households, Dec % 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: Mercator Advisory Group Copyright Mercator Advisory Group

7 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 These numbers show that interest in and use of prepaid goes beyond the unbanked. Source: Mercator Advisory Group Copyright Mercator Advisory Group

8 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 Source: Mercator Advisory Group Copyright Mercator Advisory Group

9 The Many Outlets For Financial Services Supermarkets Pharmacies Super Stores Alternative Financial Services Outlets Suppliers Convenience Stores Source: Mercator Advisory Group Copyright Mercator Advisory Group

10 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 million checks cashed B in fees (2005) 148,126 Convenience Stores 3 22,000 11,000 Check Cashers C-Stores 146,341 $54 Billion in AFS Revenue 4 The vast majority of these locations offer Money Orders and Remittance. 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, Mercator / CSP Research Project, 2010 Source: Mercator Advisory Group Copyright Mercator Advisory Group

11 Location, Location, Location Pay Day Check Cash 140, , ,000 80,000 60,000 40,000 20,000 - 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). Source: Mercator Advisory Group Copyright Mercator Advisory Group

12 Prepaid Convenience Retail Outlets in Stockton, CA: Bank of America vs. Green Dot Source: Mercator Advisory Group Copyright Mercator Advisory Group

13 Prepaid Card Access Points Dwarf Those of Major Banks 55,073 Retail Outlets 5,901 Retail Outlets 18,135 ATMs 6,467 Retail Outlets 12,355 ATMs Additional PFS Penetration: Blackhawk Western Union InComm Target / Amex MoneyGram 17,000 ATMs 5,317 Retail Outlets 15,549 ATMs 1,036 Retail Outlets 9,812 ATMs SOURCE: Mercator, Green Dot, and Scarborough research survey conducted between 0 outlets 0 50 outlets outlets Greater than 200 outlets February 2009 and March 2010 NOTE: Bank retail outlets and ATMs are as of July 2010 Source: Mercator Advisory Group Copyright Mercator Advisory Group

14 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! Remittance Money Order measures Bill Pays Failure 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 Source: Mercator Advisory Group Copyright Mercator Advisory Group

15 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 Source: Mercator Advisory Group Copyright Mercator Advisory Group

16 Mercator Prediction In 5 to 7 Years Prepaid Financial Services Will Have Disrupted Existing Financial Services Channels By Delivering Improved Liquidity, Convenience, & Price Source: Mercator Advisory Group Copyright Mercator Advisory Group

17 Mobile Financial Services Will Deliver Greater Convenience & Liquidity at Lower Cost BUT WHICH CHANNEL WILL WIN THESE EMERGING CONSUMERS WITH THE BEST CONVENIENCE, LIQUIDITY, & PRICE? Merchant, Bank, Check Casher, Mobile Operator, Card Network, Other? Source: Mercator Advisory Group Copyright Mercator Advisory Group

18 Terri Ferrise What is the role of Mobile Technology and RDC? Copyright 2012, RemoteDepositCapture.com 18

19 Explosion of Mobile Usage 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 Sources: CTIA, October 2011, ThinkMobile w/google April 2011, The Nielsen Company, 2011 Federal Reserve Board, Consumers and Mobile Financial Services Study, March

20 New Competitors are Forming Dynamics of changing markets and technology cause new competitors to arise Copyright 2012, RemoteDepositCapture.com 20

21 Evolution of Mobile Financial Services Gain consumer confidence and build behavior patterns Balances Transaction History Information Services Transfers Alerts Mobile Banking Mobile Payments Bill Payment Check Capture ebills & Invoices P2P transfers Group Collections PoS Payments Offers & Coupons Loyalty & Rewards Mobile Wallet Creates the foundation to expose transaction services Sources: American Bankers Association Copyright 2012, RemoteDepositCapture.com 21

22 Where are you? Where are you with your mobile offering? Consider what you can do to move forward. Copyright 2012, RemoteDepositCapture.com 22

23 How to Move Forward Steps to take to improve your mobile standing and attract these emerging consumer segments Copyright 2012, RemoteDepositCapture.com 23

24 Understanding the Market Needs Going Mobile: Meeting The Emerging Consumer s Preference for Managing Their Finances Add Funds ACH Direct Deposit, Mobile RDC Retail Load Account 2 Account Transfers P2P Transfers Manage Money Transaction History Balance Information Mobile RDC Status Location Services (ATM, Load Network) Withdraw Funds POS/PIN Purchase Bank Transfer, P2P Transfer Mobile Bill Pay/Remittance Contactless Payments ATM/Bank Teller Withdrawals Manage Account Manage Transaction Alerts Change PIN/Passcode Update Profile Copyright 2012, RemoteDepositCapture.com 24

25 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 Copyright 2012, RemoteDepositCapture.com 25

26 The Benefits A mobile deposit capture offering will increase Retention Revenue Relevance Copyright 2012, RemoteDepositCapture.com 26

27 Mobile Program Considerations Key elements to consider when planning a mobile program User Experience Security Compliance Copyright 2012, RemoteDepositCapture.com 27

28 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 Copyright 2012, RemoteDepositCapture.com 28

29 The Importance of Staying Relevant Banks have Consumers Trust for now Copyright 2012, RemoteDepositCapture.com 29

30 Luz Urrutia How did Community & Southern Bank expand services to the un/underbanked? Who do we serve? What are their needs? Product solutions Copyright 2012, RemoteDepositCapture.com 30

31 Company Overview: Community & Southern Bank 1. State Chartered Bank established in January 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

32 Alternative Financial Services Unbanked - Jose 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 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.

33 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

34 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

35 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 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.

36 Integrated Product Solution to Build Relationships 1. Load Money onto Card Cash Load (Retail Network & Kiosks) Cash Load (Mobile App) Guaranteed/Not Guaranteed Check Cashing Direct Deposit Reloadable Branded Prepaid Card (immediate funds) Bank Account (delayed availability) 2. Use card for basic transactions Money Remittances Bill Payment Low Cost Money Orders 4. Use card to access credit 3. Use card for cash and retail purchases Small Dollar Loans Coming in Acct Access Online/Mobile Account Access PIN/Signature Purchases ATM Cash Withdrawal

37 Kiosk Delivery Platform 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 37

38 Questions? Copyright 2012, RemoteDepositCapture.com 38

39 About The Presenters Ben Jackson Mercator Advisory Group Terri Ferrise Cachet Financial Solutions Luz Urrutia Community & Southern Bank Copyright 2012, RemoteDepositCapture.com 39