Richard Crone is a 30-year banking veteran, founder and CEO of Crone Consulting, and one of the industry’s leading experts in mobile technologies. He is also one of the key contributors to William Mills Agency’s seventh annual “Bankers as Buyers” report. Scott Mills, agency president and editor of the 2010 report, recently sat down with Crone to discuss what’s in store for 2010.
Mills: You’ve established yourself as an expert in mobile, especially as it applies to payments and banking. When did you decide that mobile was the future of banking and why?
Crone: Three years ago, the same issues were being raised by bankers that we heard in 1995 when the Internet was coming of age. I’ve seen the movie before, but with mobile the issues are even more complicated because it is not just one channel, but 16 combined into one device. The big difference is that mobile is a cross-channel enabler for customer self-service since it is present within every other channel experience.
Mills: In an ideal world, how would the average consumer use mobile in their everyday life?
Crone: For self-service, payments and opt-in “self-marketing”
Mills:In “Bankers as Buyers,” you mention that mobile banking is growing far faster than online banking. Why do you believe that is?
Crone: Mobile banking “crossed the chasm” in half the time of Internet banking and is projected to grow twice as fast because the device is already in use with no infrastructure lag experienced by PCs
Mills: When do you believe we will see widespread adoption of mobile payments by banks, merchants and consumers?
Crone: Demand unquestioned is not unquestioned: 30-50 percent of consumers are using or considering using mobile banking and early movers are growing 3 to 5 times faster than Internet banking (e.g. Bank of America at 3.8 million, adding 150,000 new users per month)
Mills: Is there a silver lining for the banking industry in this recession?
Crone: Bankers can use mobile to increase their operating margins by reducing costs. Secondly they can use mobile to create new revenue generating lines of business. For example, SoundBite Communications Inc. has developed a new service called Proactive Payments™ that is turning Expedited Payments upside down. This is an opt-in service where the customer receives a call or text message if their remittance has not been received prior to or on the due date. Customers can respond immediately and initiate an Expedited Payment for a convenience fee on the spot. What overdraft protection is for checking accounts, Proactive Payments™ is for bill payment; think of it as customer initiated “underdraft protection.” The service further extends the benefits of Expedited Payment by supplementing an outbound or “push” channel to the existing inbound or “pull” remittance connections points for consumers; and in doing so creates a new revenue generating opportunity for the bank and its serviced billers.
About Richard K. Crone Richard K. Crone leads Crone Consulting LLC, helping financial institutions, billers, merchants, payment networks, processors, start-ups and investors transform payments from a cost of business to revenue-producing new lines of business.
In his 30-year career in financial services, he has focused on harnessing the technological innovations that have shaped the industry, from the introductions of ATMs, home banking, Internet commerce, and Electronic Bill Presentment and Payment, to today’s Mobile banking and payment developments.
Mr. Crone has helped define the mobile commerce strategy for leading financial institutions, wireless carriers, payment processors, large recurring billers, card issuers, device manufacturers and technology start-ups. Crone Consulting, LLC has performed due diligence on many of the largest M&A deals and tier-one venture-backed investments in online “alternative payments” and the mobile commerce arena.
Bill Bradway, 35-year banking industry veteran and founder of Bradway Research, is one of the key contributors to William Mills Agency’s seventh annual “Bankers as Buyers” report. Scott Mills, agency president and editor of the 2010 report, recently sat down with Bradway to expand on his predictions for 2010.
MILLS: You’ve spent three decades in the financial industry. How was the recent recession different from those in year past, in terms of their impact on the industry?
BRADWAY: The great recession of Dec. 2007–and still running, has had a much more severe impact on consumers than 1973–75, 1980–82, 1990–92 and 2001–02. While high unemployment marked some of the previous recessions, this time the accumulated consumer debt load by 2007 far exceeded the prior recessions and was exacerbated by very risky lending practices that assumed the good times would continue supporting home prices and income levels. Too many home mortgages were originated without any or enough homeowner equity and adjustable rate mortgages were poorly designed (e.g., pay option mortgages, teaser rates on 2/28 subprime mortgages). Finally, the evolving financial innovations that surrounded securitizations and complex derivative instruments turned into illiquid instruments of “financial destruction” (to borrow a phrase from Warren Buffet). The financial industry meltdown exposed how the inflated real estate asset bubble was really a house of cards.
