Magazine article Mortgage Banking

Understanding What Customers Want

Magazine article Mortgage Banking

Understanding What Customers Want

Article excerpt

Remittances--the practice of sending money (usually cash) across borders, typically by immigrants in the United States to their families back home--are "a huge opportunity to tap a market that historically has not been tapped," said Daniel Ayala, senior vice president--group head, Wells Fargo Global Remittance Services, Concord, California. Ayala informed attendees at New York-based SourceMedia's Underbanked Financial Services Forum in Chicago in June that remittances represent the potential for a high product cross-sell (4.7 per customer at Wells).

"There's limited awareness that banks offer remittances. People think of the grocery store first," Ayala said, noting that lack of a common U.S. bank consumer remittance product has confused the marketplace. "[Bankers] are very smart people, [but] we over-engineered the solutions. When banks decided to go into this market, everybody came up with a different solution to the product--and that confuses the segment. [Remitters] see that it's so complex [that] they just decide to do what they always have done, which is to go back to the local grocery store to send money," he said.

According to Ayala, 90 percent of remittances are cash-to-cash transactions, but banks only offer account-to-account solutions. To "win this game," Ayala said, banks must focus on account-to-cash, because most of the deliveries in remittances are made in cash.

More than $40 billion in remittances were sent in 2005 to countries in Latin America, according to Manuel Orozco, senior associate, Inter-American Dialogue, Washington, D.C. Speaking at the Underbanked Financial Services Forum, Orozco reported that immigrants remitted an average of 20 percent of their incomes last year. Only 3 percent of American banks are offering remittance services as compared with Western Union[R], which has 20 percent of the splintered market share, he reported.

Speaking on a completely different topic at Needham, Massachusetts-based TowerGroup's Financial Services Business & Technology Conference & Exhibition in Boston, Jerry Silva, the company's research director of retail banking and delivery channels, said there is a misunderstanding about service-oriented architecture (SOA). SOA, Silva said, "is not a new technology; it is really a coming together of multiple technologies that have evolved over the years that now enable you to go and create architectures that are fundamentally reusable and cheaper."

What's more, he cautioned, "It's not that easy [to implement SOA]. No one wants to be first, [because] SOA has a unique characteristic in that it stifles innovation." Explaining that "everyone wants to be the last" to get on-board, Silva said it's because then the expensive investment costs already have been made. "The key with SOA is not that 'first bump,'" he noted. "The real cost savings come the second time, third time and fourth time you use it."

Banks that want to improve the profitability of their relationships with consumers must change some fundamental, and misguided, attitudes, according to Kathleen Khirallah, TowerGroup's research director, retail banking, speaking at the company's June conference in Boston. "Consumers want banks to provide options and then help them work through them. [But] banks typically have misunderstood those relationships, leaving a lot of money on the table as a result," Khirallah said she has found in her research.

"Banks that segment their customer base on [the basis of] age and income have really been missing the boat, because consumers look at a bank differently with different expectations about what their relationship will be. …

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