How well have banks educated customers about Check 21?

At the end of last month, a new federal law popularly known as Check 21 went into effect. To obtain an overview about what banks across the country have tone to inform and educate their customers about Check 21, ABA Bank Marketing magazine talked with Tim O'Donnell and Mike Reagan with Carreker Corp.'s Global Payments Consulting, Dallas. O'Donnell is managing director, and Reagan is senior principal. They conduct Check 21 education and awareness workshops both for banks and bank customers.

Below are the questions and their answers.

Q: A couple of months ago, it was difficult to find a banker who was worried about the need to inform customers about Check 21. Did that attitude change any as the October 28 enactment date drew nearer?

Reagan: Over the last several months, the attitude has gone from general indifference to passing interest to a sense of urgency. Certainly the calendar had much to do with it, but I think the discussions in the mainstream press raising awareness (some would probably say alarm) among customers were a significant contributor.

For example, the article in a consumer periodical back in August got their attention when it suggested that consumers with safekeeping statements should go to their banks and change back to statements with check return. An article on the MSN homepage raised concerns about increased tees with substitute checks, making them almost seem arbitrary. Personally, I don't think that particular article was well researched, but the average reader doesn't know that. And how many people does the MSN homepage reach?

Q: Give me some examples of the types of customer information campaigns your bank clients ended up developing. What are the key components of these campaigns?

Reagan: The campaigns vary by bank, and often by customer segment within the bank. Certainly the banks are very concerned with their corporate and high-end commercial customers, and this is where most of them are focused. Many took the traditional tacks of focus groups and mass mailings, but others are very targeted. These banks tailored a message to their customers about not just Check 21, but about the changing face of payments, and how their products could help their customers deal with these industry changes.

And in some cases, the message was hand delivered by the sales force. Unfortunately, not every bank formulated the company message before it got delivered by the sales rep. In a training session with one bank, a sales rep bemoaned the fact that the company message was not the same as the one he just delivered to his customers a couple of weeks before.

Q: Did you see any Check 21 campaigns that took a particularly unique or innovative approach?

Reagan: A few banks took the idea of a "campaign" to heart. For them, it wasn't just informing their customers, but truly educating them through a series of events in a variety of forums about how the bank was positioned to help the customer manage their cash.

One West Coast bank hosted a series of educational seminars that featured not just industry speakers on such topics as Check 21 and fraud, but also included a cocktail reception. And the bank didn't promote any products per se--they just reinforced their position as a business partner.

A bank in the Northeast, in anticipation of issues of fraud prosecution, took their message to local law enforcement agencies and country prosecutors so that when problems arise from areas like fraud (which is sure to happen), the substitute check will not be a surprise to the district attorney's office, and they will be more willing to prosecute.

One Southeastern bank talked about developing a program for senior citizen homes, a demographic with a high percentage of checking accounts that still receive checks back in their statements.

O'Donnell: One bank segmented their consumers by age and had a more delicately worded notification for the 55-and-older segment.

Q: Some banks assumed that educating customers about Check 21 was essentially going to be a one-shot deal. Now that October 28 has passed, does that mean that Check 21 as a marketing issue is dead?

Reagan: Check 21 certainly isn't a one-time event. At least not for the proactive banks. October 28 is the beginning, not the end, of changes in check processing in America. One bank that we worked with in the central United States used Check 21 as a reason to visit their key customers to discuss all their cash management products. I don't want to say that it was bait-and-switch, but they certainly covered topics beyond the narrow scope of Check 21. And I'm certain that their customers appreciated it. New opportunities will arise as the effects of Check 21 start to unfold after the implementation, and new marketing campaigns will continue to unfold, and hopefully they will be an extension on those that are being rolled out today.

Q: How do you see Check 21 evolving as a future marketing issue? What type of Check 21 marketing campaigns do you envision banks developing in the months and years ahead?

Reagan: Right now, the hot topic in and around Check 21 is electronic deposits from the commercial customers. The last four to five months have seen a gold rush in this area; and the banks are betting that it's not fool's gold that they are rushing after. I think that as Check 21 matures, and it becomes clear what is mutually beneficial to the bank and their customers, the new products offerings will emerge, and they'll drive the marketing campaigns. With the acceptance of electronics and nearly real-time processing, I think the banks will cede more control of the traditional check processing functions to the customers--everything from deposit creation to dispute resolution. While this reduces the banks' operating costs, I think it will be market ed as allowing the customer the maximum ability to control his or her checking account, with the bank emphasizing its position as the secure and trusted intermediary in the process.

O'Donnell: Check 21 allows for check truncation and could have the effect of increasing the numbers of NSFs.

I think the banks need to be ready for some damage control if consumers are organized to demand their checks back or if NSF rates are pushed past some invisible line of consumer dissatisfaction.

WaMu Drills Deep into Customer Attitudes and Behavior

Washington Mutual, Seattle, is an example of a fast-growing financial services institution. In 1992, the thrift had $34 billion in assets. Ten years later, it had grown to $283 billion in assets.

How was it able to grow so rapidly?

One answer is that WaMu conducts intensive research into what customers are looking for in their financial services, according to marketer Sergio Zyman in his new book, "Renovate Before You Innovate." (Penguin Group. New York, 2004)

The thrift does not just target customers based on demographics, such as socioeconomic groupings, it looks further, based on such things as:

* Shopping behaviors.

* Communication needs.

* Desired financial services.

* Future value potential.

* Attitude and approach to banking.

This type of information has given WaMu the flexibility to quickly respond to customer needs, says Zyman.

In addition, the company aggressively courts certain groups--such as low-income customers--who have often been neglected by other banks.

"Because WaMu is willing to take the time to understand these customers, they've been able to create or modify services that meet their needs." writes Zyman.

"The results have been extremely profitable."