MILLS: How will 2010 be different from the past two years?
BRADWAY: I expect 2010 will be marked by a slow, and sometimes choppy, recovery. By the end of 2010 the banking industry’s earnings should markedly higher vs. 2009; loan reserves and net charge offs will be shrinking; and resolving failed institutions benefits the industry. Some regional markets will bounce back and show encouraging signs of the economic recovery. Regions with strong high tech and health care industry segments are good candidates as job growth will be up. Community banks and credit unions which are in good shape in these markets stand to gain market share.
MILLS: What are some of the most important strategic banking initiatives that happened during the recession?
BRADWAY: The attention focused on the various elements of risk management has been intensified. A second broad initiative has addressed cost reduction, albeit in a variety of ways. The most successful cost reduction efforts have streamlined operations, improved business processes and reduced the “time” component. Ultimately, staff becomes more productive and customers receive better service and sometimes better pricing.
MILLS: You are predicting that there will be more bank closures in 2010 than there were in 2009. Why is that?
BRADWAY: Over 25% of banks lost money in 2009, which compares to less than 7% in 2006. I have forecast more FDIC failures in 2010 vs. 2009 as the FDIC has replenished its reserves with the three year advance on insurance premiums and has added more staff to handle resolutions. Fewer troubled big banks need resolution meaning 2010 failures will have an even higher concentration of small banks which will lead to a higher number of failures.
MILLS: What do you anticipate the “mission critical” areas of IT spending to be in 2010?
BRADWAY: “Mission critical” varies by institution in any given year. Overall, the state of an institution’s IT infrastructure and capacity to modify and/or integrate new application capabilities is one long term “mission critical” requirement that is sometimes overlooked or ignored. Another “mission critical” area is the ability to view business results and client relationships from a comprehensive customer-centric perspective. I believe a share of wallet philosophy will be the best long term strategy if it is well executed. Among the big banks, Wells Fargo (starting with the former Norwest) has done an admirable job over the past 18 years on both the consumer and corporate sides of their franchise. USAA is another institution that has excelled in serving consumers across their financial wallet. Some small institutions also get this strategy and have moved faster and more effectively than big institutions.
MILLS: In what areas should banks be focusing their IT spending in 2010 (vs. where they will be focusing their spending)?
BRADWAY: The answer to this question is related to “mission critical” requirements for each institution. A “follow the herd” mentality at an institution that has not addressed its “mission critical” requirements will most likely lead to disappointment. Every institution should have a clear focus on its “mission critical” IT requirements and that includes a top management and line of business executive buy in. Once that buy in is endorsed, the decisions on which IT investments “should” be addressed is much easier for an institution to make. In general, I believe all institutions should be making IT investments that improve its ability to operate around customers and their needs – which touches on products, distribution channels, and analytics to highlight three key areas.
MILLS: As an entrepreneur, how has the economy impacted your business and what measures have you taken to ensure success?
BRADWAY: To start with, I have a boutique expert business model. The market turmoil tightened budgets everywhere and sharpened the focus of both institutions and FinTech vendors. My focus on delivering very timely, insightful analysis on hot topics that do not have clear answers, such as which BankTech startups and innovative solutions have the potential for high impact has been well received. My ability to be nimble and strategic has allowed me to address customer needs on a timely basis. Finally, during the past three years, more customers have welcomed my “on demand, less is more, by-the-drink expertise.”
About Bill Bradway
Most recently, Bill Bradway was Group Vice President, Banking and Insurance at Financial Insights, an IDC Company from November 2002 to March 2006. which covered all corporate- and consumer-oriented financial products and their underlying technology solutions, specializing in core bank processing applications, multi-channel solutions, payments solutions, data warehouse and business intelligence solutions, and customer management solutions. Prior to Financial Insights, he was president and co-founder of Meridien Research before its merger with IDC in November 2002. Before co-founding Meridien Research in March 1997, he was a founding member of TowerGroup, which started in April 1993.
