by Jim Salters
NACHA 2008 – Day One General Session
This year’s show has featured a prominent “PayItGreen” theme. Displays throughout the show refer to the conference’s green practices, and the environmental benefits of electronic payments. As a factoid flashed on the monitors, “the average conference delegate produces 61 pounds of solid waste”, it struck me that “sustainability” has been a fitting theme for the show so far, and I mean beyond our environment.
It started in the opening session, where outgoing NACHA CEO Elliott McEntee once again announced record conference attendance and network volumes. After the classic Vegas dancing girls finished their routine, Elliott attributed the continued success of the ACH network to two factors: innovation and quality. Clearly NACHA and the ACH network have great momentum, and in my mind, new CEO Janet Estep’s primary task will be “sustaining” the successful balance of innovation and quality that has led to the network’s tremendous growth and value to the industry.
The sustainability theme continued into the keynote address, given by Peter Raskind, President and CEO of National City. Although in this case, by sustainability I mean “staying in business”. After significant mortgage-related losses forced National city to raise more than $7 billion in new capital, Peter looked exhausted. As a part of responding to its capital crunch, the bank was forced to re-examine its core operating strategies, and he described several of them in detail.
National City’s primary retail and corporate strategy is to serve as their customer’s preferred payments engine. By winning the primary checking account, or a corporate customer’s lead treasury management relationship, they believe they can better retain customers, grow into a broader relationship with customers, and then leverage access to payment-related data to offer personalized and highly relevant offers that are unique to each customer.
What I found most interesting was Peter’s claim that National City probably has the most sophisticated data mining and information-based marketing program in the country. Called “Insight” internally, the vision is to analyze data on what customers are buying, how they are paying, their existing products, and other data to provide “differentiating interactions” at every customer touch point: branches, call center, ATM, and online. He described a target of more than 50 differentiating interactions in the pipeline that would leverage “Insight”, including things like relevant product offers, relationship pricing, and pre-approvals for lending products. National City also offers a comprehensive rewards program called “Points from National City” that has played a key role in expanding relationships, driving primary payments activity, and increasing retention.
Is the strategy working? Peter said that after several years of flat cross-selling metrics, they have seen 17% growth in the past couple of years. He said he has been “thrilled” with early returns from investments in “Insight”, and other platforms like “Consult and See” on the corporate side.
While much of the Q&A focused on the mortgage crisis, and what should be done about it, I thought two questions were very interesting. The first was a question about mobile technology, and his specific strategy or thinking. He was quick to point out that past technologies have led to calls for the “death of branches”, or other radical and fast change. However, in reality, most change in banking has been incremental, even “glacial”, and this is probably for the best, given the critical role the banking system plays for the country, and the need to manage risk. Similarly, when asked about payment hubs, or a single converged engine and database for all payment types, he responded with a chuckle, and somewhat dismissed the question, saying “I don’t spend much time thinking about it, put it that way.” He didn’t think we’d see it during his career, and referred again to the pace of change that he believes is prudent.
When asked about fears of disintermediation, however, he was far from dismissive. He called it a “real fear”, and mentioned players such as PayPal who represent meaningful threats, and force banks like National City to have to compete even more fiercely for their customers’ business.
I’ll pass along more details on other sessions and conversations tomorrow. They will include a session on Decoupled Debit, and a great discussion with Metavante’s Jeff Lewis on mobile, bill pay, and enabling a bank’s “turn down strategy”. I’ll also share notes on one-on-one conversations with executives from Tyfone, Western Union, and Online Resources. Stay tuned!