Posts Tagged ‘Credit’
Car financing has taken a new spin with regard to providing investment for buying a car. So, how do you finance a car? If this question leaves you baffled, then you have to go a long way in the process of buying a car. The term ‘financing’ in relation to buying a car connotes either rendering loan to buy the car or lease the car to you. You are probably concentrating on the former meaning. Many people are in favour of talking car finance from dealership for it seems like a convenient option. It seems easy; you select a car, fill out a credit application, and drive away with your car – all in a day’s work. Car finance through dealership will give you car finance on weekends and even at nights when other banks and credit unions are closed.
Seems convenient, isn’t it? But there is a catch. The dealer will be certainly charging you more for your car finance. Usually car buyers are overcharged by 3% on their car finance. A great number of complaints about car financing are related to dealers. 0% APR is not only attractive but lures the buyers to acquire up car finance not meditating if it is feasible for them. There are very few people who can actually get a 0% APR. Thus car finance deals usually fall midway thereby making car finance experience an extremely distressing one. You are buying a new car and probably for the first time, you certainly want it to compliment your enthusiasm. There are few elementary things that need to be kept in mind before taking that crucial primeval step in car buying.
First and foremost in car buying and financing is checking your credit score before you apply for a car loan. Many people are unaware of the fact that they even have a credit score. You can expediently check your credit score online. So, if you have bad credit history then probably you will be paying more interest rate for your car finance. If your credit score drops below 550, then probably apply for new car finance is not such a good idea. First repair you credit score. Repairing credit score requires little effort, helps you repay your debt and retain your credit report. Online car finance companies can get you car finance loan even if your credit score is lower than required. Your car finance loan can get approved in minutes. Online car finance companies have revolutionized car finance procedure. With lowest online car finance rates, no application fees, or down payments car finance companies provide a formidable competition to car dealers. Car finance companies have set a standard for providing car finance that is worth opting for.
Read more on
http://myfreeinfo4u.com/finance/car_finance_places_you_on_the_top_gear_while_buying_a_car.html
Best Debt Consolidation Company
Debt consolidation is one of the most common debt relief solutions for many debtors. By go through a debt consolidation process, all your unsecured debts will be merged into one for better debt management. In some cases, the debt consolidation company may be able to help you to lower your minimum monthly payment and interest rates, which can help you to manage your money better.
If you have decided to go for debt consolidation to resolve your debt issue, then, finding a good debt consolidation company that can really help you in handling your debt problem is crucial because getting help from an unethical debt consolidation company can make your financial situation goes worse. Here are 5 hints for finding the best debt consolidation help.
Search As Much Information Available Online & Offline
The best way to find a reputable debt consolidation company is through a recommendation from someone you know who had used the services of a debt consolidation company and have a good comment on it. If you don’t know someone who knows a good debt consolidation company, then, look through yellow pages or you can easy find many of debt consolidation services from internet. Short list the companies that are nearby you and ask them to send you their debt consolidation service information package. You don’t need to pay a penny for requesting the company’s services details; hence, utilize these resources to ask as much information as you can so that you can make a comparison about their services. Then, compile a list of your choices.
Detect Scam Warning Signs
While searching for debt consolidation companies, put yourself in a high alert for any scammer’s signs. While extremely high fee is definitely a red flag, extremely low fee may have high hidden cost; hence, you need to really understand how the company will charge you on their service, watch out for hidden cost. Don’t believe if a debt consolidation company claims too much of guarantees and their debt consolidation package look too good to be believed. Remember, your debt issue cannot be go away overnight or in a short period of time, if any debt consolidation company tells you that they can get you out of debt at unbelievable short period of time, they lie.
Check for Any Complaint Filed Against the Company
A debt consolidation company may be legitimate but their services may be bad and can’t help much in resolving your debt issue. In order to avoid yourself from getting help for a helpless debt consolidation company, spend some time to look for complaints filed against the company; call the Better Business Bureau in your area to find out if there have been complaints against the companies in your list.
Don’t Make An Instant Decision
You should interview all the debt consolidation companies short listed which you think they can best help you in resolving your debt issue. Of course, when you talk to them, most of their proposal and recommended solutions will look good and impress you. Although, you are in hurry to get your debt issue resolve, don’t make up your final decision at the spot and enroll into any of debt consolidation plan. Tell them that you need some time to consider. Take your time and at your comfort home, compare all services from the debt consolidation companies you have interviewed earlier and select the best debt consolidation company that can provides you the best service at a reasonable price.
Fine Read Any Contract Before Sign
When you decide to enroll into a debt consolidation plan, you definitely will be asked to sign an agreement or contract about the proposed debt solution plan. Remember to read the contract in details before you put your signature on the dotted line. Don’t sign the contract if you are doubts or have questions on any part of it. Clear your doubts and get your questions answered first.
Summary
If you have decided to get professional help to consolidation your debt, then it is crucial to choose a reputable debt consolidation company with a debt consolidation plan that best suits your financial need. Hopefully, the 5 hints as mentioned will be able to guide you to find the best debt consolidation help.
Introduction
A venture financing can be structured using one or more of several types of securities ranging from straight debt-to-debt with equity features (e.g., convertible debt or debt with warrants) to common stock. Each type of security offers certain advantages and disadvantages to both the entrepreneur and the investor. The characteristcs of your situation and current market forces will impact the type and mix of security package that is right for you.
Types of Securities
- Senior debt: Which is usually for long-term financing for high-risk companies or special situations such as bridge financing. Bridge financing is designed as temporary financing in cases where the company has obtained a commitment for financing at a future date, which funds will be used to retire the debt. It is used in construction, acquisitions, anticipation of a public sale of securities, etc.
- Subordinated debt: Which is subordinated to financing from other financial institutions, and is usually convertible to common stock or accompanied by warrants to purchase common stock. Senior lenders consider subordinated debt as equity. This increases the amount of funds that can be borrowed, thus allowing greater leverage.
- Preferred stock: Which is usually convertible to common stock. The venture’s cash flow is helped because no fixed loan or interest payments need to be made unless the preferred stock is redeemable or dividends are mandatory. Preferred stock improves the company’s debt to equity ratio. The disadvantage is that dividends are not tax deductible.
- Common stock: Which is usually the most expensive in terms of the percent of ownership given to the venture capitalist. However, sale of common stock may be the only feasible alternative if cash flow and collateral limits the amount of debt the company can carry.