Prior to his career as a senior industry analyst covering financial institutions and their use of technology solutions, Bill Bradway was an executive vice president at Coast Federal Bank, a $12 billion consumer bank based in Los Angeles, California. He was responsible for a variety of banking businesses, including mortgage servicing, asset-based lending, insurance, as well as information technology, marketing, and in-house legal counsel. Other responsibilities during his 15 year career at Coast Federal included mergers & acquisitions, managing a region of 10 retail branches, strategic planning and asset-liability management, branch acquisition, and community reinvestment act compliance.
2010 was my seventh year editing William Mills Agency’s annual “Bankers as Buyers.” The historical focus of the report has been to help financial institutions and those companies serving them validate their strategic IT direction, compare investments in technology by type or direct further research. Today, we have narrowed our focus to discuss the trends and conditions that could impact spending in the coming 12 months and beyond.
This year, many of the issues are the same as in 2009. However, they are affecting banks in very different ways. For example, while bankers always fret about compliance, 2010 may be the year of the next Sarbanes-Oxley.
This year’s issue of “Bankers as Buyers” includes information that was provided by or originally published by 23 of the industry’s best and brightest analysts, consultants and executives. Here are nine of my favorite thoughts from the report:
According to an Aite Group study, “The Top Costing Cutting Tactic” of banks is to renegotiate prices with existing providers (54 percent)
According to IDC Financial Insights, over the next 12 months, “Improving profit margin” is the most important initiative driving IT investments.
Bill Bradway of Bradway Research thinks banks will hold off on any new regulatory spending until any financial reform legislation becomes final.
James Van Dyke of Javelin said he is surprised more of the largest banks have not more measures to protect against customer-facing, interactive web pages, such as, “contact us” and “help” pages.
Jimmy Sawyers of Sawyers and Jacobs, LLC comments on the need for mobile banking to be different experience than just Internet banking on phones.
Richard Crone of Crone Consulting, LLC says banks need to incorporate the mobile channel in the new accounts process.
Umpqua Bank has trained 40 employees to respond to complaints via Twitter.
Quintin Sykes of Cornerstone Advisors Inc. demonstrates that once banks reach a certain size ($7-9 billion), IT spending increases as a percentage of assets.
Chris Nelson of Zoot Enterprises said many FIs are realizing that their credit scoring models are no longer effective and they need cost effective ways to adjustment more frequently.
Please share the report with friends, leave comments or contact me directly to discuss. Also, see our “Bankers as Buyers” video update below for more information:
John Leekley, founder and CEO of RemoteDepositCapture.com (@RDCTweet) recently stopped by the agency to discuss the site’s enormous success, as well as the future of the RDC market. John was such an engaging guest, that we asked him to sit down with WMA senior vice president Kelly Williams to answer a few more questions:
WILLIAMS: What led you to create RemoteDepositCapture.com?
LEEKLEY: This is a classic entrepreneurial tale. Leading up to the official start of “Check 21” in October 2004, and while spearheading Remote Deposit Capture development initiatives at HSBC Bank USA and Deutsche Bank, we discovered there was no easy way to find and exchange information on vendors, best practices, risk, pricing, and more. In 2005, believing that RDC was going to change the very way banking is done, we decided to leave our jobs in New York City and founded RemoteDepositCaptire.com. We were fortunate to be at the right place at the right time as this new industry which would impact thousands of financial institutions, millions of end-users, and process trillions (yes, with a “T”) in payments was just in its infancy.
WILLIAMS: How far has Remote Deposit Capture come since you launched the site in ‘05?
LEEKLEY: Remote Deposit Capture has been called “The most important development the (U.S.) banking industry has seen in years” by the Federal Reserve. In fact, RDC has become the fastest-adopted technology the Financial Services Industry has ever seen, reaching 50 percent of all FIs in less than 4 years (compared to 9 years for 50 percent adoption of online banking). Today, there are close to 1 Million users / locations in operation. We estimate (as do Celent, Tower and the Aite Group) there will be at least 3 million users / locations by the end of 2012.
WILLIAMS: What were the most significant developments in RDC in 2009?
