Survival  of  the  Fi/est  

How    Community  Banks,  Regional  Banks  and  Credit  Unions  can  regain  

profitability  and  asset  growth  through  targeted  Customer  Acquisi?on  

Community FIs are well liked and respected by consumers Community Banks, Regional Banks and Credit Unions outperform their larger competitors based on Customer Trust, Loyalty, Net Promoter Score, willingness to Refer, among others.

Community FIs offer premium rates Community FIs offer superior service and pricing on products and services. In fact, as many as 10% of the Community FIs offer deposit rates that are 2x – 8x greater than the national average rates.

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Naturally, given these factors, it would be reasonable to expect that Community FIs would be a driving force in the Banking Industry with significant customer penetration.

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Community FIs underperform on all factors BUT… As a group, Community FIs did not participate in growth in 2010, as virtually all of the growth accrued to mega-banks in 2010. In fact, Community Banks lost $46 billion in deposits in 2010, while Regional Banks grew deposits by a mere $4 billion. Growth at Credit Unions was lackluster during the past 2 years – with the largest CUs (assets > $1 billion) capturing more than 60% of all growth. Smaller FIs have been unable to compete effectively!

And the often mentioned flight from mega-bank to Community FIs has been greatly exaggerated. Mega-banks control a disproportionate share of accounts with no evidence to support a reversal of this trend. Larger Credit Unions (with assets > $1 billion) control approximately 40% of all customer accounts, while the smallest FIs (assets <$100 million) control just 20% of the customer base.

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Community FIs face significant challenges The world has changed, so have §  your markets §  your competition §  your customers §  your prospects §  your challenges, and §  your opportunities The past several years has seen tremendous changes and shifts in technology, customer adoption of new channels, shifts in consumer preferences, regulatory changes and ever increasing competitive pressures. These and other factors are breaking the ‘Laws of Banking’, including §  FIs must have a physical presence in a geography to compete §  Branches are the hubs of retail banking activity §  Community FI market segments are protected from mega-bank

intrusion

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Community FIs face significant challenges Competitive environment is only getting more competitive. The deployment of tools by banks enabling remote banking and adoption of online services by consumers has forever changed the age-old competitive structure. FIs no longer need a physical presence in a geography to compete. New entrants such as Ally Bank, ING Direct, Amex Bank, Discover Bank, Capital One Bank and others have proved this beyond the shadow of the doubt. Regardless of their business models, consumers are attracted to their message and have flocked to these institutions. In parallel, the competitive environment in the “traditional” branch centric model is intense. 82% of all deposits are concentrated in 83 metropolitan areas with 50 or more Banks and Credit Unions. Nearly 60% of all deposits are held in regions with 100 or more FIs.

The opportunity for Community FI to stand out is limited at best. Community FIs now have to develop attractive product offerings that are available nowhere else. Community FIs must differentiate to survive!

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Community FIs face significant challenges Bankers’ bread-and-butter product – checking account – is no longer a viable core. With the recent regulatory changes, most checking accounts (and by extension, most relationships) will be unprofitable. The era of OD/NSFs and Interchange fees subsidizing the cost of services are over.

Worse, the customer base in most FI is highly skewed to money losing relationships. Most FIs rely on less than 20% of their customer base to generate total enterprise profits. With intensifying competitive environment, this trend is unlikely to improve without a concerted effort by individual FIs.

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Bold actions are required FIs must refocus on activities and customers that generate growth and profits. FIs must refocus their attention to ü  High Net Worth Customer Acquisition ü  Online Marketing ü  Increasing geographic footprint “virtually” These are the 3 things that distinguish a successful, fast growing and profitable FI from an “also-ran” that will continue to struggle.

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A new platform will grow profitable customers while at the same time increasing FI growth and profitability. OptiRate provides FIs with a unique and innovative platform that enables growth of High Net Worth customer base.

By combining the best of class capabilities – OptiRate’s customer acquisition platform and FI’s relationship management and cross-sale capabilities – the partnership will result in significant FI growth and improved profitability.

Talk with OptiRate today

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Serge  Milman  Serge.Milman@Op?Rate.com  

415.260.3403  (c)  800.319.6784  x600  (o)  

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