Community Banks Have Unique Opportunities

Opportunity Abounds for Community Banks

It is an interesting time for community banks. While they haven’t taken as big of a hit to their reputations as the larger national banks over the past five years, many have been unable to slog themselves out of the “mushy middle.” To see the entire Gallup report, click here.


A Look at the CFPB's Monthly Complaints Report

As participants in the financial services industry, we should be interested in what the Consumer Finance Protection Bureau (CFBP) is working on. To better understand this regulator, StratAgree has begun to review their monthly reports of consumer complaints. The most recent report was released in late December. In it, the CFPB lays out complaints by product/service, by state/district and by company.

Please note that other organizations and individuals have already criticized the CFPB data and analyses as flawed, inaccurate and downright wrong. Our purpose is not to criticize as we believe that over time the data will become more valuable. As a relatively new resource, we believe it will improve. But, because of the report’s current shortcomings, we will attempt to make reasonable corrections as practical.

The monthly report is comprised of three main sections:

Section 1 – Complaint Volume (by product, state, and company)
Section 2 – Product Spotlight (a different product profiled each month)
Section 3 – Geographic Spotlight (a different state profiled each month)

This month’s review will focus on the first section of the November 2015 report. Note that the CFPB uses different time periods for different metrics. To avoid confusion, we’ll point out the month(s) being reported in chart titles and captions. Also, when practical we will provide a comparison to the June 2015 report (the first report in the series).

Section 1 – Complaint Volume

Complaints by Product/Service
The top three products/services complained about in November 2015 were Student Loans, Debt Collection and Mortgages comprising 31%, 19% and 19% of total complaints, respectively. These top three products/services are the same as in the June 2015 report where Student Loans, Debt Collection and Mortgages comprised 32%, 20% and 19% of total complaints, respectively.

CFPB Nov 2015 Rept Complaints by Prod
CFPB Nov 2015 Report Complaints by Product/Service © 2016 StratAgree™

The bottom three products/services complained about in November 2015 were Bank Account or Services, Money Transfer and Other Financial Services comprising 1% of total complaints, each.

These bottom three products/services are the same as in the June 2015 report where Bank Account or Services, Money Transfer and Other Financial Services each comprised 1% of total complaints.

Complaints by State/District
Because populations vary widely from state to state, total complaints per state is misleading. We’ll therefore use the normalized data (complaints per 100,000 population).

The top three states/districts for complaints in November 2015 were Washington DC, Delaware and Maryland with 674, 433 and 390 complaints per 100,000 population, respectively.

CFPB Complaints per 100,000 Population, by State 2015-11 © 2016 StratAgree™

These top three states/districts are the same as in the June 2015 report (the first CFPB report) where Washington DC, Delaware and Maryland had 577, 371 and 333 complaints per 100,000 population, respectively.

The bottom three states/districts for complaints in November 2015 were North Dakota, Iowa and West Virginia with 99, 113 and 117 complaints per 100,000 population, respectively. These bottom three states/districts are the same as in the June 2015 report (the first CFPB report) where North Dakota, Iowa and West Virginia had 81, 96 and 97 complaints per 100,000 population, respectively.

The regions with the highest per-capita complaints are the District of Columbia and two of its neighboring states–Delaware and Maryland. This would suggest that awareness of the CFPB is highest in the regions with the highest concentration of federal government and CFPB employees as well as their friends and families. We’ll watch to see if this disturbing anomaly subsides over time.

Monthly Complaints for Top Ten Most Complained About Companies
The data for complaints by company is provided as a rolling average of 3 months’ complaints. The most current data is from the period July – September, 2015. Apart from the age of the data, there are two big problems with the complaints by company data. First, it does not factor in the size of the company. And second, it does not take into account differences in industry (credit reporting vs. consumer banking vs. credit card companies, etc.). With these flaws, larger companies will obviously have more complaints than smaller companies. Here are the numbers in graphical form.

