Vito Labellarte

The growth rate is slowing, but consumers added $73 billion in Q2 2023, bringing the total owed to lenders to $16.84 trillion, per Experian.

Average credit card balances now range from $3,000 to $8,000, and interest rates have surged to an average of 24%. Rising rates and balances are hitting consumers hard, and the impact is expected to worsen with the holiday season.

Solving the Problem with a 1, 2, 3 approach

1) Consolidation

Prepare for debt consolidation promotions now. As January’s credit card bills arrive, you want to be present with solutions to help.
• Direct Mail Invitation: A comprehensive mailer/letter could include a small worksheet to help them identify their current debt challenges.
• In-branch and Outdoor Merchandising: Expect to see consumers in January and February as they begin to feel the strain.
• Outbound emails: Alerting consumers to the service options. You should include all accounts in these offers.

Help consolidate higher balances into a more convenient, lower-cost option. With most homeowners sitting on record equity balances, a home equity solution might be perfect for consolidating higher-rate loans.

2) Balance Transfer

Today, most consumers possess three or more credit cards. With increasing balances, many will consider consolidating to fewer cards. However, getting consumers to switch requires aggressive marketing and highlighting product benefits beyond lower rates.

According to Mercator Advisory Group’s Report: 2021, here are the most important factors users consider when choosing a credit card:
• 62% – no annual fee
• 50% – attractive points/rewards program
• 33% – a competitive APR
• 23% – strong fraud protective features
• 21% – good customer service

That means you will likely need to have many of these features to move consumers over to your card.

Letter checks are the best promotional approaches we have seen for a balance transfer campaign. The letter check presents a cashable check that can be used to pay off other loans.

3) Education

Like any major life event, correcting a family’s financial health involves a short-term transition like the above, along with some education to avoid this circumstance in the future. Many younger consumers may have yet to learn how to live within their means and will likely repeat this behavior in the future.

Support your efforts above with budgeting and account education programs. These are critical to creating a sound financial footing for your consumers over the long term.

Rely on Westamerica for Your 2024 Marketing Needs

As you finalize your priorities for 2024, remember that we’re in your corner with over 30 years of Financial Marketing experience.

And remember to download our marketing planner for some additional helpful tools. It’s free! https://www.mywestamerica.com/marketing-planner/

Countdown to 2024 – Are you Ready?

Happy November! We’re now less than 60 days from the new year, and many are still scrambling to finalize marketing plans and budgets. Will you repeat last year’s basic plan, or have you adjusted to make next year even better?

The Four Pillars of Financial Marketing Success in 2024

Amid all the chaos today, your institution can differentiate by focusing on four key pillars for success:

1 – Consumer Centricity
The Financial Services Industry was built on trust. In today’s environment, reinforcing your position of trust starts with understanding, supporting, and responding before competitors do. The institutions that garner the most trust will be those committed to understanding consumer needs by using insights from deep data.

Mining data to provide timely products shows a level of care that few currently offer. After all, if I can’t count on my primary institution for the best, timely solutions, what type of relationship do I really have?

Having the right data at the right time is a start. Communicating consistently, strategically, and effectively is where the payoff exists. Are you using all channels of distribution – in branch, email, direct mail, and other preferred methods?

Lastly, many institutions have eliminated one fact-filled, quick-read tool that reminds the account holder each month of their relationship – the newsletter. Few consumers visit the website to find out what is going on at your institution. If you no longer produce a newsletter, it’s time to bring it back.

2 – Financial Proficiency
Today’s consumer expects more insight and help with their financial decisions. The increasing Gen Z and Millennial segments understand how to access financial products, but they have yet to learn how to manage finances.

According to The Financial Brand, 69% of Millennials cite getting out of debt as their biggest financial goal, and 96% regret some aspect of their financial picture. This means these same consumers didn’t understand how to balance debt with their financial well-being.

Why? Most financial providers are only interested in the short-term benefit of the product sale. They haven’t embraced the opportunity to be a Financial Coach.

