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Sports and Banking, an Entertaining and Educational Mix

By: Bill Poquette

The sports-themed annual management conference of the Nebraska Independent Community Bankers in Lincoln successfully combined the not-so-serious with the seriously serious. The “tip-off” speaker was University of Nebraska basketball coach Tim Miles. Other speakers’ presentations had sporty labels like “slam dunk” and “tee-off,” but they dealt with weighty matters, including cyber security, mortgage compliance, “Moneyball” for bankers, and economic and monetary policy.

UDAAP violations were the topic for Donna Clayton, senior vice president of the LenderLive Network. The regulation applies to all products and services, offered directly or indirectly, she reminded the Nebraska bankers. The prohibitions against unfair, deceptive or abusive acts or practices apply to “every stage and activity,” she noted, including solicitation, advertising and marketing, underwriting and pricing, billing, servicing and collections, and terminations of customer relationships.

On her list of practices that increase UDAAP risk were incentive compensation, as when auto dealers hike bank rates; inaccessible disclosures, when the bank should explain the product and the consumer should acknowledge receiving the information; complex pricing structures, such as revenue targets for loan officers; product bundling, including add-on products to credit cards; and overreliance on third parties, which cost Capital One severe penalties when call centers used excessive marketing practices.

DDoS attacks, or distributed denial of service attacks, have been primarily launched at the largest banks since their inception in September 2012, according to another NICB conference speaker, Denise Mainquist, founder of ITPAC Consulting.  But regulators want community banks to be warned and thinking about how to respond in the future.

These attacks are meant to interrupt or overload network services for hours or possibly days, she explained. Websites are flooded with email messages so customers cannot access them. In some cases, she added, they may be a distraction so other fraudulent activities can occur against an ACH originator or big commercial account.

Click here to view photos from this convention.

Mainquist advised being proactive. First, she said, always do a risk assessment to determine the impact of a service outage on your customer base. The greatest risk, in her view, is an attack against a big service bureau, which would bring down many banks’ systems. Banks with their own internal systems face less risk, she believes.

Citing the “Moneyball” book and film, Ted Triplett, chief marketing officer for Insight Ecosystems, told the NICB members they should be employing analytics as a business tool the same way Oakland A’s general manager Billy Beane did to build a competitive baseball team with a limited budget. “Banks need to do more with less,” he said.

Triplett explained that analytics can help a bank lower marketing expenses, improve response rates, improve customer loyalty, improve profitability, increase sales and marketing campaign results, increase return on investment and increase customer lifetime value.

More specifically, he added that analytics can help a bank measure debit card usage and interchange revenue; identify what drives someone to use a debit card; and implement campaigns to target individuals most likely to accept an offer, activate and use a debit card. They can also help banks understand why customers are leaving; understand what part of attrition is controllable; what customers are at risk of leaving; and the impact of attrition on the bottom line.

The economy continues to grow modestly but steadily, Esther George, president and CEO of the Federal Reserve Bank of Kansas City, told the Nebraska bankers. Although it is moving through headwinds, housing, manufacturing and the auto industry are showing renewed strength, and consumers continue to spend, “although on different things,” she said.

The job market has seen steady improvement, with 2 million new jobs in each of the last three years, yet there is concern over “structural issues,” according to George. There is a mismatch in the skills needed versus availability and the Federal Reserve is hearing complaints about the difficulty in recruiting qualified people, she noted.

“Jobs will come back,” she said, “but at a slower pace than we are used to.”

Bill Poquette is editor-in-chief of BankNews.

Copyright (c) December 2013 by BankNews Media