Archive for August, 2017

Overdraft Protection – Another Hot Opportunity For BPOs?

Friday, August 18th, 2017

Consumer advocates ranted about overdraft protection fees in 2008, saying the service was forced down upon consumers.

While the uninitiated can Google “overdraft protection” for a prosaic definition of the term, Stanley Bing offers the following tongue-in-cheek description for this money-spinner service of US banks:

“No matter what you spend with your debit card, even if you have no money in your account, the guys at the bank will make sure that you’re not embarrassed. They’ll pay your tab!”

To appease consumers, the US government passed Reg. E that required banks to seek customers’ opt-in for overdraft protection.

Banks went after their customers aggressively to do this. I’d called out marketing campaigns for enrolling consumers for overdraft protection (ODP) as a big opportunity for Indian BPO industry at the time. More on this in my post entitled Overdraft Opt-In Presents A Huge Opportunity For BPOs.

Seven years later, US Banking industry’s overdraft protection business has bounced back to 2009 levels. According to Wall Street Journal, “overdraft fees totaled $33.3 billion in 2016”.

Consumer advocates are now back with a fresh raft of complaints.

In a new lawsuit filed recently, the consumer protection regulator CFPB has charged TCF National Bank with “tricking consumers” into overdraft services by using misleading language that enrolled “people who said yes to a question over the phone about wanting their debit card to continue to work as it had been.” The CFPB further claimed the bank asked new customers about opting in “immediately after a series of mandatory items the consumer had to agree to in order [to] open the account…most consumers fell into the rhythm of initialing the terms of the agreement and signed on.”

A survey by overdraft regulation proponent Pew Charitable Trusts found that 52% of consumers who have paid a debit-card overdraft fee don’t recall opting in to this service.

Meanwhile, there’s the usual outrage on Twitter:

IMO these rants are groundless and deserve to be be dismissed summarily. Maybe sensing this, the guy I trolled on Twitter has deleted his tweet.

Because it really doesn’t matter how consumers signed up for overdraft protection or whether they remember doing so.

If they’re incurring overdraft protection fees today, it’s because their bank account ran out of funds while they were paying their latest (say) telephone bill. Not because they enrolled for their bank’s overdraft protection service several years ago. If their bank hadn’t covered the shortfall, their bill would have remained unpaid. Their TELCO would have slapped a late payment fine or even disconnected their phone.

This is the true context of overdraft protection.

But that won’t stop the furore. Thanks to the Great Financial Crisis, the reputation of banks has taken a massive beating on Main Street. Unjustifiedly so, in my opinion, for credit rating agencies are ones really culpable for what happened in 2007. More on that in Credit Rating Agencies & The Financial Meltdown. But I digress.

Consumer advocates are making bank-bashing hay while the GFC sun shines.

Some banks are responding proactively with measures to warn customers of the likely occurrence of overdraft. According to the Wells Fargo spokesperson quoted by WSJ, her bank has already provided low-balance alerts and is in the process of introducing a zero-balance alert that will be sent intraday when a customer’s available balance is zero or negative.

That won’t suffice.

I expect the regulator to ask banks to provide evidence that consumers who are being charged ODP fees had indeed signed up the service. I’m sure banks captured customers’ opt-in confirmations in their systems and will be able to pull out the required proof from their databases quite easily.

But I suspect it won’t end there.

I expect the regulator to require banks to take the customer’s approval for every overdraft transaction. The way ODP works today, once a customer opts in for overdraft protection – a onetime action – the bank automatically covers every incident of overdraft without any reference to the customer. Under the new paradigm, the bank will need to notify customers each time they’re overdrawn, ask them whether they want the specific incident of shortfall to be covered, and go ahead only if the customer says yes.

Considering that retail payment systems are highly automated and handle extremely high volumes, it might seem impossible to seek a transaction-by-transaction approval.

But that’s not true any longer.

Technologies like 2-way SMS Alerts are already available that can help banks to manage individual overdraft transactions.

To see how this would work, let me continue with the example of the aforementioned consumer whose account didn’t have enough balance to cover their telephone bill. As soon as the bank covered the shortfall, it would send out a text message to the customer saying “Your account was overdrawn and we made it good. We charged you $XX fee for doing this. Do nothing if you want this transaction to stay. Reply back with NO if you want to cancel this transaction. If you cancel, your telephone company may slap late payment charges or even disconnect your service”. If the customer doesn’t respond, the bank does nothing. Both the original payment to the TELCO and the ODP fee debited to the consumer stay. If the customer replies with NO, the bank reverses the payment to the telephone company and credits back the ODP fee to the consumer’s account.

