r. c. giltner services confidential how to profitably respond to the walmart/amex bluebird card and...

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R. C. Giltner Services

Confidential

How To Profitably Respond to the Walmart/AMEX Bluebird Card and

Other DDA Alternatives

August, 2013

Configuring and Marketing a Checking Account as a Companion

Card

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Agenda• A Payments Approach to Checking Revenues• Recommendation• Prepaid Payment Card Services and Bank

Strategy• Next Steps• Appendix: Walmart/Amex Bluebird

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A Payments Approach to DDA Revenues

Service Charges on Deposits Banks < $10 Billion, 2009 - 2012

While service charges on deposits are falling, “payments” providers like PayPal are growing revenues over 20% annually.

Source: FDIC, PayPal, in millions

PayPal Revenues2009 - 2012


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The “payments” revenue strategy is exploding.

Scan & Pay

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A “payments” approach to segmenting and pricing transaction services is winning relationships and earning fees consumers willingly pay.

– Financial institutions focus on “accounts,” which still provide settlement, but their undifferentiated value is at the bottom of the pack in the hierarchy of consumer payment methods, venues and management.

– Payment providers create value by focusing on the use, context and experience of specific payments, such as where the payment occurs or the context of before or after the payment.

– Use, context and experience segmentation of individual payments drives new revenue and value that often is in addition to an existing account.


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Consumers pay more for products and services according to use, context and experience.

Large $1.6969% more

Latte $5.00500% More


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Transaction account services must be segmented through the context of payment: avoiding overdraft fees, not overspending, spending control, shopping online, and ease of “handing” someone card money..

over 30% per year.


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Recommendation

We recommend establishing a checking account that behaves like a prepaid card to offer a “companion card” payment service.

1. Cross sell customers who want the prepaid option.

2. Attract accounts that want entry with prepaid option.

3. Provide account for small business/employers for direct deposit for specific employees where volume is not sufficient for Payroll card strategies.

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• Capture 5% of existing accounts with add on companion card generating $100 in revenue.

• Acquisition benefit leveraging service as a “payroll” card for small business.

• Payments expansion: “fresh start” components for accounts on ChexSystems.

• Thwart inroads by Walmart and other prepaid vendors.

• Leverage Bluebird marketing for your benefit.

Recommendation Payoff

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Recommendation:Checking Account Configured as GPR Prepaid Card

Radio :30 second ad on local stations

Print – short run in local publications Horse Trader Quill Standard News Howell County News Summersville Beacon

Direct Mail

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What Is A GPR Prepaid Card vs a Gift Card?

Gift Cards• Buy card and put

specific amount of funds on card.

• Works like a credit card/debit card except funds come only from amount “pre-loaded.”

• One time use only.

GPR Prepaid Cards• Buy card and put

specific amount of funds on card.

• “Multi-account” credit card/debit card except funds come only from amount “pre-loaded.”

• Can re-load at merchants, direct deposits or through bank accounts.

Understanding “Payments” Services vs Checking

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GPR Prepaid Card vs an Debit Card Only, Opt Out Checking Account

GPR Prepaid Cards• Buy card and put specific

amount of funds on card.• While “prepaid,” overages

can still happen but no fees.• “Multi-account” credit

card/debit card except funds come only from amount “pre-loaded.”

• Can re-load at merchants, direct deposits or through bank accounts.

Debit Only, Opt Out Checking• Debit card only and “return all”

so only access funds deposited.• While “prepaid,” overages can

still happen but no fees.• Works like a credit card/debit

card except funds come only from amount “deposited”

• Can deposit (“load”) via online banking transfer, branches, ATMs, or direct deposit.

Functionally the same

thing.

Segmentation on Use, Context and Experience

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For example, segmentation generates more revenue for the same product according to use.

$1.99 ($1.53 per oz.)

Travel UseHome Use

$4.99 ($.90 per oz.)


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Revenue is also a function of “context” and “the experience.”

Free Popcorn to All Our Guests When only $.50 more, the large

is seen as the best value.



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Alternative DDA Marketing:A Companion Card:

Use, Context and Experience• Market “No overdraft fees ever.”• Sell “Help manage your

spending.”• Manage risk and security.• Protect your Online shopping.• Have spending control while

shopping.• Have a card to hand to students,

youth, the baby sitter, etc. that you control.

