Four months ago the Consumer Financial Protection Bureau released a new interactive tool to help consumers understand the mortgage rate disparity in any given market.
Here’s what it looks like conceptually and in real life usage on my iPhone:
This tool prompted a lot of backlash among mortgage originators about how this doesn’t account for the complexity of different loan types and how the tool can actually mislead the public.
But let’s look at the problem the CFPB is trying to solve: 47% of homebuyers don’t compare rates1.
If that’s the problem, then I believe the tool does a great job of showing the user that there isn’t parity within any market. The end result of using the tool, the user should understand that seeking multiple loan bids will save them money.
When we first walked down the path to forming Hip Pocket, we took a similar approach. We asked anyone in the Lincoln, Nebraska market to tell us where their current mortgage stood (rate, amount, home value, and remaining term) and we’d show them where they stood vs. their peers. We’d also then shop the market for them if they wanted and show them their best options as well as the disparity within the market.
Here’s a bit about what that looked like:
With only two out of 17 banks and credit unions in our market offering a 3.5% mortgage at the time, a shopper’s chances of finding both of the lowest APR loans with just two phone calls or online inquiries was 1.38%.
Now this isn’t a race to the bottom on price within banking! That could be done but I’d advocate for bankers and credit union executives to consider this a wide open race to the top.
At the top is the ability to create and promote transparency in the marketplace so your customers and prospects can see that they can trust you to look after their financial well-being. When you do this, Gallup shows that you will win more engagement, confidence, accounts, and longer tenure2.
Competing on “relationships” is another way of saying that you don’t have the tools, rates, and products to compete out in the open. Eventually the CPFB or other entities (read here or here) will force transparency to the forefront.
Only one bank or credit union can choose to lead this effort in any given market. I’d rather be the leader in transparency instead of lumped into the group of “followers” when this happens.
And it will happen. Soon. We’re actually betting on it!
If your bank or credit union is leading the transparency evolution in your market, please let us know with a comment!
I’ve had the privilege of being on the inside of a many corporate product development initiatives.
My biggest regret is that they didn’t have code names like Operation Condor or Operation Honeydew.
My second biggest regret is that we did several of them all wrong by starting with an idea or a company/bank-first perspective. What I mean by that is that we were attempting to answer questions like these:
- “How can we optimize profit per checking account?”
- “How can we redesign our product offerings to make more money?”
- “How can we cross-sell more products to our current customer base?”
“How can we differentiate our industry or product offerings to diversify and lower risk?”
- “What should our project code name be? Is Condor taken?”
These questions lead to brainstorming for potential ideas/solutions to the problems. Our problems. In several cases they lead to profitable solutions but they never lead to large insights that could scale and create large profits. Your cash cow is meant to have cash calves.
If I had to do all of these meetings over again I would have shifted the focus onto the end customer and look for pain points we could solve. I would look for insights into their problems. Insights.
We don’t do this enough if at all in the financial services industry and it’s the reason that tech firms from outside our industry (@Simple for example) have entered into the foray. They believed bank customers hate banking. The customers hate the technology and the service. They asked questions and sought insights into those problems and identified opportunity if they could provide solutions.
See the difference?
Insights into customer problems = sellable solutions.
Ideas to solve our problems = potential solutions that then need to be sold.
Just over a year ago I moved my focus from working toward ideas to working toward insights. It was at this time that I became curious as to why more bank customers don’t get better rates on their mortgages and auto loans.
In looking at the market and bank data, I saw a wide discrepancy in those who were getting the best rates and those who were at the bottom. Here’s an example I presented last week from a market in Nebraska:
So, was this discrepancy due to a lack of information, poor emotional decision making, apathy, or something else? The only way to find out was to “get out of the building” and interview people.
After hundreds of qualitative and quantitative interviews, I found the consumer insights that now power the technology behind my patent-pending software company, Hip Pocket.
More importantly, the early client results are providing validation that we’re solving a real problem and not just supplying another idea. The bank gets to solve a real problem around context and confidence for the customer and position it for what it is: a consultative conversation to save the customer/prospect money.
I for one am very excited to hear from Krista Berlincourt of @Simple present a keynote at the ABA Bank Marketing Conference in Orlando next week. I want to learn from those outside our industry, to broaden my perspective, to hear their insights, and to ultimately implement the same insight-generating processes into my company, Hip Pocket.
I hope to see many of you there!
April 2nd marked the first ever conference from The Financial Brand. It was an intense and energy filled two days in Las Vegas, and I’m now able to decompress and process what I learned and the insights I will take forward.
1. One of the first things I did at Thursday morning’s opening event was engage in one of the many physical interactive posters that were placed throughout the vendor area. These posters asked questions of the attendees and asked them to write – not text or tweet – their answers on the poster. Who does Analog anymore? The Financial Brand does…and there in lay an interesting thought for me. In a conference that would be filled shortly by a kickass opening video from CU Grow, why ask participants to go old school analog?
That thought lead me to refrain from live tweeting any of the event or the nightly activities – I’m too old to engage in anything too incriminating – so this was indeed a conscious choice. What was the end result? I did feel as if my own internal processing of each event and the Forum as a whole went deeper. I wasn’t looking for tweets, I was looking for linking ideas to build a larger, more in-depth picture of the content. I believe I found some very new insights into some ideas that were challenging me and my clients so will mark this as a win!
Takeaway: Digital is the future but it’s meant to complement the best parts of old-school thought and engagement, not as a 100% replacement.
2. My favorite session of the entire conference was from Lani Hayward of Umpqua Bank. Her presentation on “Building the Umpqua Brand Experience” provided a great glimpse inside how Umpqua has grown, differentiated itself, and become the gold standard for brand within our industry.
My biggest takeaway was their internal barometer when it comes to going the extra mile and piloting new ideas. Innovation has to be an inside out movement within an organization for it to really settle into the DNA of the organization and it’s true with Umpqua.
What is your bank doing to try new ideas? Are we too afraid of failure to be innovative at our banks and credit unions? I rarely see financial institutions green lighting things that are bold enough to make participants giddy and excited. What’s your threshold for moving forward? A ironclad ROI guarantee? If so, you’re not trying hard enough.
Takeaway: There’s a huge chasm between Umpqua and most FIs…what’s your first step to fill that void because you need to move now! Whenever I take on a large challenge, I just take it Bird by Bird!
3. I heard at least one conference participant say that the ideas presented at the conference weren’t revolutionary. That’s true for most conferences. The success of each participant will always reside solely on their and their FIs ability to EXECUTE the ideas shared within the sessions!
Takeaway: I took away a lot of great ideas from the conference – some new iterations on things I’ve heard, and a few new ideas or at least new lens from which to look – but they are all fluff without execution. What can you do today to start executing? I’ve already moved to distillation and now implementation on at least one idea…are you ahead of or behind me?
4. Finally, what I noticed the most about the Forum was how palpable the energy was in the first night and full day. Jeffry Pilcher and the team at TheFinancialBrand.com have done an amazing job of building their brand over the last few years and for delivering fantastic content.
The Forum was the first time most readers were able to physically experience the brand and to meet Jeffry. I won’t say that the guy is a rock star but in watching people crowd around him at the first night’s reception, it was clear that this brand carried weight.
Takeaway: Do FIs ever do a good job of creating pent up demand and excitement for a product or service? I’ve only seen a very few examples from ING Canada or other countries where a campaign was deployed over time to build excitement. Are we just that boring as an industry or will be ever be able to create excitement around something? The first step will be creating something that has the potential to delight and excite our customers.
So those are my takeaways from the conference. If you have some to add, I’d love to hear about them!