The Indian banking industry offers a good example of the use of 2-way SMS Alerts in retail payments. For the past five years or so, everytime a consumer uses their credit / debit card, they get an SMS notifying them of the transaction. As of now, this SMS is one-way: If a consumer wishes to report the transaction as fraudulent, they have to phone the bank that issued their card. Phone means wait time, hold music, phone tree and, eventually, a live agent who has no clue about the purpose of the call. This poses tremendous friction, especially when the consumer is in an agitated state of mind, having just experienced a fraudulent transaction on their card. As a result, most cardholders don’t feel confident of being able to report a fraud. To address their concern, the Indian banking regulator Reserve Bank of India has recently stipulated that customers should be able to report fraud by replying to the SMS message they get from their banks. To do this, banks will need to upgrade their card transaction notifications to 2-way SMS Alerts.

To implement the 2-way SMS Alert technology, the bank needs to know the customer’s mobile phone number. This is not a big caveat in countries – like India – where people give out their mobile numbers freely and it’s virtually impossible to open a bank account without disclosing your mobile number to the bank (See Privacy Does Not Equal Security). However, it’s not common for customers to share their mobile numbers with their banks in the USA.  So banks will have to find a way to coax mobile numbers out of their ODP-enrolled customers. Given that privacy is a big thing stateside, this step might prove as difficult as getting the customer to opt-in for overdraft protection in the first place!

Marketing campaigns to collect customers’ mobile numbers might become another hot opportunity for the Indian BPO industry.

Forget Frugal Marketing. It’s Time For Frugal Engineering

Friday, August 11th, 2017

The asphalt road outside my house was getting concreted last year. When I was walking down on the road one day, I noticed that a narrow gully of around two feet width was left untouched on one side of road.

When I saw this, I thought there was a massive goof-up somwhere. In all probability, so went my cynical thinking, Pune Municipal Corporation – the local authority that is responsible for all public works in the city – must’ve placed an order for concreting of 100 feet width whereas the road construction contractor might’ve found out while executing the order that the actual width was 102 feet, hence the two feet strip went unconcreted.

Life went on and I forgot about this over time.

Until I saw the gully being dug up a month or so later.

From one of the workmen, I found out that the gang was laying a natural gas pipeline. This is pursuant to replacement of LPG cooking gas cylinders by piped compressed natural gas (CNG)  in certain parts of Western India including the city of Pune where I live.

In the good old days, the road contractor would concrete the entire road and go away. The pipeline contractor would come a month later and dig up the brand new road.

And not just in Pune / India. As Janette Sadik-Khan, ex-Commissioner of New York City Transport Department, says in her foreword to the New York City Department of Transportation Streetworks Manual:

Nearly every New Yorker seems to have a story about a work crew digging up a freshly surfaced city street.

Whereas what possibly happened this time was, the road contractor was instructed to leave the gully unconcreted for the gas pipeline contractor to lay the pipe a month later. Far from the goof-up I suspected, this reflects solid coordination between these two contractors.

The UK government has invested hundreds of millions of pounds in streetworks regulation, processes and technology to achieve this kind of coordination between different “public utilities” that excavate city streets for laying various types of piping, cabling, etc. In fact, the specific feature that prevents repetitive digging of the same stretch of a road one after the other by two different utilities is called “pinchpoint avoidance”. As far as I know, the local authority in Pune doesn’t have such a software. Despite that, it has achieved this favorable outcome.

This is very impressive.

And it’s not an isolated incident. There are many more instances where government / public sector organizations are using technology to deliver superior citizen / customer experience without spending too much time or money:

  • A friend went to the passport office to renew his passport. By the time he reached back home around 45 minutes later, he got an SMS saying his passport had already gone for printing and lamination. Sure enough, he got the renewed passport the next evening.
  • Indian Railways provides very responsive service on Twitter. More on this in my blog post entitled Why Social Media Has Become My First Port Of Call For Customer Service. I believe that this initiative by @RailMinIndia is handled by a team of around 20 people aided by a few open-source sentiment analysis tools. This is an amazing feat, given the huge network size, massive volumes, 24/7/365 operations and ultrafast response times.
  • The demonetization of high value currency notes in November 2016 caused a severe cash crunch in India during the last two months of 2016. The government began promoting digital payments to replace cash. In response, many banks released A2A mobile payment apps based on Universal Payment Interface (UPI), the payment system launched by the nation’s retail payments body National Payments Corporation of India (NPCI) a few months earlier. Within days, there was a proliferation of UPI apps – at peak, a Play Store search for “UPI” yielded 23 apps. The average citizen was thoroughly confused about which UPI app they should download. Realizing that the chaos could torpedo #CashlessIndia – the Twitter hashtag for the move to digital payments in India – NPCI swung into action and released a single UPI app. Called BHIM, the app could be linked to accounts in any one of dozens of participating banks. Customers of all banks now got one single UPI app to download, install and use. End of confusion. Start of adoption. BHIM was launched in barely 45 days. For comparison, development of the equivalent PayM app in UK took almost a year.