You can differentiate with a commitment to educate consumers while also servicing their product needs. Make the strategic decision to apply “human” staff to a higher level of knowledge and expertise while deploying your technical/digital support towards “transactional activity.”

Fill your branches with printed educational information, planning tools, seminars, webinars and even life coaching information so you can help consumers build their own financial security.

3 – Lending Relevancy
The lending market was turned on its head in 2023. With the costs of funds growing, retail lending and credit card rates have increased substantially. Rates grew so fast that everyone has had trouble realizing the new normal.

This IS the new normal. We need to adjust.

Lending rates must be relevant to today’s environment, not the one we came from. In talking to our customers, we find many “waiting for rates to go down” before they begin promoting loans again. In the meantime, consumers are going to their competitors for loans.

Being “relevant” within the lending space also means being present with fair rates and exceptional support. Your sales proposition should be to provide the best rates you can while delivering the right products to the right consumers at the right time.

This means you will likely need to increase your marketing budget for loan acquisition. With a tighter market and more competition, you’ll find greater success in using all your tools for building awareness and presenting relevant offers.

Use the power of pre-approved loan offers delivered via mail and email to a consumer who has shown a likelihood for a loan. Pre-approvals leverage data to drive convenient lending.

4 – Deposit Sufficiency
The current deposit environment will continue in 2024, so it’s essential to build a strategy around “sufficient” rates to help fuel your lending needs.

Generating deposits is easy when you have the highest rates in town, but few can afford it. When you adopt a strategy of sufficiency, it means you must work more diligently to acquire deposits. Key activities include:

• Ongoing outbound mailings and emailing to high deposit accounts and consumers.
• Retention programs that protect the deposit base
• Switching campaigns to move checking money to longer-term accounts with rate incentives.
• Staff incentive programs that support retention efforts
• Bundling campaigns to build more deposit relationships with the sale of other products.
• A stronger effort in longer-term and retirement products

Lastly, make sure to educate all staff members on how and why deposits are important. Many have never experienced a rate environment like this.

Rely on Westamerica for Your 2024 Marketing Needs

As you finalize your priorities for 2024, remember that we are in your corner with over 30 years of Financial Marketing experience.

And don’t forget to download our FREE marketing planner for additional helpful tools. https://www.mywestamerica.com/marketing-planner/

It starts with your collective team including outsourced resources.

“Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishments toward organizational objectives. It is the fuel that allows common people to attain uncommon results.” Andrew Carnegie

Who Makes Up Your team?

As you start planning for 2024, evaluating inward and outward resources is essential. Who makes up your key team members? Which roles are handled from inside your department, inside your company, and outside through your vendor team?

Today, many of our clients manage departments of varying sizes. Some have large contingents of personnel representing creative design, data analytics, content marketing, web admins, email/digital specialists, and more.

Inside and Outside Teams

Successful organizations often rely on an even number of inside and outside resources to get things done. In fact, the best departments will expand their external teams to gain access to the freshest and most objective ideas. Ironically, sometimes working with the inside team can even be more difficult than working with an outside provider!

Often, the biggest drawback to effective department synergy is a combination of 1) failure to establish a project goal and 2) strong communication and feedback about reaching the goal.

Goal Setting

Nothing is more powerful in an organization or department than a unified goal. You make the effort real when you state the goal to your team clearly and succinctly. (The SMART goal format is a great place to start). How-to-write-a-smart-goal-template

Once you establish the goal, it’s your job to keep momentum by updating your collective team on progress.

Communication and Feedback

When you break the project goals down to individual responsibilities, it’s easier to keep everyone on track. Every member of the team should be clear on expectations and completion dates.

Outside teams can also offer more support and perspective when they see the entire picture, not just the small sliver of activity that represents their contribution.

Course Correction and Adjustments

If the assumptions you made or expected results are not materializing, you must be flexible to change. Course corrections during the journey are warranted if it means that the journey will be more successful.

A good practice is to check in with key team members and ask if goals are on track or off track. Nobody wins if plans come up short of the true goal.

Building your team and creating a unified focus is critical to your success. Let us know how Westamerica can help.

