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Banks Aim to Take Advantage of USPS' Problems

Mercator Advisory Group by Mercator Advisory Group
March 28, 2012
in Analysts Coverage
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From Reuters:

The banking industry, struggling to make the profits it used to, is using the struggles of another industry for its marketing: The Postal Service.

JPMorgan Chase & Co, Bank of America Corp, Citigroup Inc and Wells Fargo & Co are all using the looming threat of postal service cuts to sell bank services such as electronic payments and remittance pickups that can speed payments likely to be slowed by diminished mail service.

“It is a conversation starter,” said Daniel Peltz, head of Wells Fargo’s Treasury Management division.

For banks, electronic transactions save as much as one-third of the cost of processing checks, according to industry estimates. The potential savings are greatest for bigger banks, which reap additional economies of scale by running more transactions through the computer systems they have built.
Banks are looking for any chance to save money these days, as tough markets and a weak economy hit their profits, and traditional revenue streams dry up due to stricter regulations.

For bank customers, the new electronic payments and other services offer savings, too.

The prospect of reduced mail service offers new opportunities for financial institutions to extend their reach of electronic payments and online bill pay services offered. In addition to ensuring that bills arrive on time, the added convenience and reduced postage costs are appealing. Also, studies have shown that these features are welcomed by customers once they have tried i

While it may take some time for customers embrace electronic payments and bill pay for all bills, their use has the potential to add stickiness to accounts and long-term loyalty to financial institutions.

Click here to read the Reuters article via the Baltimore Sun.

Tags: Banking Channels
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