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In This Issue
On Banking
A Practical Approach to Small Business Segmentation
Successfully Executing Mergers, Acquisitions, and Divestitures
On Payments
If You Can Stomach It
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It’s been a busy summer, so for our third quarter issue we thought we would share with you some of our thoughts and takeaways from recent work we’ve done.
In this issue of On Financial Services, we discuss the challenge of segmenting small business customers and share our thoughts on why—and how—financial institutions should be evaluating their third party EFT processors.
You will also note a new feature in this quarter’s newsletter—an overview of a timely and relevant offering from our team related to mergers, integrations and divestures. We have highlighted this offering in recognition of the continuing changes taking place in the financial services industry. As we move into 2010, we will similarly highlight some of our other offerings we think may be of interest to you. As always, we would appreciate your thoughts and feedback.
Best Regards,
Jim Neckopulos
Management Vice President, Financial Services Industry Team
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On Banking
A Practical Approach to Small Business Segmentation
By Karl Augenstein
The small business market in the United States is expected to play a significant role in reviving the economy. There are approximately 27 million small businesses in the U.S., and according to the U.S. Small Business Administration, this segment has generated approximately 70 percent of net new jobs over the past decade. There is no doubt that small businesses represent an attractive, and growing, market segment for financial institutions. However, for many banks and other financial institutions, increasing their share of the small business market profitably has proven elusive.
Part of the challenge of serving “the small business market” is the very definition of “small business”, which typically refers to businesses with less than $7 million in revenues and/or fewer than 500 employees. That means that your local plumber, mom and pop grocery chain, and boutique graphic design shop all fall under the heading of small business—despite the fact that they have very different needs and expectations for banking services.
Given the breadth of the market, developing a customer segmentation strategy for small businesses should be an important component of a bank’s go-to-market strategy. Treating all small business customers the same can risk under-delivering to some and over-delivering to others, as under-served businesses will move their banking needs to the competition, while the over-served will gladly take what’s offered, incurring greater costs than the revenue they provide. Subdividing the market allows a financial institution to focus its limited resources—business bankers, support staff, and marketing dollars—on those businesses best aligned with the financial institution’s strengths in order to generate an acceptable rate of return.
Deciding to segment small business customers is a relatively easy and straight-forward decision. Determining how and on what basis to segment small business customers is more difficult. In this article, we discuss some of the most common segmentation schemes, together with their pros and cons, and offer our thoughts on the best approach to small business segmentation. To view the full article, click here.
Successfully Executing Mergers, Acquisitions, and Divestitures
A Hitachi Consulting Service Offering
By Jim Neckopulos & John Hansen
Successfully executing mergers, acquisitions and divestitures in today’s business environment is a complex undertaking. Integrated systems and comingled data, centralized or shared services, outsourced business processes and complex vendor arrangements, regulatory scrutiny, and global operations all contribute to this complexity. As a result, managing M&A and divestiture activities requires careful due diligence, well-structured program and change management techniques, and effective project planning efforts across and within each functional area.
Hitachi Consulting has worked with numerous clients to address all aspects of the M&A and divestiture process, enhancing their ability to capture the full benefits of a successful implementation. To learn more about how we can assist your organization, click here. |
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On Payments
If You Can Stomach It:
Re-Evaluating Your Third Party EFT Processor Relationship
By Melissa Fox
Although many of the largest financial institutions process their ATM and debit transactions in-house, the vast majority outsource their EFT processing to third parties. And although often viewed as a commodity service, financial institutions' processing relationships have important implications for their product offering, internal operations, and customer experience—and they can have a direct impact on their bottom lines.
The landscape for EFT processing has changed significantly over the past several years. Debit has eclipsed ATM as the primary EFT service, and the evolution of interchange, rewards, and fraud has increased the complexity of processing and managing debit transactions. On the ATM front, declining revenues and increasing costs have continued to put pressure on deployers’ profitability, at the same time that technology advancements have created opportunities to expand ATMs’ functionality and user experience. For processors, competition for volume is only increasing, and consolidation and changes in ownership among the leading players has created “swirl” in the industry.
Given these changes, we conducted a small research study in the spring of 2009 to explore trends in financial institutions' use of third party EFT processors. We spoke with nine financial institutions to better understand how they are currently using third party processors, what drives their buying decisions/satisfaction levels, and what their priorities for future investment are. Based on these conversations and our own experience, we have put together some of our key takeaways and thoughts for financial institutions that are (or perhaps should be) in the process of evaluating their processor relationship(s). To view the full article, click here.
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Hitachi Consulting is a recognized leader in delivering proven business and IT strategies and solutions. From business strategy development through application deployment, we leverage decades of business process, vertical industry, and technology experience to understand each company's unique needs and to achieve sustainable ROI. Inspiring your
next success!®
Our national Financial Services Industry Team is the result of significant investments the firm has made in this space over the past few years. In August 2005, we acquired Dove Consulting, a Boston-based strategy and organization consulting firm specializing in payments strategy and research. In March 2008, we acquired JMN Associates, a leading provider of consulting services to the financial services, real estate and insurance industries based in San Francisco. Together, our team brings valuable expertise and practical, proven solutions to clients in the areas of business and technology strategy, process improvement, market research, project management, and industry and regulatory compliance.
Visit us at: http://www.hitachiconsulting.com, or send feedback to: onfinancialservices@hitachiconsulting.com.
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© Copyright 2009 Hitachi Consulting. Contents in this newsletter may be reprinted with proper attribution to Hitachi Consulting. |
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