If you wait until Halloween to start thinking about the Holiday season, you’ll miss the opportunity. That’s why major retailers are already displaying holiday items in their stores…right now. You can actually purchase your pre-lit Christmas tree today at Costco.

The Holiday period is traditionally seen as immediately following Halloween. From November 1 through December 26, you have the chance to build business opportunity for your organization and your consumers.

Holiday Marketing Opportunities

Holiday promotional themes are as timeless as the holidays themselves. In fact, The Financial Brand has reported on the major holiday promotional opportunities. It’s an extensive list but some our favorites include proven tactics such as Holiday Loans, Skip-a-Payment Promotions and Free Gift Wrapping.

Holiday Loan Campaigns

During this time of year, consumers are looking for that little extra to get them through the heavy shopping period. It’s a natural time to reach out with a lifeline for some extra funds.

We are fond of small loan amounts that can be presented in many ways including branch merchandising, direct mail letterchecks, email announcements and statement inserts. The key is to ensure that all consumers have a chance to participate at their appropriate lending level.

Here is a great example of a campaign we prepared for our client, University Credit Union: Instant Loan UCU.pdf

Skip-a-Pay Offers

Skip-a-pay loans have been popular for years. It’s a simple concept with big benefits. And it’s one that consumers appreciate. Especially during the holidays when things can be tight.

The concept is simple, and you can use with many types of accounts.

For instance, if you have an auto loan that you want to promote for your skip, simply allow the consumer to skip the next payment, and add that payment to the end of the loan. Some institutions add a small charge for the convenience which helps to offset the loss in the loan revenue.

An example might be a $600 car loan payment that you allow to skip for a $75 convenience fee. That $600 gets added at the back end of the loan so you haven’t lost it.

In most circumstances, this is a win for both you and your account holders as the small price they pay to skip a loan is a big benefit over the next payment they may have to make. That extra breathing room might be enough to help them avoid missing a payment and incurring late charges or start a downhill slide.

Gift Wrapping/Paper

How about a nice premium that brings people into your offices? Custom gift-wrapping paper and/or gift wrapping service allows you to generate some much needed face time with your consumers. It gives you a chance to help them with an important holiday chore, and reconnect with your staff and products.

Customized wrapping paper featuring your logo and/or design can be produced for pennies. Offering consumers both free wrapping paper and wrapping services are a sure fire method to generate attention.

I’ve been working in the marketing communication space longer than I care to admit. (Actually I do admit it at the bottom of the page! 😃)

I’ve seen our approach to consumer communication shortened, streamlined, and sped up. All in an effort to be “more efficient and effective.”

The shift from analog to digital, along with the programmatic methods of connecting, targeting, and pushing has eliminated some fond and friendly methods. Methods that were steeped in tradition, and valued for their relevance and impact.

Digital media does not build emotional connection like print media

In 2016, researchers from the University of Maryland published their findings on this topic in The Journal of Experimental Education. Their research suggest that printed marketing materials tend to outperform digital when it comes to reading comprehension, recall, emotional impact and persuasiveness.

The researchers first asked college students which medium they preferred to use for studying, and which they felt offered them the best recall. Ironically, students overwhelmingly chose digital content for both responses. However, when they were tested on their actual retention of information, the results demonstrated that these students clearly had better recall after reading printed materials.

Explore some favorite ways to add more balance to your Marcom mix

Like any good mix, strive for a balance. New and old. Digital and analog. Online and in person. Here are some great (many forgotten) tools that are still being used by many of our clients:

The Wall Calendar – The printed wall calendar is alive and well. In the past week alone, I’ve received two wall calendars in the mail from organizations I do business with. The obvious benefit – I think of them every time I look at the calendar. Make sure to create one that is relevant to you and your audience. We produce many with photos submitted by clients. You can pull together imagery of all types all long as it is relevant and supports your brand. Consider customizing the dates with important local information, suggestions, or helpful tips.

