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The Greatest Strategic Challenges Facing Financial Institutions Today

February 18, 2014   Posted in Uncategorized | No Comments | Email This Post | Print This Post

Financial institutions (FIs) have moved past the Great Recession and are focused on the future.  The future includes addressing potential threats and challenges.  What are the greatest strategic challenges for FIs this year?

The greatest economic challenges are a slow growth economy, continued low interest rates, and higher operating costs.  FIs face several important demographic challenges, including the gradual loss of legacy customers and their large deposits. Another demographic challenge is the emergence of younger generations, many of whom are digital consumers, with vastly different banking preferences and expectations compared to their parents. FIs are also challenged with the difficulty of recruiting and retaining qualified younger generation employees.

Regulation challenges include the remaining implementation of the Dodd-Frank Act (only 50 percent complete) and new regulations issued by the Consumer Financial Protection Bureau. FIs face increases in regulatory costs, higher risks, greater operating complexity and continuous employee training requirements. Some new regulations threaten the viability of traditional business lines such as residential mortgage lending and servicing.

Technology delivers its own set of challenges. Financial institutions face the challenge of trying to keep up with the latest technology, budgetary constraints, increased risks and complexity, the need for more IT staff and continual employee training.

Finally, many executives that we have spoken with recently indicate that competitive challenges have increased this year. Non-bank competition, in particular, is stronger, especially in the areas of electronic banking and payments and alternative lending.

Financial institutions are not lacking meaningful strategic challenges. Banks and credit unions, however, are employing a variety of strategies to solve these challenges and to take advantage of the best opportunities available today. The various strategic approaches chosen by FIs will be the subject of my next blog.

2013 – The Year of Mobile Banking

February 13, 2013   Posted in Uncategorized | No Comments | Email This Post | Print This Post

All signs point to a big push by financial institutions to deploy mobile banking this year. An article this morning in the Wall Street Journal, Banks Make Smartphone Connection, illustrates this trend. Many financial institutions have deployed mobile banking or plan to deploy it this year. The difference in an FI’s approach will be its deployment strategy. Some deploy mobile banking to provide customers with the ability to conduct standard transactions using a smartphone or tablet. Standard transactions include balance checking, transfers between accounts and bill payments. The more intrepid FIs are providing an additional level of mobile banking – remote deposit capture by camera. Consumers can sit in the comfort of their home and “snap” a deposit remotely rather than travel to a branch. The most innovative FIs have now taken mobile banking to a third, exciting stage-“mobile phone bill pay”. Mobile phone bill pay allows customers to take pictures of their bill coupons using smartphone or tablet cameras.  The FI electronically processes the payments for them.  First Financial Bank, Texas, calls their version Picture Pay™.

Mobile banking is clearly designed to satisfy the preferences of tech savvy customers of all ages and to also attract new Generation X and Y customers.

I enjoy mobile banking.  I began using the mobile check deposit feature when it was first offered by my bank. I had to complete a quick learning curve, answer my concern as to whether it would work (it did) and change how I track deposits. Now, after a number of months of use, I use mobile check deposit for business and personal accounts and am quite satisfied.

It’ll be fascinating to see the speed of adoption of mobile banking by FIs and consumers. Keys to consumer adoption will include trust, ease of use and reliability. It’ll also be interesting to see what impact mobile banking will have on in-branch, Internet and call center transactions.

What are your mobile banking views? How quickly do you think mobile banking will be adopted by FIs and consumers?

First Wellesley Voted Top Consulting Firm

August 2, 2011   Posted in Uncategorized | No Comments | Email This Post | Print This Post

FOR IMMEDIATE RELEASE

Honored by Banker & Tradesman for Fourth Year in a Row

Wellesley Hills, MA, August 2, 2011 — First Wellesley Consulting Group, Inc. has been named the Banker & Tradesman Best of 2011 Gold Award winner in the Bank Consultant category.  First Wellesley is honored and pleased to be designated the top bank consultant by the Banker & Tradesman 2011 Readers’ Poll.

“We are truly honored to have been chosen again by the Banker & Tradesman readers.  We thank the readers, our clients and colleagues for their confidence in us,” said James D. Jones, President/CEO, First Wellesley Consulting Group, Inc.

Banker & Tradesman, founded in 1872 and headquartered in Boston, MA, is published by the Warren Group.  The Warren Group provides comprehensive banking and real estate news and data throughout New England.

  • The readers’ poll honored the best providers of services in the banking and real estate professions.
  • Over 40,000 votes were cast for the providers that they believe are best in numerous banking categories.
  • “This is a subjective, not objective poll.  It does not measure who writes the most business, who has the most revenue or the most customers.  It does measure the loyalty and satisfaction readers have with vendors.  It is an opportunity for readers to speak up for those providers they believe are the best,” said Vincent Michael Valvo, Group Publisher and Editor-in-Chief, Banker & Tradesman.

About First Wellesley

First Wellesley Consulting Group, Inc. (www.FirstWellesley.com) was established in Wellesley Hills, MA, in 1991. First Wellesley is a national professional services firm specializing in the financial services and mortgage industries and provides strategic planning, consulting, research, presentation and SurveyMatters™ polling services.

Consulting services include lending strategy, technology and organizational optimization and best practice process reengineering.  Clients include Fortune 500, Inc. 500, and other companies, including national and community banks, vendors and trade associations.  First Wellesley is a member of the Massachusetts Bankers Association.