CFPB Nov 2015 Rept Jul-Sept Complaints by Company © 2016 StratAgree™
CFPB Nov 2015 Rept Jul-Sept Complaints by Company © 2016 StratAgree™

Let’s look more closely at the four banks listed in the “Top Ten Most Complained About…” list. They just happen to be the largest four banks in the country. For context, here is a pie chart showing the 2015 market shares of Bank of America, Wells Fargo, JP Morgan Chase, Citibank and all others:

Bank Market Shares 1Q 2015
Bank Market Shares 1Q 2015 © 2016 StratAgree™

Considering their large size, we can expect the number of complaints about these banks to be large as well. In fact, we could assume that complaints about each of these banks should roughly equal their market share. But, before we can make that comparison, we need to strip out non-bank product complaints from the CFPB data so we can compare apples-to-apples. Here’s a chart showing the breakout of complaints about the largest banks as a percent of total bank product complaints (credit reporting and alternative financial services complaints have been removed):

CFPB Nov 2015 Rept Jul-Sept % Complaints by Bank
CFPB Nov 2015 Rept Jul-Sept % Bank Product Complaints by Bank © 2016 StratAgree™

Breaking the data this way, we see that the four banks that have 54% of the consumer banking market are the target of 60% of consumer bank product complaints. More interesting is the fact that Bank of America and Wells Fargo appear to have more complaints than their market share would indicate while Chase and Citibank appear to have fewer complaints than we would expect. That observation makes it just wrong for the CFPB to label them as part of the “Ten Most Complained About Companies”

Only time will tell if the CFPB data quality will improve, but for now we can’t determine with certainty whether the biggest banks are better or worse than other banks.


The vast number of consumer complaints to the CFPB relate to credit issues–76% of complaints appear to be about credit products and credit reporting and 19% are regarding debt collection. Other financial services (money transfer, etc.) account for 2% of total complaints while complaints about checking and savings accounts were just 1% of the total.

Complaints about checking and savings accounts were just 1% of the CFPB total.

Geographically, the highest complaining regions were Washington DC, Delaware and Maryland with complaints per 100,000 population of 674, 433 and 390, respectively. Complaints for the rest of the country averaged 197 per 100,000 population. It would appear that CFPB employees, their families and friends are driving artificially high complaint volume in those regions.

Lastly, the CFPB’s Top Ten Most Complained About Companies data doesn’t tell us much because it doesn’t consider company size or other differences (banks are lumped in with credit reporting agencies, monoline credit card companies, mortgage servicers and alternative financial services providers like payday lenders and money transfer businesses).

Even with the flaws, it is helpful to see which products are being complained about and which regions generate the most complaints. StratAgree will continue to monitor future CFPB monthly complaint reports and strive to draw meaningful conclusions from them.

Competition for Checking Is Heating Up Again…

By now, this offer should be familiar to everyone in our business–“Switch to Bank X and Get $300!”

Banks, particularly the larger players are pulling out the stops with offers of $300, $400, even $500 for moving. What are these banks looking for? Customer relationships–checking, savings and a loan relationship. Some of the offers are targeted at new checking customers and offer large bonuses for opening and funding a premium account. Others are going after relationships offering bonus money for various account types. All have activity and funding requirements, but know this–these offers work.

StratAgree recommends that regional and community banks do two things. First, they must understand the value of customer relationships to know how much is reasonable to spend to acquire them. Second, they need to ensure that their digital banking offerings (particularly mobile banking) are current and attractive.

Customer Value
Banks need to know which account types customers buy, what the average balances in those accounts are and the length of time customers keep these accounts open to begin to understand the value of a customer relationship. Many a marketer has been criticized for high cost per account acquired but few of the criticizers have solid evidence for why they believe it’s “too much.” Better marketing decisions are possible when you know the real value of a customer relationship

Digital Tech
The bigger banks are investing in state-of-the-art mobile banking platforms. Smaller players are beginning to lose share on this alone. Get current. Again, customer relationships are probably worth more than you think. Marketing isn’t the only investment required to attract and retain them.

Here’s a great piece that appeared at about 6 weeks ago. Although it’s a similar story, we don’t see this as a new trend–it’s always been good business. It’s just that some players have better information to guide their strategy.  Chase has been using this tactic for many years with great effect. They know what a customer is worth. Do you?



To learn more about Customer Lifetime Value, contact Alpine Jennings at 716-713-4266 or

Robert Dorn at 404-987-2419.


Women Stuck Managing Home Finances

Women, more often than not are the CFO of their household. Our friends at The Financial Brand have compiled research from Regions Bank, Allianz and other sources showing that women feel like financial management of the household ends up being their responsibility in spite of their feeling less confident in financial matters compared to men.