The Thank You Card – Does your organization have a formal thank you card that your front line team can use? A thank you email is one thing…and EVERYONE uses them (along with a survey that nobody wants to answer). But the card that is handwritten knows no equal in impact. People open them, read them, sometimes share them and often keep them. Do you have a stash of professionally printed thank you cards with matching envelopes? Perhaps you should.

The Holiday Card Mailing – Do you reach out to your clients on the holidays? Few people do anymore. Instead, they send out another email wishing “wonderful seasons greetings” or some other worn sentiment. A thoughtful card, preferably signed, is a message that will likely be displayed around the office. Plus, the creative options are endless. From ornaments to music playlists and funny photos with QR codes to link to videos, the chance to put a smile on a face and a warm spot in the heart is increased.

Interested in some of these ideas? Just drop me a line and I’ll send you samples for your review

The field of players in the “Buy Now Pay Later” service, or BNPL continue to grow. This year has seen the addition of Apple into the mix with their “Apple Pay Later” offering. Apple joins a growing field of payment providers that are offering the “installment loan” solution to purchases.

Installment loans are the age-old method of “paying later.” Most of the early installment loans were retailer driven. You wanted to buy something buy couldn’t afford it, the retailer would book the sale and take your down payment and then bill you for the difference. It might be a 12 or 24 month schedule with interest payments included.

New “No Interest” Payment Programs

These BNPL loans are now referred to as point-of-sale financing.

Buy it now, but pay it later. And, without any interest payments. This sure seems like a free lunch. However, if you miss a payment there often is a large late fee for some providers. In the case of Apple Pay Later, if you miss a payment your future purchases are prohibited.

Still, many are signing on to the service. It’s estimated that today, there are in excess of $100 Billion in annual loans and growing.

Younger Consumers are Using BNPL

According to statistics from Cornerstone Advisors, the usage of BNPL skews younger, with the largest segment being Millennials. Currently, 41% of Millennials are using the service:

Gen Z (21-25) 36%
Millennials (26-40) 41%
Gen X (41-55) 30%
Boomers (56-75) 18%

With so many younger consumers using the service, it’s critical to maintain a retention strategy to avoid losing these relationships.

What Can You Do to Compete?

Cody Banks from PSCU explained the challenge this way, “Institutions should package BNPL services in a way that promotes responsible use AND aligns with the institution’s vision.”

Today, you can partner with a provider to offer similar services to remain relevant in all categories of payment/lending services. But this isn’t a winning strategy on its own. You must also leverage the other advantages that your institution brings to the relationship.

Leverage BNPL to grow the Complete Relationship

Offering a BNPL is just one leg of the service stool. Like any tool that facilitates spending, it can be misused. For many it can lead to unintended consequences…like spending more than you earn.

Instead, resolve to be a proactive resource with financial wellness initiatives and products that feature low fees and low interest. Actively reach out to the younger segments to help them build good credit habits with a starter credit card, or offer a balance transfer from a higher rate card to yours.

Because these are smaller balances and transactions, this strategy won’t drive short-term profits. However, it will build a deeper relationship and a meaningful access to these consumers as they grow and evolve.

The economy keeps chugging along despite the predictions from seemingly everyone. Although interest rates have increased, all signs are showing that the economy is resilient. But things aren’t exactly what they seem. It depends on where you look.

There are areas of growing consumer risk.

Credit Card Debt is Climbing

A recent article from CBS News reports the following:

“More Americans are racking up credit card debt as inflation pushes up the cost of food, utilities and other staples.” And, “60% of credit card holders have been carrying balances on their cards for at least a year, up 10% from 2021.”

“59% of Americans who earn less than $50,000 a year carry a credit card balance from month to month,” the reporting notes. “The percentage drops slightly to 49% for those who earn between $50,000 and $80,000 and dips again to 46% for people making $80,000 to $100,000 a year.”

Most people don’t want to compromise their lifestyle choices when they are coming up short during these inflationary times. So, they are making up the difference with credit card spending.

And with some of today’s credit card rates hovering around 25%, it doesn’t take long to rack up massive debt.

