Marketing in Banking Flashcards
What are the four key elements of marketing?
- Multi-dimensional
- involves creating value
- focuses on tangible goods, service or an idea
- relies on relationships
What are the four components of the marketing concept?
(The four P’s of the marketing Mix)
- Product
- Price
- Promotion
- Place
W
What five factors lead organizations to adopt the Marketing Concept?
- A decline in sales or market share
- slow growth
- a change in buying patterns
- increased competition
- increased budgetary pressure
Which Act in 1980 eliminated the interest ceiling rate on bank deposits?
Depository Institutions Deregulation and Monetary Control Act
DIDMCA
What is omni-channel experience management?
A consistent customer service experience across all access points
What is the difference between strategic planning and marketing planning?
Strategic planning is the mission and vision of the firm
Marketing planning is the tactical methodology and plans to help achieve the vision
What are the five areas of customer expectation for quality service
- responsiveness
- assurance
- empathy
- reliability
- tangibles
What is the first question that should be asked when the marketing department receives a request from another area?
Does this fit into our marketing plan?
What are the foundational blocks of a bank’s brand?
- products and services
- systems and delivery channels
- corporate culture
What elements should be integrated into all marketing objectives?
- Branding
- Customer Service
- Segmentation
- Recency and Frequency
- Attrition and Retention
What is the avarage rate of attrition at banks across the country?
10 - 20%
When looking at customer life-cycles at the bank, what four groups should they be segmented into?
- new customers (3-6 months)
- inactive tenured customer (>6 months)
- active tenured customer (>6 months)
- lapsed or dormant customer
How can banks fill a funding gap?
- Offer a promotion to generate deposits
- Purchase fed funds or brokered deposits
How is a banks financial sucess typically measured?
- Return on Assets (ROA)
- Return on Equity (ROE)
What are the three priary methods a bank makes money?
- Interest Income
- Non-interest income
- Investments and securities
What is Interest income
interst earned form lending, usually presented net of interest expense for deposits
What is Non-interest income?
Interest gained from service fees and other charges
What is investments and securities?
Interest income generated from the investment of liabilities that exceed lending volume
How is ROE calculated?
ROE=Net Income/Shareholder Equity
How is ROA calculated?
ROA=Net Icome/Total Assets
What is a strong ROA?
Anything over 1%
What are the main sources of non-interest income?
- debit card interchange fees
- account service fees
- overdraft charges
- trust service fees
- safe deposit box rentals
What is ALCO?
asset-liability committee
What is ALCO charged with?
Ensuring that the bank’s risk, funding needs, funding sources and gaps are managed effectively
What are assets?
Dollars earning interest for the bank (loans) or represent capital
What are liabilities?
Dollars that are owed to another source such as deposits and accounts payable
What are retained Earnings
Dollars generated from operations that exceed liabilities and can be usedfor future needs
What are some options for filling a funding gap?
- increase deposit marketing
- slow the growth of loans
- sell a portion of the loan portfolio
- purchase fed funds from the Federal Reserve
What tactics can be used to increase loan demand?
- Increase loan marketing
- expand credit threshholds
Pricing is a variable based on what eight factors?
- Operations cost (overhead)
- Funding costs (for loans)
- Investment capability
- term of the product
- Competition
- Rate environment
- Account balances
- Organizational goals
What are the major fedral regulators that oversee the nation’s financial institutions?
- Federal Reserve System (Fed)
- Federal Deposit Insurance Corporation (FDIC)
- Office of the Comptroller of the Currencey (OCC)
- National Credit Union Administration (NCUA)
What types of institutions does the Fed oversee?
- Bank holding companies
- State banks that are Fed members
What types of institutions does the FDIC oversee?
- State-chartered commercial banks that are not Fed members
- State-chartered savings associations
What types of institutions does the OCC oversee?
- National Banks
- Federally-chartered savings and loans associations
What types of institutions does the NCUA oversee?
Federally-chartered and federally-insured credit unions
What was the intention of the Community Reinvestment Act of 1977?