LEEKLEY: The top 5 developments include:
i. The rise of “mobile” and “consumer” capture.
ii. The issuance of the FFIEC’s RDC Risk Management Guidance.
iii. The incorporation of RDC into QuickBooks 2010.
iv. Mass-market coverage of RDC in mainstream media including The Wall Street Journal, The New York Times, and USA Today.
v. The introduction of sub-$250 scanners and the ability to use flatbed scanners.
WILLIAMS: When did you realize that the site was finally taking off?
LEEKLEY: Within just a few short months, thousands of visitors were visiting the site on a monthly basis. At the same time, potential advertisers and site sponsors were contacting us. Given our independent and unique business model where the vast majority on our site is available free of change and without the need to register, it was critical to gain the support of industry-leading organizations to advertise on the site. We were fortunate to have quickly attracted premier site sponsors who today include RDM, WAUSAU, Panini, NCR and EPSON. With the support from the industry in terms of both visitors and sponsorships, we were able to hire our first employee within our first 8 months. However, we didn’t take a paycheck for ourselves for over a year as we were reinvesting 100% of cash flow back into the business. When we finally did take that first paycheck in late 2006, it truly was an indication we had made it to that “next level”.
WILLIAMS: Name three things that would increase the impact of RDC immediately
LEEKLEY:
a. A better understanding of RDC’s complete value proposition. Most people focus only upon fee income (for FIs) and the elimination of the trip to the bank (for end-users) and overlook the value of deposits / balances, cash flow acceleration and the automation of data associated with payments.
b. A better understanding of what the unique risks of RDC are (and are not), and how RDC can actually be a safer payments processing platform than has been available previously.
c. An easier and less costly way for end-users to get up and running with RDC.
WILLIAMS: What do you think the future for remote deposit capture looks like?
LEEKLEY: Watching the future of this industry develop will be fascinating. RDC has evolved from a convenient way to deposit checks into a payments platform with the ability to process multiple payment types (Checks, Credit & Debit, ACH and even Cash), capture the payment data and integrate into account receivable, customer billing, ERP, risk management and other systems. At the same time, I can think of no other industry where there can literally be thousands of service providers competing for my business. In its first five years, RDC has radically altered the very way banking and payments are done. The next five years will prove to be even more transformative and exciting.
WILLIAMS: One a personal note, describe what the transition from banking executive to entrepreneur has been like for you.
LEEKLEY: The transition from banking executive to entrepreneur has been amazing. Working in New York City, yet living in New Jersey with my family was invigorating, exhausting and challenging. While my career was flourishing, it was almost impossible to spend the time I wanted to with my family. While I now work more hours per week than I did while I was a banking executive, I have far more control over which hours those are. Being an entrepreneur has afforded me a wonderful work / life balance where I can continue to enjoy the challenges of a career, but I can now also focus much more on my family – which is the most important part of my life. I can now be my son’s soccer coach, my daughter’s softball coach, and spend more quality time with my wonderful wife. I have found being an entrepreneur is still invigorating, exhausting and challenging, but I have also found it to be much more rewarding as well.
About John Leekley
John has over 19 years banking experience, the majority of which focused specifically upon cash management product management, strategy and development. Prior to starting RemoteDepositCapture.com, John held positions at HSBC Bank USA, Deutsche Bank, PriceWaterhouseCoopers Consulting, and has conducted independent consulting engagements for numerous Financial Institutions. John holds an MBA in Entrepreneurship and Finance from New York University’s Stern School of Business.
Since founding RemoteDepositCapture.com, Mr. Leekley has been a featured speaker at numerous industry & user conferences, annual meetings and industry gatherings. In addition to hosting the industry’s first RDC Conference, Mr. Leekley is a primary resource to, and has been a featured speaker with the FFIEC, FDIC, US Treasury, Office of Thrift Supervision and the National Credit Union Administration. John was a key resource to the FFIEC and assisted in the development of the FFIEC’s RDC risk Management Guidelines and trained over 1,200 auditors. In November 2009, John was a featured speaker to the Federal Reserve at their annual Fraud Information Network Conference.