While each of these securities has unique characteristics, they can be grouped into two categories: debt or equity. In structuring a venture financing, the primary question is whether the financing should be in the form of debt or equity.
Disadvantages of Debt to a Company
From a company’s viewpoint, there are two potential disadvantages to debt.
- An excessive amount of debt can strain a company’s credit standing, thereby reducing its flexibility in meeting future long-term financing requirements on a favorable basis. It can also negatively affect a company’s ability to obtain short-term credit. Of course, the form of debt the venture financing takes makes a difference. For example, subordinated debt will have less impact on borrowing capacity than senior debt.
- The venture capitalist has the option of calling his loan if the company is in default of the loan agreement. This remedy, which is not available to him under other financing agreements, puts him in a better position to influence the company’s affairs when it is in default.
Advantages of Debt to a Venture Capitalist
From the venture capitalist’s viewpoint, there are three principal advantages to debt.
- There is a greater likelihood that the venture capitalist will get his principal back and, at least, a small return. Many of the companies in the average venture capitalist’s portfolio are referred to as "the living dead." Needless to say, their performance has turned out to be disappointing. In some cases, these companies are able to repay principal with interest but have limited appeal to potential acquirers or the public. As a result, a venture capitalist with an investment in such a company’s common stock may be unable to recover his investment within a reasonable period, if at all.
- As previously discussed, under certain circumstances the venture capitalist is in a better position to influence the company’s affairs.
- The venture capitalist has a senior claim. However, it should be emphasized that the meaningfulness of a senior claim depends on the marketability of a company’s assets and the amount of equity it has to cushion its creditors’ position. For example, in the case of a start-Lip situation with little or no equity, a senior claim means little or nothing.
Percentage Ownership Needed
While the difference may not be great, depending on the particular circumstances of the company, a debt position involves less risk than an equity position for the venture capitalist. Accordingly, a company should not have to relinquish as much ownership when a financing is in the form of debt. However, this advantage must be weighed against the disadvantages of debt.
No matter how the venture financing is structured, it must be priced so that it is attractive to the venture capitalist. There is no clear-cut answer as to how much ownership a company will have to relinquish to make a financing attractive. Broadly speaking, the greater the potential return perceived by the venture capitalist, the less ownership he will demand. In other words, if a company has a patented product which a venture capitalist thinks is revolutionary and highly marketable, he will undoubtedly settle for less ownership than he would in the case of 4 company with a relatively less attractive product. Thus, his ultimate position will be a business judgment based on his potential return.
Before you enter negotiations with the venture capitalist, you should determine what your company is worth and how much of your company you want to sell. The following procedure can be used to get a rough idea of how much ownership you will have to give up to make the financing attractive.
- Estimate the risk associated with the venture financing. If the investment is very risky, the venture capitalist may be looking for a return as high as 15 times his investment over five years. Conversely, if a relatively low degree of risk is involved, the venture capitalist may be satisfied with doubling or tripling his investment over five years.
- Make a reasonable estimate of the price/earnings ratio applicable to comparable publicly held companies. The market value of the company can then be projected by multiplying forecasted annual earnings by the estimated price/earnings ratio for comparable companies.
- Divide the estimate of the total dollar return the venture capitalist wants by the projected market value of the company. This yields the percentage ownership the venture capitalist will need, as oil the future date, to realize his desired return. It is important to note that any equity financing required during the interim period must be considered in making these calculations.
Case Study
Suppose XYZ Company, Inc., a start-up, needs $500,000. The company’s product appears to have excellent potential. However, because the product is new and unproven, an investment in the company would be extremely risky. Accordingly, it is reasonable to estimate that a venture capitalist would want a potential return of at least ten times his total investment in five years. Management estimates that the company should be able to "go public" at 20 times earnings in five years. Projected after-tax earnings for the fifth year is $1,250,000. Additional long-term financing of $500,000 will be needed at the beginning of the third year.
Scenario I
In the calculations below it is assumed that the venture capitalist who provides the initial financing ($500,000) also provides the subsequent financing ($500,000), and that he wants a return equal to ten times both. However, it should be noted that if the company made satisfactory progress during the first two years, it would be reasonable to assume that the venture capitalist would be satisfied with a lower return on the subsequent financing since it would involve less risk.
Estimate of Total Dollar Return Required Total Investment $ 1,000,000 Estimate of Return Required X 10
$10,000,000
V. Projected Market Value in Fifth Year VI. VII. Projected Earnings $1,250,000 VIII. Estimate of P/E Ratio x 20
$25,000,000
Percentage Ownership Needed in Fifth Year Estimate of Total Dollar Return quired $10,000,000 Projected Market Value of Company in Fifth Year 25,000,000
40% Scenario II
In this set of calculations it is assumed that a second investor provides the subsequent financing ($500,000). The calculations show that the venture capitalist who provides the initial financing ($500,000) would need 20% ownership as of the fifth Year to realize the return he wants. However, since the ownership to be given up for the subsequent financing will reduce his ownership position, he will want more than 20% ownership initially. For example, if it is assumed that 15% ownership will have to be given up for the subsequent financing, the venture capitalist who provides the initial financing would need 23% ownership initially to end up with 20% ownership in the fifth year.
Assume the same facts as Case I, except a second investor provides the subsequent financing for 15% ownership.
Estimate of Total Dollar Return Required Total Investment $ 500,000 Estimate of Return Required X 10
$5,000,000
Projected Market Value in Fifth Year Projected Earnings $1,250,000 Estimate of P/E Ratio x 20
$25,000,000
Percentage Ownership Needed in Fifth Year Estimate of Total Dollar Return required $5,000,000 Projected Market Value of Company in Fifth Year 25,000,000
20%
Thus, it appears that the investment ($500,000) may be attractive to an interested venture capitalist if the principals of XYZ Company, Inc. are willing to give up approximately 23% ownership.
Conclusion
It must be emphasized that the above procedure is highly subjective. And, you should remember that what really matters is how the venture capitalist views the relative attractiveness of a company. Typically, venture capitalists are satisfied with a minority interest. Although a venture capitalist may demand a majority interest, generally they are not interested in operating control. Some of them like to tie the amount of ownership they ultimately get to the performance of the company. For example, a venture capitalist who wants a majority interest initially may give the principals the opportunity to earn part of it back. Such an arrangement can be used to compromise on pricing when there is a significant disagreement between the principals and the venture capitalist.
To entrepreneurs unfamiliar with venture capital, it may appear that the venture capitalist is seeking an extraordinary high return on his investment. However, it is important to understand that, even under the best of circumstances, only a minority of the companies in which the venture capitalists invests will be successful. He is well aware of this, and must make a sufficient return of his successful investments to come out with an acceptable return overall.
Private banking is derived from Swiss, specialized in the fortune management business of providing special financial services, promoting the cooperative value between commercial banks and customers and prolonging customer relationship value chains. The concept of private banking came out in China after 2005. In September, 2005, Swiss Friends Bank Co Ltd started its business in Shanghai and brought the concept of private banking to Chinese market. Since 2007, the profits of private banking were ten fold of other retail business. Therefore, more and more domestic banks began to involve in the private banking.
In recent years, many banks announced to set up their private banking centers. It is without doubt for these banks to occupy some rich men gathering places as their focuses, such as Beijing, Shanghai and Shenzhen etc. The customers of private banks from China Merchants Bank Co., Ltd grew by 35% than that in 2008. Compared with less than 0.02% private banking customers in the whole customers of China Merchants Bank Co., Ltd, the total assets of private banks accounted for more than 10%, the highest level in all commercial banks. The private banking of China CITIC Bank also rose fast in 2008. Now its customers of private banking are two thousand. The condition of private bank in China Merchants Bank Co., Ltd is 10 million Yuan (1.46 million USD), but China CITIC Bank is 8 million Yuan (1.16 million USD).
In 2007, Chinese private banking rose. Chinese funded banks mainly concluded Bank of China, China Merchants Bank Co., Ltd, Industrial and Commercial Bank of China Ltd, China CITIC Bank, Bank of Communications, Construction Bank of China and China Minsheng Bank etc. The foreign funded banks concluded Hong Kong and Shanghai Banking Corporation Limited
, Citi Bank, Bank of East Asia, Deutsche Bank Group, Swiss Friends Bank Co Ltd, BNP Paribas, Standard Chartered Bank and Edmond de Rothschild.
Chinese private banks are mainly located in the economically developed areas, such as Shanghai, Beijing and Shenzhen etc. foreign funded banks are in Shanghai and Beijing. Some Chinese funded banks, because of its local advantages, also set their private banks in big cities with huge customer potential, their business spreading a wide area.
By the end of 2008, Chinese millenaries were about 0.5 to 1 million. The reason for uncertain numbers is that Chinese millionaires were accustomed to investment in real estate, such as living houses and shops etc. they expected to benefit from revaluation in real estate, so the numbers fluctuated sharply. The definition of millionaire is that individual floating assets are more than one million USD Except housing.
The global financial crisis, stemmed from the sharp decline of American real estate market, seriously stroke the large European and American banks. Although most private banks escaped from direct hit, they were influenced by the financial fluctuation. The crisis made some investors to transfer their investment to more conservative products, leading to the profit reduction in some private banks.
Taking consideration of the infancy of local financial market, many riches are preferential to manage their fortunes offshore in previous Chinese emerging market. The foreign funded banks occupy the most part of market share. The occurrence of financial crisis makes Asia especially China become the minimal negative influential country and the safest market. In the future, Chinese rich families are even preferential to invest at home, which brings huge development opportunities for Chinese private banking.
In the developed countries, the success of private banking is inseparable with politics, society, economy and law, such as steady currency value, natural advantages of tax rate, long financial history, prosperity in financial market, steady bank systems, sound legal and confidential systems and massive rich experienced financial talents.
By contrast, Chinese private banking market, with huge market potential, needs perfection of supporting infrastructure in its infancy. Chinese private banking market mainly faces the following problems: strictly supervision of finance and the adoption of separate supervises models is unfavorable to the promotion of various businesses; Underdevelopment of financial market (regardless of business tools or means); lack of strong investment bank supports; shortage of necessary systems and organizational structures of private banks.
From the part of Chinese private banking, international financial crisis is not only strikes but also opportunities, on the one hand, the slowdown risk existence in the private banking market, on the other hand, the development opportunities of organizations and talents transferring to Chinese market.
As a whole, Chinese private banking market is still in its infancy and hugely demanded for customers. In two to three years, Chinese private banking market will rise explosively.
The author of this report made a profound investigation and investigation of Chinese private banking, and then wrote this report. Readers can obtain more following information:
- Present situations of Chinese private banking
- Analysis on the market demands of Chinese private banking
- Analysis on the foreign funded banks with private banking in China
- Analysis on the local banks with private banking in China
- Analysis on the factors affecting the development of Chinese private banking
- Analysis on the development trends of Chinese private banking
- Analysis on the influences of international financial crisis on Chinese private banking
To get more details, please visit Research Report on Chinese Private Banking Market, 2009
Branch Banking – A Cat with Nine Lives
Dr. Nicos Rossides: CEO MASMI Research Group
Bud Taylor: Director Consulting MASMI Research Group
Introduction
Branch banking is dead! Technology is killing the retail branch! The Internet rules! Younger tech savvy customers are taking over as the brick & mortar customers die off!
Maybe. But to-date we have not quite lopped off the head of the face-to-face banking Hydra. Things may be different in twenty years, but they’re not dramatically different today.
But we like being in denial. Every time we are confronted with evidence of the survival of branch banking we find ways to dismiss it. For example, research in the UK published by Deloitte & Touche in September 2002 found that 80% of bank customers use the branch, and 52% regarded it as the preferred channel. Similarly a Gallup Poll conducted in the US in April 2003 found that 83% of Americans had visited their bank at least once a month on average over the previous year. It is easy to disregard these studies – we can dismiss them as dated.
When we update the studies we get some indications as to the impending demise of branches. For example, an American Bankers Association survey in the summer of 2007 found that 36% of U.S. consumers use branches as their primary banking method. Is that the death knell? Not really. That 36% is still the largest group for any one channel. Online banking came in second at 23%, followed by ATMs at 21%, mail at 8% and telephone banking at 5%. Damn, thought we had them!
Ok, Ok. Branch banking still exists, but is it just for the old and infirm? You know, those people who have a difficult time getting around and would find it most convenient to do their banking from their home. Yes, that group. Well, maybe they are the ones holding onto the legacy of the past, but does that mean that young people don’t want to do their transactions in a public location? The evidence only confuses matters further. The 2007 American Banker’s Association survey found that those who go to a bank branch are generally older folks; but still, a substantial 25% of those under the age of 34 side with the older crowd and prefer to do their banking in person. When will these youngsters learn?
Even if we take a somewhat narrow look at branch banking in New York City we come up with the same trend. In September 2007 the New York Times reported that branch visits decreased by 11.5% between 1995 and 2000; yet they increased by 28% between 2000 and 2006. What can we conclude from this? Many things, but the imminent demise of branch banking isn’t one.
If we extend our scope of vision beyond banking we find that younger generations like physical retailing even in their technology world where you’d think they would always gravitate to online purchasing for the latest electronic gadgets. That’s not the case. Apple’s retail stores are a magnet for younger consumers, and this is turning out to be good business. These stores now contribute close to $1.25 bn. to the company’s annual revenues of $6.2 billion and rising – with a profit margin exceeding 20%. That’s huge by retailing standards. Of course, we need to be careful here. Is it really possible for transactional banking to rival Apple’s retail experience? It may not be possible, but it is a good target.
Why Don’t Customers Comply with the Efficiency of Technology?
So, as much as we try, we can’t make the case that retail branch banking is dead in the US, in Europe, or in Emerging Markets. It may be dwindling, decreasing, or diminishing, but it’s not dying. That may be good news for customers, but it’s bad news for bank executives. Branches are the most expensive way of conducting transactions. Computers were invented to process millions of transactions at centimes per transaction. Do this from your house, or car phone, please! You don’t need to go to a building that houses friendly people. Banks have to invest capital in information systems and technology to do volume processing, but they’d prefer not to continue the capital drain into structures and operating expenses for people.
Why don’t bank customers just “stop” using branches? Why don’t they follow good business principles and complete their transactions efficiently, by machines? Well, MASMI research demonstrates the hypotheses that trust (a somewhat elusive yet critical notion) is an important driver of choice; and trust tends to be delivered better by people than by machines.
“Banking”, read that as “my money”, is so important to customers that they want to entrust a personal transfer of their wealth to a human being – on the assumption that a person understands the value of the transaction, whereas a machine only sees it as a transaction. This is an interesting hypothesis and a body of MASMI research corroborates it. We see that customers want more than a transaction; they want to personalise their relationship with the bank.
This desire for a relationship may be stronger in banking than in many other business sectors because banks have high switching barriers. Customers are fundamentally averse to artificial constraints as a way of doing business – they want choices. When customers don’t have choices, they want to be compensated. When it comes to banking, the compensation is the personalisation of the transaction. Customers tend to be saying, “…I may not be able to easily put my money somewhere else, but I can make my bank provide personal accountability when I want it! I want to be sure someone is handling my money – not just a machine. I want to see human beings, so I can relate to them, and I don’t want to travel across the city to a strange neighbourhood to find them. I want them down the block, at the corner.”
Banking should see this as a huge opportunity. Relationships are the essence of customer loyalty and they have fallen into the banks’ lap. Banks that continue to build their business on faceless transactions will lose in an increasingly competitive world. The push for faster, better, cheaper is a siren call. In commoditised banking only one competitor is allowed to dominate at any one time – until someone else shaves a point off a transaction. Customers are giving us the answer to these ever-decreasing concentric-circles of cost reduction. They want a relationship. The question is whether we’re willing to listen and can provide this cost effectively. The bank that listens will win. It will keep its customers who will purchase more and refer the bank to others. For the foreseeable future, banks will need to continue to invest, albeit wisely, in their branch network. The fact that branch banking is expensive is irrelevant – it has to be done.
Since you have to make the investment, doesn’t it make sense to maximise the return in a branch development strategy? Of course it does! So what do we do? We have to meet the customer expectations for two things: excellence in operational mechanics (the rational dimension), and creating engagement in relationship dynamics (the emotional dimension).
Customers want more than a “painless” transaction
Our banking executives are fine with the operational mechanics part. They understand this, they can control it, it’s right brained. Banks have a good measurement handle on their missions from an internal, transactional point of view. They have numbers and they know how to manage by the numbers – even from a customer perspective. They immediately go to defining and implementing best in class metrics, like:
o Efficiency to measure the relationship between inputs and outputs. That is, what does it cost to complete a transaction? How many tellers does it take to serve 100 customers? How many square meters of floor space is required per 100 customers? How much computer time does it take to process a transaction?
o Level of service that brings time into the equation, like turnaround. Time needed to complete a transaction? Time needed to resolve an issue?
o Quality of service that brings accuracy to the table. Number of error free transactions? Number of complaints resolved at the first level?
These are the essentials. We know how to measure transactions, identify service gaps, and take corrective action. But these essentials are only an ante. This is taking “pain” out of processing; but this isn’t playing the whole game. This isn’t where we should stop. Yet, often managers do just that. They don’t want to go further. Stopping here is comfortable. But stopping here doesn’t bring “gain”, and that’s how banks can differentiate themselves.
Differentiation is all about enhancing the dynamic relationship that customers have with their bank – and the focal point of this relationship is the branch. Sure, we can ‘humanize’ the IVR system by recognising the caller by name; and we can evoke an emotional connection to a website by embedding your avatar into the transaction. However, how effective can a machine or technology be in this regard? At what point does clever technology fail to overcome customer cynicism? For the present, at least, our research says that most people prefer to interact with human beings, not machines. What is this customer group looking for?
Customer Centred Business Strategy
At MASMI we know that once customers have their rational needs satisfied then they’re willing to enter into a relationship. Something that is emotional and personal. There is a huge body of research and literature to support this belief. Often the proponents have widely different perspectives on how our rational and emotional beings interact. For example, Clotaire Rapaille presents the thesis of our “reptilian hot buttons” and argues that our reptilian emotional brain always wins. Antonio Damasio comes from the point of view that emotion and reason are not separate, but are quite dependent on each other – neither leads nor follows. Bank branches may not resolve these positions, but they need to address the point of agreement, that emotions matter! There is a relationship among our memories, our emotions, and our behaviours.
The need for an emotional connection while banking will differ by customer. It’s not critical for everyone; it’s likely strongest for the people who keep going to branches. So, if we’re going to spend money on a branch strategy, how do we make the best of it? How do we tap into the emotional connection that customers seem to want?
First, we need to realign the banking business model around the customer. This might seem to be stating the obvious, but, in fact, traditional service models tend to be focused on optimising back office efficiencies with insufficient attention paid to the front office side of the equation.
MASMI research shows that high performing businesses put the customer at the centre of their strategy. They articulate their strategic intent based on an analysis of customer needs and then build their key operational capabilities in alignment with that. They recognise that the heart of their business is to provide pain free transactions that are infused with connectors that evoke emotional responses from customers. The strongest way to do this in a bank is face-to-face at a branch. A branch is more than a building – it is a stage where we can create a performance, an experience for our customers, where we can connect with real people. But we need to know what buttons to push. Research can give us some answers.
Reliable customer feedback is difficult to obtain as even complaints by customers do not represent a particularly reliable benchmark – for many reasons, not least of which is the fact that customer tend not to complain, even after bad experiences. To get around this barrier we use a number of research methods to align the internally focused “customer service standards” with the externally focused “promise to customers”. These methods include strategic customer loyalty research programmes aimed at understanding drivers of customer behaviour and corrective actions; performance tracking of transactions; and mystery shopping to monitor whether the promise to customers is being delivered.
All of these methods are aimed at uncovering the unarticulated needs held by customers that drive them to a face-to-face relationship at a branch. What we have learned is that loyal relationships with customers come down to an activation of the person’s senses about their deeply held conviction of what a bank must be. We all know the five senses that activate emotions. They are seeing, hearing, feeling, touching, and smelling. These have to be matched with the customer’s personification of their bank. That is, how does the branch banking experience reinforce the customer’s expectation of what the bank should be?
The branch can’t provide this experience until we know what customers want – and this may vary among branches. For example, some customers might want their branch to appear “safe and secure”, while at another branch people expect to be treated “casually and informally”; somewhere else the branch must be the “friendly meeting place”, a social experience; while the cross-town customers want to have a sense of “efficiency and frugality”.
The right customer experience has a business purpose – it contributes to profitability through incremental sales. Building relationships will require an advisory and service orientated profile within our physically redesigned branches. Better design plus skilled employees will certainly be required to personify the branch to enhance the emphasis on the emotive triggers – moving beyond a transaction towards building relationships.
Winning branches will find ways to work this personification and enhanced value addition into their operations. As neuroscientists tell us, we are emotional beings before we are rational ones. If we were totally rational, no one would smoke and everyone would eat organic food. Customers may find it hard to articulate their needs, but they come to their branch wanting to be comforted by the feeling that people at their bank is “one of us”, “…I feel good about my bank, they understand me”.
The emotional response to the customer experience starts in the parking lot. Not finding a space creates anger; if the path to the door is clean, most people feel a sense of comfort; when the door opens easily they feel confident that things are working well at their bank. What happens when they enter? Is there a safe in-sight to promote the feeling of security? Is there music to make them feel welcomed? What’s on the television while waiting for service – financial information that helps them feel up-to-date? How is the transaction completed? How are the staff dressed? Do they convey a sense of professionalism? Is the deposit slip on re-cycled paper to make them feel environmentally responsible or is it embossed with the bank logo to make them feel elegant? The beauty of branches is that they can be configured to meet local needs – one size does not fit all. It’s all about “staging” at the branch level. By conducting research into the customer experience we can pinpoint how to activate the emotions and keep customers coming back.
The bank branch is the strongest touchpoint for the customer assuring them that their bank “gets it”. The branch engages most deeply with the emotions of the customer. It is the branch that delivers the strongest relationship and activates emotions. A bank’s Internet site can be easy to navigate, and an ATM transaction can be efficient – but efficiency only touches one dimension of a complex web of requirements from a banking partner. Slick automation doesn’t tell us a lot about professionalism, security, and concern for me when things go wrong. I want to go to my branch, and I do!
Bank Branches and the Credit Crunch
Of course, headlines across the world in 2008 have been dominated by the impact of the credit crunch and the subsequent banking crises, with bank failures, bankruptcies, government bail-outs and eventual part nationalisation in some countries. Billions of dollars have been pumped into economies world-wide to prevent systemic banking failure, and try and encourage greater liquidity into the money markets.
Yet how much this affects the individual bank customer is difficult to judge at this stage. Clearly when there is fear of an individual bank collapse, scenes of depositors trying to withdraw their money become prominent in the media, such as appeared in the UK with the collapse of Northern Rock in 2007. However, whether this fear has permeated customers at a widespread general level is too difficult to judge at this stage. There is little evidence to date that customers are concerned with who owns their bank – whether it is one institution or another or the government – as long as their savings and deposits are not at risk.
And it may be in such difficult times that the branch will come to play an increasingly important role in terms of providing a visible sign of a bank’s permanence and viability. MASMI’s research has shown that, in Emerging Markets, where the banking sector is still relatively immature and local bank failures are not uncommon, for many customers a visit to the branch remains important – not only because it helps them to better understand details about a bank’s products and services, but as a means of providing reassurance as to a bank’s stability. In a world where even banks in developed markets are perceived as weak, the branch may acquire greater symbolic status. It can give customers what they really need: a sense of trust, and a degree of confidence that their bank is here to stay and has a relationship with them. It’s not a glass tower full of over compensated executives. It’s a part of their life, staffed by people just like them – good people who are trying to build a good life, and who strive to serve them with honesty and care. Ultimately, the litmus test is whether customers feel that through its branches the bank is an indispensable part of their own lives.
Conclusion
The branch is critical in the life of a bank. Significant numbers of customers still visit the branch weekly. But branches need to be more than simply efficient at the transactional level. They need to exist at the personal level where relationships are developed; and it is these relationships that will turn the branch from a primarily transaction center into a home for loyal customers. This is good news for banks and the crisis they are currently facing. Trusted banks and their branches are an important source of client engagement and revenue generation.
The future is therefore bright for bank branches. They will be a revived source of business for banks. Customer loyalty, through staged customer experiences, will increasingly turn banking towards cross-selling and value-added advisory services. By connecting rational and emotional elements, branches will reinstall trust in financial institutions and regenerate economic growth.
Customers have shown that they want to work with their bank branches; now banks have to find ways to make this a worthwhile and profitable experience for both parties.
Sources:
“Bank branch transformation: The new multi-channel reality”, CEO Eontec Limited and Mark Greene, General Manager, Global Banking Industry, IBM Corporation, The Bankwatch, March 23rd, 2005
“Bring Back the Branch”, Deloitte &Touche, September 2002
“Banks Race to add Branches”, USA Today, 19th June, 2003
“Inside Apple Stores, a Certain Aura Enchants the Faithful”, New York Times, 27th December, 2007
“How to Develop Stronger Retail Partnership to Accelerate Small Business Sales”, Martha Crawford, NBW Consulting Group, American Banker 8th Annual Small Business Banking Conference, October 2003
“Customers still like to use bank branches”, Dennis Jacobe, Northwestern Financial Review, August 1 – August 14, 2003
“The Branch Bank is Dead, Long Live the Branch Bank”, David Webber, The Banker, November 2000
“Long Live the Bank Branch”, Greg McBride, Bankrate.com, May 17, 2004
“Retail Banks Must Redefine Role of Teller to Meet Customer Demand and Achieve Overall Cost Savings”, Tom Brogan, TowerGroup Research, July 2008
Damasio, Antonio. Descartes’ Error. Putman Publishing, 1994.
Lehrer, Jonah. Proust Was A Neuroscientist. New York: Houghton Mifflin Company, 2007.
Rapaille, Coltaire. The Culture Code. New York: Broadway Books, 2007.
“Has the Bank-Branch Frenzy Peaked?”, Sewell Chan, New York Times, September 10, 2007.
About the Authors
Dr. Nicos Rossides: CEO MASMI Research Group
Dr Rossides is Group CEO of MASMI, a leading independent research agency operating in Central Eastern Europe and the Middle East. Prior to joining MASMI he was CEO for Synovate’s CEEME region, the global head of solutions as well as CEO for its Loyalty Practice.
Nicos has more than 20 years of market research and consulting experience, much of which involved developing a research infrastructure in Central and Eastern Europe.
Prior to becoming a market researcher, Nicos was Senior Research Fellow at Kyoto University, where he received a Doctor of Engineering degree. A Fulbright and Mombusho scholar, he also received senior management training at MIT’s Sloan School.
Nicos has published a large number of articles in professional journals, contributed papers to numerous conferences and lectured at several universities and symposia.
Bud Taylor: Director Consulting MASMI Research Group
Mr. Taylor is a senior associate with MASMI where he advises clients on how to put their research data to work. Prior to MASMI he was an SVP and Global Director of Consulting for Synovate Loyalty. Before joining Synovate Bud was a Partner with Deloitte where he led its change practice in the US southwest.
Bud is a Canadian and naturalized US citizen. For over 30 years he has consulted to marquee clients in all major business sectors and in all parts of the world. Bud’s clients include: Microsoft Europe, the National Commercial Bank (Capital) of Saudi Arabia, the Whirlpool Corporation, Sony Electronics, and the Overseas Chinese Banking Corporation.
Bud contributes articles to professional journals and has published a business book: Customer Driven Change that demonstrates how to unite customers, managers, and employees in the process of organizational transformation.
For people in need of debt relief, debt consolidation is often the option considered. It is simply combining all your debts into a single loan so that instead of paying several creditors, you’ll only be paying a single creditor. Is debt consolidation a good or a bad idea? To answer this question, let’s take a look at the advantages and disadvantages of debt consolidation,
Advantages of Debt Consolidation
- Paying your debts is a lot more convenient. Because you’re only paying one creditor, you’ll have an easier time tracking your payment schedule and submitting your payments.
- Budget your monthly expenses more efficiently. Since you’ll only be dividing your monthly budget between your expenses and your debts, it will be a lot easier to manage.
- Lower your interest rates. Since you’ll be paying just one creditor, the interest rates of your debts would also be significantly lower.
Disadvantages of Debt Consolidation
- There is the risk to incur new debts again. People who consolidate debts tend to use their credit cards again once their outstanding balances has been paid off. Paying a single debt each month makes it seem like you don’t owe much at all and you still can afford to incur new debts.
- A debt consolidation loan is technically a second mortgage. Since a this type of loan is secured on your home property, it is just like a second mortgage. It can take you a long time to be entirely debt free.
- Lower interest doesn’t necessarily mean less payment. Yes, a debt consolidation loan will lower your interest rate but since it is a long-term debt, if you calculate your repayments, you could be spending more in the long run.
- You run the risk of losing your home. This is the most serious factor about getting a debt consolidation loan. If you still fail to keep up with your debts, you end up losing your property. Obviously, once you get into a debt consolidation, you need to be aware of this risk and do all you can to make sure you will never delay or miss your monthly payment.
Would You Go for Debt Consolidation? As you can see, there’s more to debt consolidation than just rolling all your debts into just one payment. If there are other ways to get out of debt without getting a debt consolidation loan, why not consider it? If you really feel helpless about your situation, seek credit counseling from a trusted non-profit credit counseling group especially if you have trouble controlling your spending.
Bear in mind that debt consolidation will only work if you can perfectly keep up with your monthly payments. If you’re still unable to make your payments after consolidating your debts, then you’ll be facing a more serious dilemma and that is losing your home.
Don’t rush into debt consolidation without considering the responsibilities and consequences that comes with it. Remember, debt consolidation comes with adjusting your lifestyle and finding ways on how to handle your finances more efficiently.
It can be absolutely hard to do away with bad credit even when you have a debt consolidation plan, most especially when you still use your credit cards indiscriminately. To succeed with a debt consolidation plan, you are going to avoid using your credit card too much. A lot of individuals fall into the false sense of security that a debt consolidation loan give and may end up using more cash on their credit cards.
It is imperative that you consult a debt consolidator expert on the best way to consolidate your debts if you are planning so. A debt negotiator expert is one who is totally knowledgeable at bargaining and negotiating debt terms. A good debt negotiator will make sure that you walk away with the best debt consolidator deal.
Debt consolidation loans help to ease worry and anxiousness from your mind because it enables you pay off your outstanding debts. Thanks to debt consolidation loans, you can simply do a way with all those credit card debts that are scattered all around the whole place. Consolidating your debts help to bring clarity and purpose to your debt payment plans– more organized approach of debt payment.
It can be very embarrassing to have creditors knocking on your door because of your debts, right? Lots of debtors have been dragged to court over credit card debts. With the right debt management loan, you can easily avoid the embarrassment of house calls and court orders related to outstanding debts.
Christian debt consolidation companies help to manage the debts of Christians individuals. Christian debt consolidation companies help to negotiate loans for their clients and make sure that their debts are managed. If you are a Christian with a desire to manage your outstanding debts, you can consult a Christian debt consolidation company.
Apart from debt consolidation loans, there are other alternatives to get rid of debt. Some individuals get rid of debts by taking up two jobs to increase their source of income. But many people say that debt consolidation is the fastest avenue to pay off credit card debt.
An ideal candidate for a debt consolidation loan is an individual who has enormous credit card debts. Credit card debts can keep you away from perpetual misery and penury too. With a good debt consolidation plan, you can live your life with some measure of financial stability.
Remember, do not to trust all the low interest offers that most debt consolidation companies give as they may be bogus half the time. Stay away from debt consolidation programs that try to get you to join one affiliate program or the other. Try to research other debt consolidation alternatives before you make any choice.
You never know when and who would need help from a credit card debt consolidation program. Sometimes unexpected circumstances can lead to financial difficulties which in turn would lead you to consider debt consolidation. Some of these circumstances are loss of job, loss in business, death of an earning member and so on. If you are finding it hard to pay off your credit card loans, then it is wise to consider debt consolidation. This is much better than bankruptcy. This article will help you with steps in finding the right credit card debt consolidation program, make you aware of the advantages and disadvantages of debt consolidation so you can decide whether credit card debt consolidation is the best option for you or not.
Basics of Debt Consolidation
Debt Consolidation is a big loan that will pay off your credit card loans. There are several ways these debt consolidation programs work. The most popular way is to take one lump sum amount of money from you (the borrower) and distribute it to your credit card companies (the lenders). All your loans will be consolidated into one payment usually withdrawn directly from your bank on a fixed date every month. These programs make the card holders life easier.
As a general rule, if you have many credit cards from different companies with high interest rates, then debt consolidation can help you manage your debt with only one bill and much lower APRs. These debt consolidation companies negotiate a lower interest rate for you and this can save a lot of money in the long run. This will work out in your favor if you have credit cards with APRs of around 30% because the debt consolidation programs can reduce these interest rates to between 12% – 18%. These programs require a monthly administration fees, which is usually around and this will come off your savings. Remember if the admin fee does not come off your savings, then it is not a good idea to sign up for a debt consolidation program.
So it looks like everything about the credit card debt consolidation is positive. Well, it is not always the case. There are a few advantages and also disadvantages of debt consolidation programs. You have to find a balance between them. The fact is that credit card debt consolidation companies do help you in paying off your debt. Here are some advantages and disadvantages of these programs.
Advantages
1. Decreased payment amounts: The monthly payments will be less than what you were paying before debt consolidation because you are paying off the loan over a longer duration.
2. Simpler to manage: After you signup in the debt consolidation program, you will have a relief from reading your credit card statements, deciding how much to pay for each credit card and then making the payments one by one. Usually, the company will withdraw the money directly from the bank and you will not have to be concerned about late payments.
3. Decreased interest rates: This is one of the major advantages for many credit card owners. Some of the debt consolidation companies bring down the interest rates much lower than the current ones. This can save lots of money for you.
4. Debt Management tips: Many of the good debt consolidation give lots of free tips on managing your debt. They draw out a plan on debt management. These tips are invaluable. They even mail out booklets on debt management.
Disadvantages
1. Lower FICO scores: Many experts debate that debt consolidation does not have any effect on credit (FICO) scores the fact is that debt consolidation has a negative effect on the credit scores. Enrolling into debt consolidation will always be reflected in your credit history. Most credit repair companies mention that it is difficult to increase your credit score if you are currently working with a debt consolidation program. Your credit scores can be raised after you have paid off the loans and are not currently in any debt consolidation program. Even if you can remove one credit card from the debt consolidation program that can help you increase your credit scores.
2. Higher Payment: Since your payments are made over a longer duration of time i.e. in more number of the years, then you will end up paying more in the long run. One way to prevent this is – if your financial situation has improved, then you can pay off larger sum of money. Most of times there will be no penalty for paying off the debt sooner than the agreed number of months. Before enrolling in a credit card debt consolidation program, you can confirm if there is a penalty or not for paying off the debt sooner than the agreed number of months.
3. Credit cards inactivation: If a credit card payment is enrolled in a debt consolidation program, then that particular card account will be inactivated. i.e., that credit card can no longer be used.
4. Negative Impact on Future Loans: Once you have enrolled in a credit card debt consolidation program, this will remain in your credit history. So, all future loan requests (new credit card applications, home loan, car (automobile) loans etc.) will involve references to your debt consolidation. i.e., the lender will have knowledge about your participation in debt consolidation program. Some people are very uncomfortable about this but it is up to you decide. Your credit history is a private record and will be provided by credit score companies only on a need-to-know basis. If you apply for home loan, then the chances of getting rejected is higher and if you get accepted, then mortgage broker will ask for explanation. Again all these conversations are kept confidential.
So, the question is – when should you consider a credit card debt consolidation? If you are paying high interest rates around 30% on a credit card, you have many credit cards, you are unable to make payments or your are barely able to make just the minimum monthly payments, you are finding it difficult to manage all the payments etc., you must consider signing up for a credit card debt consolidation program. After reading through the advantages and disadvantages mentioned earlier, make decision about signing up or not signing up for credit card debt consolidation program.
How to find a good debt consolidation program / company?
Signing up with the right debt consolidation program is critical for saving money and successfully consolidating your debt. There are a good number of scams in the debt consolidation business so it is in your best interest to proceed cautiously to prevent being victim of a scam. Here are some very good sources of finding the right debt consolidation program.
1. References from friends and relatives: It is best to ask your trusted friends if they have any recommendations for reliable credit card debt consolidation program i.e., if they have enrolled in one of these or know of anyone who enrolled in one and is satisfied. As mentioned before, there are many scams and so with this option, you can feel safe. This should be your first option.
2. Television advertisements: Most of big and established companies run advertisements on TV. These are companies that have a lot of experience and have been successful with debt consolidation. But it is a wise thing to research the company. Look for their website and check for their standing in Better Business Bureau (BBB) and must have been in existence for a few years. Also, search http://ripoffreport.com website for this company – this website where victims of scams post their experiences.