James D. Jones, a 32-year industry veteran, is a nationally known speaker who discusses innovative strategies, best practices, emerging technologies and industry trends. He is a former bank executive, mortgage banker and Big 4 consultant.  He speaks nationally at industry conferences to CEO, director and management audiences and educates industry professionals in strategy and technology.  Mr. Jones serves on the core faculty of the New England School for Financial Studies.  He is the author of Strategic Planning for Mortgage Lenders, published by the Mortgage Bankers Association, and is designated as an MBA Master Faculty Fellow.

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Loan Origination Compensation Rules – Do they hit the mark?

February 3, 2011   Posted in Uncategorized | No Comments | Email This Post | Print This Post

Effective April 1, 2011, the Federal Reserve Board is implementing the “final” rules for loan officer compensation and steering. (follow this link for further information) Having spent time reviewing the rule and its implementation, I have some thoughts.  No one can disagree with the importance of regulation prohibiting unfair, abusive or deceptive mortgage lending practices. The question is how to achieve these goals. I believe that these loan originator compensation regulations create a number of undesirable and unintended consequences for lenders and consumers. Let me identify a few.

Consumers will be prohibited, on a practical basis, from negotiating price with lenders. Because compensation to loan originators must remain constant, loan originators will be prohibited from reducing their commissions on specific loans to meet competitive conditions. The net effect of this will be that a consumer will be prompted to obtain their mortgage from a second lender rather than negotiate better pricing with their first lender. Think of the consequence of this prohibition being applied to the automobile industry. Consumers would be prohibited from negotiating a better deal with an auto dealer and have to go from one dealer to another in order to achieve their best deal. I don’t believe consumers will appreciate this frustrating “serial shopping” requirement.  This is one unintended consequence of the new regulation.

Loan products that require more work on the part of loan originators and lenders are likely to be deemphasized or ignored. Loan originators can only receive a fixed commission percent based on loan amount, without regard to loan type or any other factors. This means that the more complex loans such as first-time home buyer loans, low-to-moderate income loans and other type of products that require more work are more likely to be ignored. Loan originators will pursue the loans which are easiest to do and not focus on loans that take double the time to complete.  Consumers lose out under this scenario.

I estimate that the cost of implementation for small to mid-size lenders will range between $50 and $150 per loan for the first year. Significant legal, management, regulatory, disclosure, technology, training, monitoring, process workflow, audit and other expenses make this a costly regulation to implement.

Now, here’s the kicker.  The Federal Reserve Board intends on implementing this regulation on April 1, 2011.  Meanwhile, the Dodd-Frank Wall Street Reform and Protection Act also includes provisions for loan officer compensation changes.   The Board plans to create a second round of rules to further revise loan officer compensation.  This means that lenders will be required to pay twice to implement loan officer commission rules.

What about the new disclosure requirement?  I’m not convinced that the simplistic “safe harbor” provision will provide consumers with the best loan choices.  Providing “lowest rate,” “lowest points and fee,” and “lowest interest rate” for a “safe mortgage” options is not the same as providing consumers with the best loan recommendations for their circumstances.  Selecting the “best loan” for a consumer is not always as simple as the three “lowest” options.

I’m not persuaded, given the regulation’s complexity, that the “one and done” rulemaking process will produce a regulation that does no harm to consumers, lenders and loan originators.  It’s essential that the Board issue FAQs to lenders answering the multitude of questions that have arisen to clarify how lenders should implement the regulation. I believe it would be appropriate to delay the implementation date until the Federal Reserve Bank issues FAQs and examines closely the unintended consequences and negative effects of the regulation as currently written.

Should the regulation be implemented on April 1st as is? Should it be delayed and modified to eliminate known problems and issues?  Should it be delayed until a single officer compensation regulation be implemented that includes the Dodd-Frank Act? What do you think?

So, What’s Your Favorite Technology?

February 3, 2011   Posted in Uncategorized | No Comments | Email This Post | Print This Post

The other day, I was trying to determine what my current favorite technology is.  Having considered a number of possibilities, here’s my choice – my Apple® iPhone. The iPhone is incredibly easy-to-use, efficient and liberating.  It has transformed the way I connect to content and friends, research questions, dine out, travel and make decisions.  The iPhone has untethered me from the computer, guaranteeing immediate connectivity almost anywhere I go.

I now have about 170 apps. My apps include the common and practical ones – email, calendar, contacts, weather, clock, and camera. Some of the apps are business-focused – a “time tracker,” WSJ Mobile, WebEx, Skype, Travelocity, and Kayak.   Other apps, like FIOS DVR Manager, are extremely clever, enabling me to easily manage cable recordings remotely.

I use lots of travel apps, including ten I just downloaded for an upcoming trip to Germany and Austria.  I have found that travel apps are extremely helpful when planning and while on location.  I use apps to choose cities, hotels, restaurants, things to do and flights, check the weather and exchange rates and so on.

I love to eat out.  Yelp and tripadviser are two apps I consistently rely on to find good restaurants.  Last weekend I visited a new region of Connecticut and ate at three great restaurants using the apps.

The iPhone has transformed how I connect with the Internet, obtain information and interact with colleagues and friends. I use it at home and on the road in the U.S. and Europe. My life has become more efficient and better with the iPhone. It’s the most versatile technology I have owned since the 1970s.

Let me ask you the same question – what is your favorite technology? How has it made a difference in your life?  And, if your choice is a smartphone or tablet, what are your favorite apps?

About Jim Jones

James D. Jones, a national speaker for 16 years, has presented to financial services and mortgage audiences for organizations of all sizes.More >

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