44% of women said they are solely responsible for making financial decisions for their household, compared to 35% of men. However, men rated their overall confidence in handling finances higher (6.20 on a seven-point confidence scale) than women (only 5.86). Women under age 50 rated their confidence even lower (5.61).

The largest confidence gap between women and men is in the area of investing, where women respondents showed a confidence level of 4.75 on a seven-point scale compared to 5.42 for men. For the entire article click here.

Banks Need to Step It Up With Millennials

Our friend, David Kerstein of Peak Performance Consulting Group wrote an interesting piece on the need for banks to attract millennials that appeared last month on BAI’s Banking Strategies blog. Dave’s premise isn’t anything new, but the fervor in which he makes his point is particularly apropos–other competitors will step in to serve this important segment in banks don’t. In fact, it’s already happening.

Banks need to take action or risk losing this segment to new entrants in the payment, consumer banking and business banking space. And there is cause for concern: we counted 38 different non-traditional competitors in the payments space alone, of which 10 were new in the last year.
–David Kerstein

As we’ve stated before, StratAgree’s assessments is that banks’ must focus on experience and that means digital. Serendipitously, consumers in the Millennial segment are up to ten times more likely to switch than more mature (older) counterparts. The point is: the time is now to make sure your customer experience is up to date so you can protect the customers you have and attract new customers from laggard institutions.

To see Dave’s article in its entirety, click here.


Younger Consumers Ditching TV

Millennials are dropping cable after leaving their parents’ home.  The trend appears to be related to lower incomes of younger consumers. A new Nielsen report, (covered by the New York Times, see link below) shows the trend is likely to reverse as these younger consumers start families.

smartphone-982563_640For us, the takeaway is that 1 in 4 consumers ages 18-24 without children are foregoing cable TV. According to the research, these consumers are using an antenna or the internet for TV.

For consumers under the age of 32, at least half of their TV watching is on computers, tablets or smartphones.

Not surprisingly, this growing trend underscores the necessity for advertisers to build their presence in digital media.

The entire text of the NYT article can be found here.

Key Purchase of First Niagara Will Make it 13th Largest in U.S.

Cleveland-based KeyCorp (KEY) agreed to buy First Niagara Financial Group Inc (FNFG) for $4.1 billion.

What Does It Mean?
Large bank deals appear to be back. Though they had slowed in the aftermath of the financial crisis, acquisition of banks over $1 billion in assets is picking up again. Key reports that the combined company will have over 1,300 branches in 15 states and deposits of almost $100 billion. The deal is the 2nd biggest this year and, when completed, Key’s purchase of First Niagara will make it the 13th largest bank in the U.S at $135 billion in assets.

First Niagara, a well-known brand in Western New York had fallen on hard times over the past several years. After a decade of rapid growth through acquisition, the company was just not able to adapt to the extended low-interest environment. Expenses were too high compared to its revenue. Other factors, including the announcement of a “process issue” and a $1.1 billion writedown of company goodwill spooked market watchers and eroded company credibility. For the past two years, rumors persisted that the bank was being prepared for a sale.

What Can We Expect Now?
In the protracted low-interest-rate environment of the past seven years, banks have had to focus on expense control to protect profitability. Because Key and First Niagara both have a presence in many of the same markets, tough decisions will have to be made about which offices to keep and which ones to shut down. Customers will be impacted by any such changes so bank decision makers will need to exercise care.

Rival banks like Buffalo-based M&T Bank will be doing their best to take advantage of the customer disruption that will come as Key blends First Niagara into its operations. In fact, it is expected that competitor banks will target affected customers with special offers specifically designed to lure them away from the disruption.

While some analysts are saying that Key paid too much for troubled First Niagara, only time will tell. One thing is certain–bank mergers appear to be back.

Maybe What We Need is a Monday Box

My wife and I have a large family. When our children were young, getting to church on time Sunday mornings was a real challenge. At the time we needed to leave, invariably one child would not have socks, another would have no idea were he left his dress shoes. Chaos would ensue as we ran around helping to locate our children’s missing items. Eventually, we would find everything and help the kids get ready for church. The process was not pleasant and it often resulted in us being late.

As we struggled with how to teach our children better preparation skills, we lit on the idea of a “Sunday Box.” We introduced our plan to the kids in a family meeting. They listened as I explained that success in anything requires us to plan, to prepare and then to work (though I think I started to lose them at “work”). Luckily, my wife was able to quickly get them enthused with an activity—they would each select a box and decorate it any way they liked and use it to hold the items they needed for Sunday. They were excited to proceed!