• “Load” with direct deposit, etc.

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Bank DDA Marketing:A Bank Account

No Use, Context and Experience• Hear is another checking account with just

a debit card. What’s different?• Now balance your account and don’t think

your online balance is accurate to make sure you don’t overspend or overdraft. Balance my account on a cell phone?

• Let me explain how you can “Opt out” under Regulation E to avoid overdraft fees. What is Reg. E ?

• You need to manage risk with your full bank account information. My risk?

• Be careful shopping online, or at risky merchants. Not shop online?

• Don’t let others use your debit card. Not parent, child, brother, sister, baby sitter…?

VS.


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GPR prepaid marketing use, context and experience is growing 30%+ a year and penetrating all

segments, serving over 10% of households. The Amex/ Walmart Bluebird card reflects this mass market strategy.

Source: The Wall Street Journal


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The benefits driving the growth of “prepaid” can be provided in a checking account:

• No overdraft fees ever. (73%)* (positions Reg E

opt out as a benefit)

• Control over spending. (58%)*

• Retail access for loading.

• Second chance options where CheckSystems scores are low.

“Community banks struggle to devise a 21st century business model that accounts for changing consumer behavior.”*

* Analysis of GPR Branded Prepaid Cards, Bretton Woods, 2012

Growth Drivers of Prepaid Card Services

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Many specific uses are driving the explosive growth of prepaid use among checking account holders.


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Prepaid customers have a checking account.


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1

2 3

Overdrawing their account for liquidity services is the least attractive option for this customer segment.


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Banks and non bank competitors are offering prepaid card alternatives, with large banks underwriting their own card and smaller banks partnering with a vendor.



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Unlike prepaid card programs, a “Prepaid Checking” account allows the financial institution to keep all the account revenue and face no “prepaid” compliance concerns without partnering with a vendor.

Source: National Community Investment Fund and Our Analysis, Card Revenue Only


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These accounts will add between $100 and $200 in added revenue per account.

Product Revenue and Financial Pro Forma

Net Revenue Analysis Annually Annually

Component $ Rate $ Rate

1 Spread Revenue (10 yr avg 5 yr yield) $100 2.25% 2.25$ $400 2.25% 9.00$ 2 NSF/OD and Return Check Fees $0 - -$ $0 - -$ 3 Interchange (net) 0.18 10.00 21.60$ 0.16 17.00 32.64$ 4 AMT (foreign) $3 0.25 9.00$ $0.0365 17.00 7.45$ 5 Monthly Fee $5.95 12.00 71.40$ $12.95 12.00 155.40$

6 Total 104.25$ 204.49$

Prepaid Check Card

Assumpitons

Prepaid Checking

Assumpitons

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Product Revenue and Financial Pro Forma

This generates valuable contribution over the direct variable costs of $58 with the largely fixed costs of retail checking delivery.

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We would recommend expansion of “payment” services that could be added to any “account.”

Chex Systems (Fresh Start)

5.95/mo.

12.95/mo.

$19.95 mo.

Product Expansion

No Chex

PrePaid Check Card $5.95/mo.

Current Accounts As Priced

No Overdraft/Return Check Charges $14.95/mo.$13.95/mo.

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SummaryWe bring the key skills for a successful and timely, turn-key implementation:• Understanding the “Payments” revenue

opportunity.• Product strategy definition. (bill pay?, ACH?)• Product financial contribution and budget.• Product system set up definition.• Product expansion for ChexSystems accounts.• Marketing guidance and templates.• Executive and branch team training.• Sales and operations training, sales script and roll

out.

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Appendix: Walmart and Amex Bluebird

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The single most important competitors is now Amex/Walmart.

Prepaid is now promoted as an alternative to checking accounts.

Big retailer promotion and in-store availability is driving consumer interest.

Walmart/Amex Bluebird Account

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The competitive challenge is significant.


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Rich features include: direct deposit, online and mobile, checks, ATM access, sub-accounts.


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Bluebird


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Bluebird


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Bluebird


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Bluebird


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Bluebird


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Bluebird


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BluebirdFees


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Bluebird “surcharge free” ATMs include our ATMs.


r. c. giltner services confidential how to profitably respond to the walmart/amex bluebird card and...

Documents

payments providers

payments expansion

companion card payment

card money

context of payment

gpr prepaid card vs

walmartamex bluebird

checking account