The Real Cost of Consumer Debt

Making excessive interest payments is not a healthy practice. The credit card trap relies on those that get into a terrible habit of running up balances, resorting to the minimum balance payment, and never paying off the principal. Once you arrive at the cycle, it’s almost impossible to break.

And, when someone does default, everybody else pays for it through higher rates and fees.

Repackaging Loans and Educating Consumers

Before things get worse, now is that time to reach out to those account holders in need. You can pro-actively move those high balance accounts into lower priced options, such as home equity loans. But just as important as solving that initial problem, you can augment this effort with some financial education to help your users from becoming a statistic.

Tools that can help you focus their efforts on sound financial management include:

• Webinars covering the ABCs of household finances

• Educational web pages sharing the true cost of financial decisions

• Financial planning brochures with worksheets and budgeting tools

• Individual counseling

While many of these tools have been in existence for years, often people don’t notice their availability or their need until they are beginning to face financial discomfort. And that becomes the time that you can help them plot a new trajectory for their life.

Help them now…and forever.

Last week we discussed the impact of the Fed’s move on pricing strategy. We also started with the assumption that organizations are likely in the latter stages of dealing with this dilemma.

We learned that we (as individuals and organizations), go through several phases when a change (or major life event) occurs:

• Shock – We aren’t ready for the change; it’s a surprise.
• Fear – We are now afraid of what this may mean to our world; we are scared.
• Acceptance – We’ve come to accept that now this new set of conditions is going to remain
• Transformation – Now that we have accepted these changes, we have to adjust our perspective to fit this new reality.

Everybody goes through these phases at different speeds. And so does an organization.

I believe that most organizations have gone through the acceptance phase but are still struggling with the transformation stage. But this is exactly where we need to be heading – to explore a new way of pricing that is more dynamic than what we have historically relied upon.

In a recent article in Financial Brand, they discussed key strategies to optimize your pricing strategy in these times. It’s worth sharing:

Savvy financial institutions around the world are experimenting with unconventional inputs to create pricing models that allow them to stand out in their market and appeal to the customers they want to serve.

Here are just a few examples:

• In the United States, a midsize credit union rewards long-term customers with more favorable loan and deposit pricing. Customer loyalty creates value for the credit union, and giving special rates to these individuals strengthens the overall relationship.
• In Europe, a large retail bank calculates a relationship score by evaluating assets and liabilities across multiple customer accounts (retail, wealth, business, etc.). The resulting “value score” is used as a pricing attribute when they’re creating a rate sheet. We’ve also seen these scores used to impact fee waivers and cash back rewards.
• In the U.K., a large commercial bank incorporates climate data into how it prices loans secured by real estate. So, for example, if a property is located in a floodplain, the loan would be priced to reflect the increased risk of operating a business in that location.

By moving away from one-size-fits-all pricing models, these financial institutions are capturing business that works well for them at a price they — and their customers — find attractive.

Now these ideas may not be exactly what you are looking for. However, the idea is not to necessarily copy somebody else’s plan, but to create your own.

Coming out of this most recent season shows everyone how inflexible and obsolete our current pricing methodologies are. There is room for improvement.

Can you use this as a backdrop to building a new approach for your organization? Now’s the time.

Thanks for joining me today!

Psychologist have tried to help us make sense of the way we deal with change. There are many different models of thought. One popular philosophy posits that we go through several phases when a change (or major life event) occurs:

• Shock – We aren’t ready for the change; it’s a surprise.
• Fear – We are now afraid of what this may mean to our world; we are scared.
• Acceptance – We’ve come to accept that now this new set of conditions is going to remain.
• Transformation – Now that we have accepted these changes, we have to adjust our perspective to fit this new reality.

Everybody goes through these phases at different speeds. And so does an organization.

Organization Changes in Response to Industry Changes and Pricing

The past 12 months seem to be one of adjustment and transition. Starting last year, the Fed began moving up the interest rate. At first it was a shock. There were small increases where there hadn’t been any for years. It was still too early to understand. But then the spigot opened, and the Fed continued to increase rates to a level not seen in years.