By Kelly Williams, senior vice president, William Mills Agency
Too many conference rooms sat empty in 2009
For more than a decade I’ve attended most of the big financial industry conferences. There’s no denying it, we’re now in a “global climate change” at these shows, and I predict things will never be the same again. Long gone are the days of bankers lining up at the door of the exhibit hall waiting for the opening. Over the past couple of years, the volume of financial industry conference attendees (bankers, lenders, buyers/decision makers) has dropped through the floor, and it’s never going to bounce back.
This isn’t any new news to the exhibitors, but still too many vendors are using the same trade show playbook that they used 10 years ago! Millions of dollars are wasted on outdated trade show sales and marketing tactics. Too much time and effort is still spent on squishy balls and leaky promotional pens. Too many sales people are standing in empty booths tossing Nerf boomerangs to the bored sales people at the empty booth across from them. For those companies whom I’m describing (and you know who you are), this is madness and it’s got to stop!!!
Here’s some quick advice for the 2010 trade show campaign.
1) Kill the island booth – The only folks who care about the size of your booth are the booth manufacturers. Scale down to a 10’ x 10’ and use the tens of thousands of extra dollars to…
2) Get a hospitality suite – I guess it still happens sometimes, but I haven’t witnessed a truly substantive sales meeting in a trade show booth in years. It’s always interesting to see how vendors spend so much money and resources on their booths, only to take prospects over to the lunch tables on the side of the hall floor or back to their hospitality suite.
Smart companies realize the importance of having a captive prospect. Get your prospects away from distractions, off the exhibit hall floor and up to your hospitality suite. The trick is getting a suite at a hotel that is adjoining the show. If it’s more than a block away from the conference, forget it.
3) Go lean and mean – In 2010, expect even fewer attendees at all conferences. Do your homework before deciding on the total staff needed for the event. Having your booth overstaffed with few prospects on the floor isn’t just a waste of money – it looks silly! Bring only your best, brightest and most attractive sales people.
4) There’s gold on them lunch tables – the best spot, by far, to meet prospects, customers, partners and influencers is the lunch tables on the exhibit hall floor. My most successful clients held more meetings at the lunch tables than in their booths or suites. Don’t just use these tables for lunch. The tables are free, it’s typically quiet, they are always open and there’s plenty of room to meet.
5) Kill the cocktail parties – How many times have you heard this conversation at a conference? “Are you going to the XYZ party tonight?” “No, I’m going to the ABC reception, then we’re going to the Gaslight District. Maybe we’ll see you down there.”
At a recent trade show, I saw the president of a new small company standing at the bottom of an escalator handing out flyers to his cocktail party for later that evening. His party was to be held 10 miles away from the conference at a no-name restaurant. As I ascended the escalator, I glanced back at this man as he smiled and nodded nervously back at me in a last ditch effort for me to attend his event. I felt so badly for the poor guy that I almost didn’t throw away his flyer when I got to the top of the escalator.
If you’ve got $50,000 to burn, then maybe you can pull off a successful party. However, I’ve seen too many companies attempt to have a reception only to get stomped by bigger companies with bigger parties. Let’s face it, cocktail parties are nice to attend and meet new people, but I challenge the entire financial industry to show me one example of where they made a big deal at their own party.
My advice: Go to the other company parties and sponsored events. Save the $50,000 and use it to take your best customers and hottest prospects out to dinner and/or a show.
6) Don’t just work the show, work the city/region – good hunters and great sales people know that if there isn’t any action in one spot, then move on to another spot. The high cost of travel, combined with waning conference attendance means it’s important to see if there are any prospects/customers in the city or region of the show. Many financial institutions simply don’t have the budget for their people to attend conferences any more, but this doesn’t mean they aren’t available to meet with you at their office.
7) Work with your allies – I expect a growing trend of vendors sharing booth space with strategic partners in 2010. This idea is not new, but it’s becoming more popular as true strategic partners work together to identify mutual prospects/customers and present their products/services together at these conferences.
Richard Crone is a 30-year banking veteran, founder and CEO of Crone Consulting, and one of the industry’s leading experts in mobile technologies. He is also one of the key contributors to William Mills Agency’s seventh annual “Bankers as Buyers” report. Scott Mills, agency president and editor of the 2010 report, recently sat down with Crone to discuss what’s in store for 2010.
engaging guest, that we asked him to sit down with WMA senior vice president Kelly Williams to answer a few more questions: