When Should Digital Banking Technology Providers Outsource Adoption Marketing Services?

6-16-21

When Should Digital Banking Technology Providers Outsource Adoption Marketing Services?

June 15, 2021

EXECUTIVE OVERVIEW There is an ongoing discussion inside Digital Banking Technology Providers (DBTP) as to whether they should provide adoption marketing tools to support end users and drive awareness, enrollments and usage or to outsource this function – or outsource this resource. The issue continues to come up year after year as these systems become more feature rich, thus raising the need for support and addressing more inquiries from FIs and their end users. For over 25 years, Murphy & Company has been creating, editing, delivering and updating digital banking adoption marketing tools for hundreds of banks and credit unions across the US. We prepared this short document to share our experience and demonstrate how it is faster, easier and more economical to outsource this service.

13610 Barrett Office Drive, Suite 206

© 2021 Murphy & Company, Inc. 636-394-2116 | mcompany.com

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St. Louis, Missouri 63021

THE ROLE OF DIGITAL BANKING & MARKETING TOOLS IN THE MODERN FI The focus of digital banking adoption marketing has greatly shifted since the first ten Prodigy banks went live in 1992. Initially, digital banking was an awareness play and was so exciting and new that all a bank had to do was show that they had it and the user was engaged. But back then there were just a few basic features. About 15 years ago, the focus shifted to benefit the digital banking technology provider, as the increased number of end users began to directly impact the vendor’s revenue. Today, the focus has shifted to the business needs of the FI.

How is digital banking technology helping FIs meet their business objectives?

1. For large business and treasury accounts, leveraging roles and responsibilities and enforcing a corporate user plan is a powerful feature. Like Positive Pay, this requires robust marketing, end user documentation and “how-to” video content, so business customers have the tools to establish a digital banking system reflecting their security policy. As employees come and go, editing this policy to ensure compliance will require support materials.

2. For small businesses, driving the fee income for FIs through the use of wires and ACH is a huge opportunity.

3. On the consumer side, there is some focus on streamlining service for financial and operational efficiency, by keeping end users off the call center and alternatively moving to self-service channels. The other focus point is driving end users to engage in mobile deposit. As a precursor, to opening new accounts and even loans online. It is our observation and opinion that until consumers do basic functions online they will never do complex actions like applying for a loan. This brings to light the true question for senior management of digital banking technology providers, do they want to invest their time and resources in improving the core products or trying to stand up a marketing effort.

It is our experience and observation that adoption marketing materials produced in 2021 must be robust, branded to each FI and updated to meet these basic business needs.

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ADOPTION MARKETING DEFINED Adoption marketing has been defined many different ways by many different stakeholders. After 25 years and almost 1,000 FIs, we present the following:

Our experience suggests that adoption marketing is anything shared with the end user and staff to:

§ Promote the digital channel with modern, branded promotional videos. § Drive the end user to the point of enrollment. § Walk through the first login process and session. § Answer questions as the end user expands their use and gets comfortable adding digital banking to their regular daily activities.

From a deliverable’s perspective, adoption marketing includes but is not limited to:

§ A single page on the website which delivers all digital banking material. § Job-aids or short brochures to promote key features. § Full-length, branded and feature-matching user guides. § Marketing or promotional videos, fully branded to drive enrollments. § “How-to” educational videos, fully branded to drive understanding and usage. § Custom video content. § Content for digital banking help or hot buttons. § Ongoing updates to all content as the digital banking providers enhance their system offerings. § Employee training sessions. § New consumer on-boarding workflows including retail, small business and treasury.

Other considerations:

§ Adoption marketing content should be available to staff members to drive training. § FIs report that half of their front-line staff DO NOT actively bank where they work. This requires that content be located and accessible outside the digital banking experience (app) to serve a second purpose in the training department and training cycles. § The content must have an upgrade path without having the FI pay the full price again. § This content must be viewable and applicable in multiple marketing settings including emails, social media, in- branch visits and consumer support calls.