We immediately went down and rummaged through the boxes in our basement until each child had selected one they liked. Then, we all went to the store in search of contact paper, stickers and other decorations. Upon returning home, we spent about a half-hour helping the kids cover their boxes with brightly colored contact paper of their choosing. Finally, they used crayons, markers and stickers to complete their masterpieces.

The plan we had agreed upon with our children was that on Saturdays, as part of our household chores, we would each prepare for Sunday by “loading” our Sunday boxes. Socks, shoes, pants, ties, slips, bows, etc. would all go into the box on Saturday so Sunday would be smooth and stress free.

It worked wonderfully. The difference this little team exercise made in our family life was amazing. Gone were the strife and anxiety of rushing our kids to get ready for church. The awful tension was replaced by peace and harmony which put us in a much better frame of mind for church.

In our careers, we often struggle with being disorganized, rushed and anxious like my kids used to be before the Sunday boxes. What if we as working adults went about making a “Monday Box”? Could we set aside time on Saturday to review the previous week, to go over our appointments for the coming week, to think about what we really need to get done in the coming week, and to schedule time to accomplish the important things that we care about?

Plan, Prepare, Work

Plan The Week
A good plan requires that we know the lay of the land–a review of where we are relative to where we want to be. Think about people first—clients, direct reports, boss, colleagues—then, think about your goals, projects and other responsibilities. The goal of planning is to consciously decide what you want to accomplish in the coming week. Commit these ideas to paper (or bytes) and you have a plan. Now, move on to preparing for the week. Warning: Don’t shortcut the plan! Planning is about becoming aware. If you’re not aware, you can’t prepare.

Prepare for the Week
With plan in hand, prepare for the week. Get out your calendar and start inputting the tasks you need to accomplish to achieve your goals for the week.

Attending a few meetings?

Make time to read the prior meeting minutes and other materials to become informed beforehand. Do some research and come prepared to contribute.

Leading a meeting?

Make time to review minutes, assignments and other takeaways from the last meeting. Prepare an agenda. Connect with people and send friendly reminders about their assignments. Distribute the agenda well in advance.

Meeting with an employee, client, or boss?

Review notes from the last meeting to make sure you are progressing toward achievement of your goals. Make sure to complete any tasks agreed upon at the last meeting.

Working to achieve a goal?

Calendar the tasks you need to complete to move ahead toward accomplishment.

Monday morning will roll around before you know it. There will be plenty of distractions and temptation to avoid doing the things that will move you closer to achieving your goals. But, now is the time to keep your resolve to do better, to increase your effectiveness and reduce your stress. Stephen Covey encouraged us to be strong at these moments of decision and challenged us to exercise “Integrity in the Moment of Choice.” Stay firm and work your plan.

Earnestly “loaded”, the Monday Box will contain everything we need to have a productive, fulfilling week. Stress will decrease, accomplishment will increase and professional competence will be amplified. Taking the time to plan and prepare will actually take much of the “work” out of our work. I’m going down to the basement right now to find my Monday Box.

Citi Testing Screenless, Cardless ATMs

Diebold has created an ATM that is screenless and doesn’t use ATM cards. How does it work, you ask? You use your smartphone!

Using your smartphone you preschedule pickups of cash. When you get near the ATM it identifies you by the near field communication (NFC) chip on your phone. And then confirms your identity through other means, like an eye scan.

This new ATM is being shown at a trade show this week in Las Vegas and Citi has begun testing them in a few areas. However, it could be years before an ATM like this becomes the standard. Several banks have been trying to develop and test cardless ATMs for years. But so far none have done a large-scale test of such a machine.

Yet someday a screenless, cardless ATM may become the norm.

For the full article from Consumerist, and a picture of what one of these ATMs look like, click here.

The Parable of the Thermostat: A Lesson in Communication

Our company had just moved into a brand-new state-of-the-art building. It was constructed using green design principles with an open, organic feel and plenty of windows for natural sunlight. I was excited to move in!

Entering my new office that first morning, I noticed it was a bit too cool for my taste so I turned the thermostat up a degree or two. After unpacking a half dozen boxes and beginning my real work, I was still cold so I bumped the thermostat up again.

