By: Eric Walloga Vice President Sales, Finance, Travel & Entertainment Valassis
Published Wednesday, May 30, 2018
When it comes to advertising efforts, most marketing professionals in the banking industry understand the challenges and consequences of advertising campaigns that focus on developing low to moderate incomes (LMI). Consumer behavior among bank customers is constantly evolving and customer acquisition marketing technology continues to innovate. The combination of these realities require that banking leaders constantly examine their Community Reinvestment Act (CRA) approach for possible gaps that may be holding them back from achieving success.
The CRA is a federal law designed to encourage banks and thrifts to help meet the needs of borrowers in LMI neighborhoods. LMI areas are defined as census tracts with an average household income less than 80 percent of the Housing and Urban Development (HUD) area median income for the county where the census tract is located.
To ensure compliance with CRA regulations, federal regulators conduct assessment audits of the records of each bank to ensure their lending activity in LMI census tracts is in line with the size of the deposits that they are taking in from these areas. The consequences of falling out of CRA compliance can be severe. For example, a poor CRA record can result in the denial of a bank’s request to open new branch locations, ATM’s or on a larger scale, restrictions on a bank’s merger or acquisitions.
One way for a bank to meet the challenge of increasing their LMI loans is to make CRA loan purchases from other institutions. However, these types of loans can be hard to find, and can come at a premium. Banks can also increase CRA loan activity by opening new branches in an LMI area. However, the trend of opening new branches appears to be going in the opposite direction with banks having actually closed 9,666 locations since 2008 according to a study by NCRC.(1)
Closing branches does not lessen the requirement for a bank to demonstrate that they are serving the banking and lending needs of the LMI areas that remain in their service areas. In fact, it can make it more challenging thus requiring a bank to seek new and innovative ways to enhance their marketing efforts to drive higher LMI consumer engagement.
The good news for banks is that technology advancements in cross channel media capabilities, household personalization and predictive analytics are now available to boost LMI lending activity. Financial lending institutions should consider the following capabilities when choosing a CRA marketing partner:
Cross channel consumer touchpoints: Nielsen Research tells us that half of U.S. consumers use between four and seven touch points. However, Millennials, a group that now has the highest percentage of minorities of all generational segments, use between eight and 11 touch points.(2) CRA marketing campaigns that leverage mobile, online and print touchpoints across LMI census tracts, will command a higher percentage of brand influence over consumers seeking financial services, than campaigns that use just one touchpoint.
Personalization: According to a recent McKinsey study, personalization reduces acquisition costs as much as 50 percent, while lifting revenues by as high as 15 percent.(3) Banks can now leverage advanced postage optimization approaches in direct mail to deliver 1 to 1 message versioning without increasing overall cost. For example, a unique message for millennial renters, versus millennial homeowners who live next to each other. The ability to version an LMI message by consumer type is critical toward generating superior marketing return on advertising spend (ROAS).
Predicative Analytics: Predictive marketing users are 2.9 times more likely to report revenue growth at rates higher than the industry average per a recent Forrester Consulting study.(4) Advancements in connecting online behaviors to residential addresses have now made it possible to combine real time online signals, and traditional big data sources to understand which LMI census tracts are showing intense in-market signals for financial services. Leveraging predictive analytics can substantially increase consumer engagement and activation rates, while lowering marketing cost through greater efficiency and optimization.
Programmatic Direct Mail & Email Remarketing: Advancements in identity matching technology allow banks to engage anonymous LMI individuals that visit their website and, start an online loan application, but fail to complete it. Banks can now send those individuals a remarketing email that arrives within 24 hours and personalized direct mail messages that reaches the home within one week of their online application abandonment. This approach allows a bank to continue the conversation with LMI consumers who are showing intense interest in their brand and are in the consideration stage of a needed service. This additional personalized effort could make the difference in bringing these high value consumers back to the website and completing their online application or form.
On April 3, 2018, the US Department of Treasury released recommendations to modernize the CRA in the areas of geographic assessment definitions, clarity, flexibility, timeliness of examinations, and incorporating performance incentives.(5)
Perhaps now is the time to reevaluate your CRA marketing approach and drive LMI consumer engagement to new heights.