13610 Barrett Office Drive, Suite 206

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St. Louis, Missouri 63021

ADOPTION MARKETING ECONOMICS: REVENUES With adoption marketing defined, the next question is at what point is it economically viable for a technology vendor to stand up a marketing effort. If a technology provider is going to set up this effort, they will need to have a net number of FI clients purchase enough content to support the fixed costs of the marketing effort. As we will define shortly, this is difficult as only a fraction of FIs will look to their digital banking technology provider for marketing services. Let’s bring these numbers into focus by reversing the process and subtracting the FIs who are NOT candidates for these services from the total population served by the digital banking technology provider. 1. The first group of FIs who will not want to purchase these tools are those large enough to build them internally. 3. The third group of FIs who will not commit dollars for adoption marketing will be those who want to do it internally. This is more common among credit unions than banks, but a large number of FIs have marketing departments and the tools to create basic marketing tools are becoming less expensive and offer more features. 4. Finally, a small group of FIs will not engage anyone for adoption marketing because they are confident their end users don’t need it. We think this is a mistake, but many FIs who support communities of doctors, schoolteachers and engineers are the last to see a need for this. 5. There is one more group which must be subtracted from the larger group; those who the vendor may want to waive the costs. If the technology provider is also the adoption marketing provider and adoption marketing appears on the same net new FI contract or is added to a renewal, the marketing tools are the most vulnerable to be negotiated away. Given the competitive nature of today’s top eight digital banking technology providers, this is a common event. However, if these services are offered by a third party, that does not happen. 2. The bottom 10 to 20% of FIs will have assets too low to commit marketing budget dollars to adoption marketing and will do without.

To calculate the financial opportunity for digital banking technology providers to generate revenue by offering adoption marketing services, they must start with the total number of FIs and subtract at least the five groups listed above.

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ADOPTION MARKETING ECONOMICS: COSTS The next step in building the business case to offer this service internally focuses on the costs of stagging and running an adoption marketing function. To keep digital banking content affordable to the FI, building custom guides and videos for each customer is not feasible. Our 25 years of working through this specific question and process has shown us only one viable model: 1. Create libraries of content applicable to multiple FIs.

2. When an FI engages for marketing services, allow for a time and cost-efficient way to brand, configure, grab system screenshots and package the deliverables.

3. Prepare for and respond to local, unique branding requests and edits.

4. Continue adding to the library for new feature adds and feature updates. We recently created two user guide templates (retail and small business) for a major digital banking provider. It took nearly 400 hours of effort. This was for only the user guides. With an internal cost of $1000 an hour, this is a $40,000 minimum effort. Animated video content costs about $2,000 per finished minute to create. The very basic libraries, each approximately ten minutes in length, will take an upfront investment of $20,000 each. At a minimum, you will need to provide content for retail, business, bill pay and mobile banking representing at least an $80,000 investment. To get started using the template method, the minimum cost to build the first libraries is $100,000. This still leaves the need for higher end business functions to be covered by video like positive pay and roles and responsibilities. Once the content is started, the primary costs are employees. The following is a breakdown of the minimum team needed to stand up an internal adoption marketing unit, create and then brand the marketing deliverables.

FULLY WEIGHTED EMPLOYMENT & PRODUCTION COSTS $70,000 § Salary § Incentives § Benefits § Corporate Overhead § Matching Taxes § Computer Equipment § Licenses for several apps (e.g., MS Office, Salesforce)

TITLE

ROLE

Adoption Marketing Salesperson

This person takes the referral from the relationship manager and identifies the marketing needs of an interested FI. Relationship managers at all technology partners are under-pressure for cross-sales, upgrades, contract renewals and extensions, etc. They cannot be distracted with adoption marketing tools and make their global number. When not working with new orders, they will be on a schedule to follow-up with active clients to make sure the adoption marketing content is up to date.

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Adoption Marketing Team Manager

$85,000 § All items listed above.