Fear creeped in and most institutions early on started to pull back promotional programs. The worry was of the unknown – were these rates going to continue going up, level off, or go down? Will we be competitive? Can we take some extra profit on the deposits we are keeping at these very low rates, or do we ride the rates up with the market and increase our market share?

Or we do nothing.

Now What?

Today, I believe much of the industry is in the acceptance phase. There is an understanding of what is happening, and the short-term effect. Most institutions have adjusted rates to meet the new levels. But there still seems to be a “pulling back” and a relaxation on outbound marketing and promotion.

Without marketing, the organization will shrink and lose potential share. We have been playing defense. It’s now time to go on the offense.

Transformation – Now is the Time.

It’s time to get your organization out of the acceptance phase and into the transformation phase. Embrace a forward-facing look.

What does transformation look like to you? It could be many of the following:

• Adjusting pricing in line with new realities
• Building new products and categories that reflect current pricing and market demand
• Adjustment of staff focus to line up with changing consumer needs and new realities
• Add/subtraction of staff/personnel in conjunction with changes in workload and overall demand
• Protecting your market share with confident advertising messaging and aspirational positioning

Until you get into the transformation zone and move forward, everything will still feel like a crisis.

The biggest danger is being comfortable staying where you are (in the acceptance zone), “waiting to see what happens next.” Or, hoping things will go back to the way it was. It never does.

In the meantime, others may be eating your lunch.

The lifeblood of any business is the attraction of new users to its base. This is because there will always be a natural attrition taking place. People move, change circumstances, and unfortunately die. Regardless, if you’re not fully invested in developing new relationships to offset these changes, your organization will suffer. It will die.

What changes are you willing to make?

Remember the saying, “if we keep doing the things we’ve always done, we’ll get the results we’ve always gotten.” Nothing could be more true with appealing to a younger demographic. We talk to many institutions that have this goal yet they go about it the wrong way. Somehow, they believe that just by “marketing” (think advertising/communication) to that group, people will flock to their business.

It’s not that easy.

To appeal to the youthful demographic, you must be relevant, become part of their consideration set, and have credibility with these consumers.

What the young consumer wants – Technology

Younger generations want emerging technology seamlessly integrated into their daily banking experience. Furthermore, they’ve come to expect a consistent, user-friendly experience with any touchpoint they have with you. Many are also demanding flexibility that adapts to their lifestyle, from access to digital services as well as brick-and-mortar locations to multiple channels where users can communicate with the institution (in-app support, virtual assistants and more). Source Forbes, Financial Brand

A Digital First strategy resonates well with these users. Their world is digital, and you have to create the experience that fits with their desires, not yours.

According to Forbes, just adopting the technology won’t be enough. Digitizing experiences will not drive growth by itself—fine-tuning the digital experience through innovation, personalization and continuously new approaches will be necessary to keep younger audiences engaged.

What the young consumer wants – Advice

The young consumer finds the financial landscape challenging. They don’t understand it and know they need help. At the same time, their comfort with digital over human interaction may make them harder to connect with.

Develop programs such as webinars and seminars on topics in line with their interests. Encourage them to suggest areas that can be helpful. Build an ongoing repository of support in line with their general needs. Financial planning is a major issue that many young consumers need advice and encouragement.

What the young consumer wants – Relevancy and Respect

Every generation wants to be acknowledged for who they are and their uniqueness. It’s easy for an established institution to overlook this important component. If a new, younger consumer doesn’t feel comfortable in the relationship, they will move on.

Some of the simple, yet important elements of serving this segment is to ensure you have staff that represents this group. Having staff from this age group allows you to showcase that you value these groups and have trained staff that can handle their needs.

Create a team from the younger employees with the goal of evaluating and challenging all the current service practices and procedures. Things that have “been done a certain way for years” may no longer be relevant. And, will likely serve to push younger consumers away.

Remember it’s a journey.

A healthy organization is going to allow some flexibility as they bend and adjust to various societal and demographic changes. Staff should be as comfortable explaining what a savings account is used for to a young consumer and comparing investment options for an older consumer.

There is no one size fits all.