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PCBB Banc Investment Daily September 22, 2017
Banc Investment Daily
September 22, 2017

Zika and Your Payment Strategy

Scientists have found that the Zika virus can be used to combat brain cancer cells in adults. You heard right - a particularly aggressive form of brain cancer known as glioblastoma seems to be attacked by the Zika virus. So far, this otherwise deadly virus has successfully diminished these aggressive tumors in mice, while leaving other brain cells untouched. Human trials are still at least 18 months away but tests in the lab show early promise. To be sure, the difficulty for bankers in deciding on a payments strategy pale in comparison to curing brain cancer, but it is still challenging.
Payments have always been a mainstay of the banking business. But the rise of new financial technology (fintech) firms poses challenges to community banks. If payments migrate away from banks, the data associated with those payments is also lost. That data is literally a gold mine of information that banks can and should be using to enhance and focus services, as well as improve and target marketing and sales efforts.
The payments situation is captured in considerable detail in a new survey by Capital Performance Group done in conjunction with the ABA. Its findings are particularly important to community banks, which were well-represented. The survey received responses from 219 institutions, most of them community banks with less than $1B in assets.
Much of the survey detailed how banks are lagging in adoption and implementation of robust payments strategies, capable of keeping up with technological changes. One finding that seems particularly telling is the lack of attention to capture and analyze data residing even in their own servers.
Here's how the payments situation breaks down. Of the banks surveyed, 90% have no formal payments strategy. Of those that do have a formal strategy, 71% do not capture and analyze payments so they can learn more about customer behavior. So, even those banks that have adopted strategies are not effectively using the data they collect to enhance their businesses and improve customer service.
The survey found that part of the problem is simply inaction on the part of banks to leverage powerful data analytics tools for sales and marketing. Nearly all banks use data analytics to track activity volumes and to help in fraud detection. But, only 44% use any data analytics in their sales efforts, and just 39% use it to help craft targeted marketing to customers.
This means community banks still have time to carve out a competitive advantage. Knowing this, you may want to get your management team together and consider getting a plan in place to keep up with the arrival of innovative products and competitors.
However, if it were easy, more banks would be doing it. So, there are definitely challenges to overcome. Once a payments strategy has been set, the areas of ongoing resource coordination and technological development, among others, will need to be addressed as well.
As the mobile landscape accelerates, the pressure for banks not only to have, but to understand and effectively use their payment strategy, will only become greater.
Banks seem to be anticipating this, as 71% of those surveyed expect to increase investment spending on commercial payment services in the next 12 months and 67% expect to increase investment spending on consumer payments services.
Payments and the data they provide can represent a real competitive advantage for community banks in targeted sales and marketing activities. Now may be the right time to make a move.