This person takes the order for adoption marketing tools, executes the paperwork, reaches out to the FI, holds a kickoff call and begins to gather information and creative assets like logos and screenshots. This person will then assign the project to either the video or user guide expert for execution. This person also manages the CRM dashboard and deliverables. This person leads the creative direction and production efforts including editing and related tasks to make sure the video content matches the FI’s branding, live features and is approved by the FI. This person will lead the creative direction and production efforts including editing and related tasks to make sure the guide content matches the FI’s branding, live features and is approved by the FI. This is a critical person who prepares many of the assets and text to make sure the video and user guide leads are able to spend as much time as possible working on the final product. This person is also responsible for quality control and closed captioning.

Video Lead

$90,000 § All the expenses listed above, plus $1,000 a year for Adobe Creative Suite.

User Guide Lead

$80,000

§ All the expenses listed above.

Quality Control Editor

$60,000

§ All the expenses listed for

Video and User Guide Leads, but at a lower salary.

Total

$385,000

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ADOPTION MARKETING ECONOMICS: ROI For an internal adoption marketing effort to be viable, it must:

• Cover its costs • Provide margin equal to that of the rest of the company • Have a large enough FI customer base that when those who do not want adoption marketing are removed from the opportunity pool, enough are left to make the effort profitable.

Initial Library Setup

$40,000

People Costs Year 1

$385,000

People Costs Year 2 (We experience 3 to 4% inflation each year.)

$400,000

Two Year Total

825,000

Average cost, first two years.

$412,500

Typical margin for a digital banking technology provider.

50%

Annual revenue to cover expenses and provide a margin equal with the corporation.

$825,000

Average Amount an FI spends on Adoption Marketing services

$7,500

Number of participating FIs needed before the adoption marketing units are profitable and any other content is built. 110

This model suggests that 110 FIs would need to engage the technology provider for adoption marketing services at a cost to them of $7,500 each for a marketing effort to recover its costs and return margin from marketing on par with the rest of the company.

Digital Banking Technology Providers need to have a large enough population of FI clients, so that when those FIs who will not participate are factored out, there is still a large enough number of FIs willing to pay for these services to make the marketing unit financially self-sufficient AND yielding profit on par with the margin performance of the rest of the company.

13610 Barrett Office Drive, Suite 206

© 2021 Murphy & Company, Inc. 636-394-2116 | mcompany.com

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St. Louis, Missouri 63021

MANAGEMENT CONSIDERATIONS 1. To stand up an adoption marketing team, a digital banking technology provider will need to sell and collect an average of $7,500 per FI.

2. The primary fixed expense component with this number is the cost of people.

3. There is the option to raise prices and “throw” in marketing, but the complexity of adding significant digital banking features drives the need for more robust content which is not easily “tossed in.”

4. Adoption marketing services and tools must also meet the training needs of front-line staff. Only inserting this content “In-app” cuts off many of the opportunities to drive adoption usage.

5. Instead of the technology provider spending this money on marketing, could that same money fund a technology development or deployment service that would impact ALL FIs in their community?

6. Murphy & Company, by serving multiple digital banking technology communities, spreads the overhead across far more FIs and leverages common marketing elements over a wider community of FIs.

7. Given the large number of FIs we serve from across several digital banking providers, Murphy & Company can offer these services at no expense to the digital banking technology providers, and in many circumstances, offer a revenue share.

ABOUT MURPHY & COMPANY Murphy & Company is a FinTech focused marketing firm based in St. Louis, Missouri. We have helped hundreds of financial institutions achieve their digital banking goals. Our world-class creative content is supported by 25 years of direct work experience and front-line knowledge, which helps drive greater enrollments and digital banking usage. The team is lead by Paul A. Murphy, a 30-year FinTech vendor who participated in one of the first ten online banking rollouts in 1992 and is the author of “Banking Online for Dummies” the first book published on the topic in the US. CONTACT US To further discuss these topics and more, call us at 636-394-2116 or email Paul A. Murphy, President of Murphy & Company, at paul@mcompany.com.

13610 Barrett Office Drive, Suite 206

© 2021 Murphy & Company, Inc. 636-394-2116 | mcompany.com

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St. Louis, Missouri 63021

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