Sunday, October 01, 2017

Bank Products: Blah Blah Blah

At a recent banking conference, Ray Davis of Umpqua Bank took center stage to tell of his journey from a small, Oregon community bank to a regional powerhouse. He mentioned products only briefly. And product was not part of the bank's success. I thought, Why?

Stuck on the topic, I jotted down the products that I remembered from when I landed my first banking job in 1985 while Davis spoke. I never claimed to have a great attention span. And I used those hotel notepads. Someone has to use them. Here was my list:

Products Circa 1985
Mortgage loan
Car loan
Personal loan
Home equity loan (?)
Business loan and line of credit
Commercial mortgage loan
Construction Loan

Checking account (business and personal)
Savings account (business and personal)
Certificate of deposit (business and personal)

Merchant services (?)

Then I wrote down how that list has changed.

New Products: Circa Today
Money market accounts (although could be classified as hyped savings)
Sweep accounts/cash management

The hedging and options might be categorized as features of business loans, versus products in and of themselves. But let's not quibble over insignificance.

What do you notice about the above lists?

What I notice is there is little difference in the products of today and the products when MacGyver developed improvised explosive devices with his shoes.

Bank products, at their base, have not changed. So, perhaps, instead of developing complexity in our product set, we should look to develop simplicity. Wouldn't we all benefit from more simplicity?

What sparked this post was a recent article in written by Mark Gibson and Kevin Halsey of Capital Performance Group in Washington DC. It was a precursor to a presentation they gave at the ABA Marketing Conference in New Orleans titled "How to Build Remarkable Products". One of their slides from that presentation is below.

This slide, and another I was privileged to see, dubbed as one of the most popular by the authors, speaks nothing of product. In fact, I will confess to you that when I hear bankers talk about products, product management, product design, etc., I have no idea what they are talking about. Bank products have been the same since I've been in banking.

Yes, there are different features to products, such as high interest rates for checking account customers that engage in specific behaviors, or option-based CD's as developed by Neil Stanley of The CorePoint. Still a checking account. And still a CD.

Distribution is different. Back to my notepad, I penned the 1985 distro points as person-person, in-branch, telephone, and ATM. Today we could add online, mobile, and social (for customer service). As a list, not very impressive.

However, in terms of customer utilization, distribution has been massively disrupted.

Sure, bankers can tick off all of the new features added to that standard product list, as mentioned above. But new products? Hardly.

So why not simplify? Like Southwest did when they went with one airplane model. Why not have a personal checking account, that is non-interest bearing up to a certain average balance, which could differ based on customer utilization that could easily by solved by AI, and bears interest above that level. Same with business checking, now that we can pay interest on those accounts. 

Savings accounts could easily have sub-accounts. Like the proverbial envelopes in the night stand drawer that tucks money away for certain things such as Emergency, Vacation, and Holiday. I believe PNC did this with the Virtual Wallet account. To me, Virtual Wallet is nothing more than a practically thought out savings account. 

I recently commented to a bank's strategy team that I thought the days when bankers could rely on sleepy money are coming to an end. The 13-month CD special trick, where the CD reprices at the lower 12-month CD when it matures, is over. A business model that relies on the stupidity of your customers will die. Imagine a customer getting a text from a financial management app that says "your bank is screwing you". It may not say that, but it would say that a CD is maturing and the rate it will role into is below market.

No, we can no longer rely on sleepy money. But perhaps we should focus Marketing on touching the customer in every phase of the buying journey instead of concocting schemes to complicate products, tinker with pricing, and rely on Rip Van Winkle customers. This is what I believe my friends at Capital Performance Group were emphasizing.

If I were a marketer, I would focus on simplicity in product design. And sophistication in the customer acquisition or relationship expansion funnel.

But I'm not a marketer. 

~ Jeff


  1. Jeff,
    Great post! I will be sharing this with several contacts in the banking world. Love it!

  2. Thanks Jeff,

    We strive to meet client needs and wants in the way that is most simple, easy, and clear.

    The new CD product that you reference can be found at

    1. Neil,

      Great take on an old product. Especially for those that would like a CD, but are hesitant about the extension risk of taking a long-term CD.

      Thanks for the comment and happy new year!

      ~ Jeff