CBA Live 2016: What’s Next for the Consumer Banking Industry
Like previous years, the Consumer Banking Association (CBA) executed a successful 2016 conference. Their theme, “Leadership Unplugged” was a big part of the conference as two keynote speakers, Stanley McChrystal, retired 4-star US Army General and Heather Cox, CEO of Citi FinTech, discussed their non-hierarchical, empowerment and shared-consciousness approach to leading teams. They identified in their organizations that there was a gap between what they needed to do and the traditional organizational systems and processes—a common problem in many organizations. Their approach provided their high-performing teams to be adaptable and to create a culture of trust and collaboration. This brought decision making down to each level, allowing for invention and the ability to move quickly in a rapidly changing environment.
CBA has many different content tracks that span mortgage, banking, student loans, compliance and auto finance to name a few. During my time at CBA, I attended a variety of these sessions to bring highlights to the variety of our blog readers. Here are a few:
- Subprime Auto Market. Nearly one-third of the U.S. is considered non-prime and it is important to understand the subgroups within that population in order to serve those who can be good customers. For example, prior prime customers are a good customer segment to extend credit but there are others as well. The speaker’s position was that the problem with the traditional credit score model is that it looks at the ability to repay a loan. However, there is not enough data to judge the likelihood of the ability to repay for these subprime customers. This is complicated by the fact that in 2007, a typical subprime customer had a destabilizing event every 87 days and that has moved to every 30 days. Looking at the detailed transactions and if a consumer is breaking even on income and expenses and other data points is a better way to determine if they can handle additional credit obligations. Identifying those non-payers in the subprime market is crucial as it drops loan losses by 49%.
- Millennials. This market segment is reluctant to buy items such as cars, music and luxury goods and are choosing to use services that take that ownership burden off of them—a sharing economy. For example, 30% of millennials don’t intend to purchase a car in the near future. They also expect to handle financing with no hassle. According to JD Power, the most highly satisfied auto loan customers reported they spend 15 minutes or less discussing and signing the final paperwork—after 30 minutes the scores drop significantly. This likely holds true in other loan situations as well.
- New Communication Channels. One in three customers have cancelled a service or ended a relationship with a bank after a bad customer service experience. And with a fully engaged customer driving 40% more revenue than a disengaged customer and patience with customer service representatives running out, especially in millennials, businesses need to make some changes. 71% of consumers would prefer to use a virtual assistant in a conversational human-like way without requiring a call to a live agent. And 90% of consumers say a positive experience with a mobile app makes them more likely to continue doing business with that company. With these facts, when developing a self-service program, consider if it is intuitive, conversational, personalized, anticipatory and consistent.
- Power of Data. When banks were surveyed, the three top challenges for their organizations around data was data structure, skilled staff and poor analytical planning. With regards to implementation, the top impediment to success is too many silos (57% of respondents). The next two were the amount of time to analyze large data sets and the shortage of skilled people for data analytics. Data is growing at 40% a year and by 2020 IBM estimates that over 40 zetabytes of data will be created – an increase of 300 fold from 2005. Moving your marketing from a campaign-based model to a moment- based model is necessary to stay relevant, but you will need to build or outsource that data component. Your campaigns will move from segmentation to a segment of one—being always on, using algorithms, listening for triggers, capturing the moment and reacting to the moment.
- Payments. One session discussed international payment trends and implications for the U.S. Faster and real-time payments are active in 18 countries with 200 billion transactions per year. The defining attribute is speed of interbank account transfer with availability of funds in potentially less than one minute. The real-time market infrastructure is coming, however adoption cost for banks can be significant and business cases for real-time payments currently have limited propensity to generate revenue.
Based off of this conference and what I heard about the new way to lead an organization, I will be grabbing a copy of Stanley McChrystal’s book, “Team of Teams: New Rules of Engagement for a Complex World.” Like this keynote, CBA had so many great speakers and sessions and I look forward to attending again in 2017 in Dallas.