To encourage depository institutions to help meet the crdit needs of the communities in which they operate including low- and moderate-income neighborhoods consistent with safe and sound banking operations to ensure deposit-gathering institutionsare not operating in a community solely for obtaining deposits and neglecting the community’s need for loans
The Gramm-Leach-Bliley Act of 1999 (Financial Services Modernization Act) created what benefits and challenges to FIs?
- Permits banks to offer any financial service and safeguards to prevent discrimination from securities and insurance regulators
- Federal Home Loan Banks have additional flexibility to meet increased funding needs of community bankers
- Extended the frequency of CRA exams for banks wit less tahn $250 million in assets and an outstanding rating
- Closed the loophole that allowed commercial companies from acquiring a bank charter
- Provided specific guidelines for seeking, storing and sharing customer personal information - including requirements for the frequency and and timing of privacy statements and customer opt-outs
What is the USA Patriot Act of 2001
The law contains strong measures to detect, prevent and prossecute terrorism and international money laundering
What is the CAN-SPAM Act (Controlling the Assault of non-Solicted Pornography and Marketing Act)?
- Requires unsoliceted commercial email messages to be labled, include opt-out instructions, and the sender’s physical address
- Prohibits deceptive subject lines
What is Check 21?
Check Clearing for the 21st Century Act
* enabled the acceleration of the transition from paper to electronic checks
* banks may now accept remote deposit ( via ATM, computer or mobile scan
What is the Fair Credit Reporting Act (FCRA)?
Provides rules governing pre-screening
What is the purpose of the Real Estate Settlement Procedures Act (RESPA)?
- provide customers with understandable and uniformly presented information about the mortgage transaction and costs associated with it
- prohibits kick-backs and referral fees between settlement service providers that result in higher costs and reduced quality to consumers
What is the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)?
- New authority to the regulatory agencies to monitor the safety of the financial system
- Established the Consumer Financial Protection Beaurau (CFPB)
- Increased regulation of mortgage lending and servicing by banks and non-banks
What is Regulation C?
The Home Mortgage Disclosure Act (HMDA) requires lending institutions to report loan data to the public to ensure lawful lending activity
What is Regulation DD?
Implements The Truth in Savings Act of 1991
* Applies to consumer deposit accounts
* Ensures consumers have comparable and consistant information to make informed decisions about deposit accounts
When a bonus premium or gift is given as an incentive in connection with the opening or addition of a dposit account, it is not considered interest if it meets these guidelines:
- can only be given to the depositor upon opening a new account or adding to an existing account
- No more than two premiums per deposit account in a 12 month period
- The total cost of the premium must not exceed $10 for deposits of less than $5,000 and not exceed $20 for deposits of over $5,000
What is Regulation Z?
Truth in Lending
* Outlaws deceptive and unfair lending practices
* Requires banks to disclose in consistent and uniform ways the terms and cost of credit
What is Regulation B?
Equal Credit Opportunity Act (ECOA)
* Forbids creditors fom discriminating before, during and after the extension of credit based on a “prohibited basis”
* “Prohibited basis” includes
* * on the basis of race, color, religion, national origin, sex, marital status or age
* * because part of the applicant’s income derives from any public assistance program
* * because the applican has in good faith exercised any right under the Consumer Credit Protrction Act
What is Regulation R?
Gramm-Leach-Bliley Act retrictions on the way banks advertise; requires a bank list ALL the services it provides trust customers,
When must insured depository organizations include a reference to the FDIC?
When an advertisemenr promotes deposit accounts or the services of the bank in general.
Conversations or markeing materials about nondeposit investment products must include what information
(four box)
These products are:
* Not a deposit
* NOT insured by the FDIC or any other federal government agency
* NOT guaranteed by the bank
* subject to investment risk and may go down in value
Compliance decisions should always be made with the goal of finding a solution that:
- is easiest for the customer
- meets the principles of the complianc guidelines
- upholds the reputation of the bank in the community
- limits the bank’s legal exposure
- positions the bank to be a profitale venture
What are the three core areasof financial soltions offered by banks?
- retail services
- business services
- trust services