I’m convinced by these events that some kind of digital revolution is going on behind the scenes. As my friend said, it looks like government agencies are achieving a lot by reengineering their backend for a small cost.

I call this “frugal engineering”.

IT product and services companies in India have traditionally clamored for “frugal marketing”.

Well, it’s now time for them to embrace frugal engineering.

That said, mere reengineering of the backend can drive adoption only of government systems where users – citizens, employees of government agencies, local authorities and public utilities and others – are compelled to use the systems regardless of the frontend and the overall user experience.

For commercial systems, adoption requires true digital transformation, which combines the latest in forms, social, mobility, analytics and AI technologies with best practices in UI, UX and CX. On that count, there’s a lot of scope for improvement in many applications, as I’d pointed out in the Redefine Digital section of Indian IT – Turning Crisis Into Opportunity: Part 2. To achieve the desired end state, a lot of work needs to be done around usability, uptime, education and marketing. I doubt if that will happen with a frugal approach but only time will tell.

Taking Persona Based Marketing To New Heights With Persona 2.0

Friday, August 4th, 2017

In Use And Misuse Of Personas In Marketing, I’d defended personas from being lampooned by some misguided marketers.

That doesn’t mean I believe everything is hunky-dory with personas.

There are at least three problems I see in the way personas are created and used in Persona Based Marketing (PBM) campaigns today.

A. SOLE FOCUS ON WHO

I read the following comment on an article about personas:

‘There’s too much focus on “Who is the buyer?”. Marketers should rather focus on “What does her company want?”’.

This is very true, especially in B2B products and services where purchase decisions are made by committees. Since a committee comprises of people with varying personalities, it tends to place the company’s needs above any individual’s persona. Ergo, persona based marketing has its limitations. That’s the best case scenario. In the worst case scenario, PBM based on simplistic personas of the committee members can actually backfire.

B. PERSONA 1.0 IS STATIC

Traditional personas are too macro, can’t be updated in real time, and suffer from other issues highlighted by Venkat Nagaswamy, Co-founder and CEO at Mariana, in Kiss your personas goodbye (and say hello, AI)!.

We couldn’t agree more. As a result of their unchanging nature, personas widen the already-gaping chasm between sales and marketing.

C. HUMAN PERSONAS ARE PASSÉ!

Personas are currently obsessed with human beings. As a result, they may become irrelevant in the digital world.

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While the current generation of personas are still useful in PBM, they face the risk of becoming obsolete in the near future. We need a new generation of personas that address the above maladies.

Good news is tools and technologies are already available to develop the future-proof Persona 2.0.

#1. MARKETABLE ITEMS

According to CEB Marketing, B2B purchase committees comprising of members with varying personalities manifest a so-called “Interpersonal Persona”.

Ignoring group dynamics and continuing to run PBM campaigns on the basis of individual personas can backfire. Therefore, B2B marketers need to replace their simplistic personas with Interpersonal Personas. But this can take time.

In the immediate term, we recommend supplementing PBM with Marketable Items, which package product features and service capabilities into compelling reasons to buy that resonate strongly with the target market’s pain areas and hot topics. As you can see from the examples of Marketable Items we’ve created for several technology product and services companies, a Marketable Item vibes with the buyer company’s needs. This helps marketers overcome the shortcomings caused by PBM’s sole concern with the “who is the buyer” question.

#2. SOCIAL MEDIA & ARTIFICIAL INTELLIGENCE

Marketers can use a combination of social media and AI to add online behavior and many other attributes to the current generation of personas, thus making them dynamic and actionable. Such personas will help marketers extract more bang for their PBM buck.

#3. EXPAND TO COVER BOTS

Algorithms are playing an increasing role in the purchase of stocks, media and other products. Robo-advisors are exhibiting human-traits like conflict of interest. Personas can’t remain exclusively focused on human beings.

To stay relevant in today’s digital world, personas must cover bots. By doing that, they will help PBM target algorithms, robo-advisors and other non-human buyers.


Persona 2.0 created by using the aforementioned tools and technologies can overcome the shortcomings of the current generation of personas and take PBM to new heights.