Throughout that first week, I continued to mess with the HVAC system to try to get comfortable. When I could stand it no longer, I called Maintenance. They explained that the system was computer controlled and that they would make an adjustment. I was satisfied that the problem was solved. It wasn’t.

After another week, I called back in desperation—“Please help me! I’m freezing!” The kind person on the line said she’d send a technician over immediately. When the technician arrived, he quizzed me on the situation. I told him I’d been freezing for two weeks and no matter how high I turned the thermostat, it just kept getting colder. He examined my thermostat and, without a word, he left!

As I sat there shivering, wondering why he had abandoned me, the technician returned to my office. Only now he wore a silly grin on his face as he yanked the Velcro attached thermostat box off my wall and disappeared again. He was gone 10 seconds and returned only to reattach the thermostat to the wall.

Reading the puzzled look on my face, the technician explained, ”Our HVAC controllers are wireless. It turns out that while you’ve been freezing for two weeks, the guy next door to you has been boiling. I just swapped your controllers—you should be fine now.”

It dawned on me–every time I had turned the thermostat up, the temperature of my next-door neighbor’s office had been going up. Because it was so warm in his office, he had been turning his controller DOWN. Literally, my office mate and I had been torturing each other as, little by little, we had each maxed out the one control we had our hands on.

Although comical in retrospect, there are many lessons in this true story turned parable. Here are five:

Lesson 1: Communicate
My own lack of communication prolonged my pain. If you see something in your workplace that isn’t right, speak up. Perhaps a critical tool is missing or doesn’t work, or maybe you or members of your team lack proper training. It’s possible that there aren’t enough hours in the day for the existing staff to get the job done.

Any impediments to getting your job done well should be productively communicated and now. Discuss the problem with your team.  Come up with potential solutions. Present the problem and your recommendation to your manager.  The best ideas and solutions come through understanding the problem. And, understanding the problem can only happen through communication.

Lesson 2: Adapt To Your Environment
I had a job to get done so I stayed with it. Because of the cold, I wore a jacket and then a parka (really). Sometimes our work environment is uncomfortable in other ways—high pressure, bad boss, demanding clients, uncooperative co-workers, etc. Whatever the challenges, you can’t just stay home. You have to try to make it work. If you’re overwhelmed, ask for help. If you’re under-skilled, get training. If you’re inexperienced, ask for coaching. Stretching yourself to meet the challenge will make you more capable, more productive and more valuable.

Lesson 3: Make Sure You Have Your Hands On The Right Controls
My high-tech wireless thermostat was impressive–it looked great and was designed well. It just didn’t control what I thought it did. Likewise, when we take action in our professional roles, we should be thoughtful and intentional in ensuring that we are focused on the right things and using the right tools for the job.

We should be purposeful in choosing what to focus on. The late Stephen R. Covey taught this powerfully when he said, “If the ladder is not leaning against the right wall, every step we take just gets us to the wrong place faster.”

Lesson 4: Act Quickly When Things Go Sideways
If I had called for help on day one, I could have avoided two weeks of misery for my office mate and me. In our jobs, perhaps critical materials haven’t arrived or the progress of the work isn’t on track. If you know you’re going to miss a deadline, you have to make decisions and act immediately–get more resources, expedite the order for materials, find an alternative supplier, etc. We do what it takes to stay on track.

If nothing can be done to avoid missing a deadline, communicate with management and/or your client ASAP. It’s always better to be up front. Distrust is worse than missing a deadline. If you’re honestly doing everything possible and the project is still going to be late, reasonable people will want to know so they can accommodate the delay in their other plans.

Lesson 5: Communicate
I’ve made communication the focus of both lessons #1 and #5 because professional and personal effectiveness begins and ends with it. Regarding the fundamental importance of communication, renowned British physicist Stephen Hawking said:

“For millions of years, mankind lived just like the animals. Then something happened which unleashed the power of our imagination. We learned to talk and we learned to listen. Speech has allowed the communication of ideas, enabling human beings to work together to build the impossible. Mankind’s greatest achievements have come about by talking, and its greatest failures by not talking. It doesn’t have to be like this. Our greatest hopes could become reality in the future. With the technology at our disposal, the possibilities are unbounded. All we need to do is make sure we keep talking.”

Effective communication is the most powerful activity you can engage in. It’s the most powerful skill you can develop. And it, along with honesty, are the most valuable character traits you can exhibit.