3. Mails: When you are unable to payoff debt on time, you will receive mails from some companies that will offer help with debt consolidation. These companies have permission to access some of your basic information. The good thing here is that your fit their profile of enrollees and that is why you received a mail with their credit card debt consolidation services. As mentioned earlier, research these companies using the same methods described above.
4. Telemarketing phone calls: Typically, telemarketing phone calls that you get is because your debt situation is such that it fits the requirement of their enrollees. If you receive a phone call, remember to never enroll in the first phone call. Note down all the details of this company such as the websites, contact person and phone number to call. Research the company extensively as mentioned above.
5. Online Research: Research the internet for good credit card debt consolidation companies both non profit and profit companies. Once you create a list of possible companies, research the companies extensively. Talk to these companies until you are comfortable about enrolling with them.
For a few months or years, if you can handle the disadvantages of credit card debt consolidation programs, then enroll in a program. Debt consolidation can get you out of your current debt problems and save you a lot of money by lowering your interest rates but if you do not spend judiciously, then you will be back into the same debt problems and this cycle will never end. So the long term solution to debt problems is to change your spending habits and live slightly below your means. Remember you need to manage the money / debt and NOT let the money / debt manage you.
People avail loans with high interest rate without giving even a second thought as to how they will repay them and soon they realize that they have committed a mistake. But no need to press the panic button, you can get rid of all your debts by applying for a debt consolidation advice. Debt consolidation advice will help you merge all your debts into one debt with low interest rate.
ABOUT DEBT CONSOLIDATION ADVICE
Debt consolidation advice helps you tackle your multiple debts economically. With debt consolidation advice you can merge all your existing debts into one with low interest rate. This way you’ll have to pay only one monthly installment instead of many. The interest rate will be charged on a single debt instead of many. Also you don’t have to listen to the nagging calls from your creditors; instead you’ll be answerable to only your lender. Your debt consolidation adviser will help you get a debt consolidation loan at lower interest rate and flexible repayment duration. Debt consolidation advisor will also help you to manage your existing debts. With the help of your debt consolidation advisor you can get rid of your loans and lead a debt free life. Debt consolidation advice is also available for people suffering from bad credit status. A person can get a tag of bad credit due to reasons like arrears, defaults, CCJ, IVA, bankruptcy etc. but now they can also avail the benefits of debt consolidation advice. There are many banks financial institutions, lending firms that offer debt consolidation advice at nominal charges.
DEBT CONSOLIDATION ADVICE: ADVANTAGES
Debt consolidation advice is very important for people suffering from multiple debts. With the help of debt consolidation advisor such people can get rid of their loans and will be able to lead a debt free life. Debt consolidation advisor will help you obtain a debt consolidation loan at lower interest rate and reasonable terms and conditions. You don’t even need to search for a lender; your advisor will search the lender for you. Debt consolidation advice can be availed at nominal charges. You can use Internet to search for banks, financial institutions offering debt consolidation advice.
People with bad credit history can also avail debt consolidation advice, because debt consolidation loans are open for bad creditors also.
APPLYING FOR DEBT CONSOLIDATION ADVICE
Applying for a debt consolidation advice is very easy as there are many banks, financial institutions and lending firms that offer debt consolidation advice. You can use Internet to search for banks, lending firms that offer debt consolidation advice.
With debt consolidation advice you’ll be able to manage all your debts efficiently and economically.
The typical debt consolidation loan is a type of unsecured personal loan where the only collateral that you have to offer the lender is yourself. Debt Consolidation loan shortly means, exchange of one loan for another. Debt Consolidation loan can be taken anytime if you feel you cannot afford your monthly payment. When you have several high interests debt you can consolidate it into one lower, fixed rate loan.
Debt Consolidation loans are various sorts of credit types that you are able to use in order to consolidate your debt. There are several different types of loans out there that will allow you to consolidate your debt in different sorts of ways. These ways include second mortgage debt consolidation loans, such as a home equity line of credit home loan, or cash out refinance debt consolidation loan, or even a credit card balance transfer is available to help consolidate debt that you have built up over a period of time.
There are several different types of debts out there that can be consolidated through debt consolidation loan in different sorts of ways. Debt Consolidation loan can be of two types unsecured and secured debt consolidation loan. In unsecured debt consolidation loan they have higher interest rates as without collateral and a solid credit rating, the borrower is considered at high-risk. So consolidating this loan can give you low interest rate than you are paying rite now. Whereas in secured debt consolidation loan you can get low interest rates even with bad credit as the property is provided as collateral. These loan can be got easily as the creditor is at less risk. So its beneficial to both creditor and debtor. The added advantage would be, it will also improve your credit score as subsequent payments are made to pay off the new loan.
The type of debts which most people look to consolidate are bill debts. Nearly half of Americans are currently dealing with the devastating stress of unmanagable bills and unsure whether they’ll be able to make ends meet each month. So bills consolidation loan is solution to your bills debts problems. It would simply lower your monthly payments by applying one interest rate to the whole debt amount, which is generally lower than the collective rate as too many different payments mean different rates of interest.
There are special debt consolidation loans for student and military debts. Student debt consolidation loan may be a great way to lower your interest rate and to allow you only one monthly payment to one lender. Another is Military Debt Consolidation Loan. These military debt consolidation loan programs will allow you to make monthly payments in a timely manner and will also allow you to take advantage of having an easy budget to maintain.
Get your Low Interest Debt Consolidation Loan for Free !!!
Debt consolidation is an excellent way to reduce the amount of outstanding bills that you needed to pay or even lower the interest rates of your current bills or perhaps even to get some tax relief from it. By utilizing debt consolidation you are capable of getting relief from your current budget. It will allow you to bring down your current monthly payments on your debt and to as a result have more cash available in order to spend on other things that you may need. Not only this, but some of the options available to you will also allow you to get some tax benefits in the process.
If you end up taking out another loan you need to make sure that you stick with it, or else you could very well end up going even further into debt and hurting yourself. To succeed you need to make certain that you change the spending habits and budgeting that got you into this situation. You also need to be careful not to empty out the assets of your home equity as you may need that cash in a pinch one day.
Following these simple steps can allow you to take advantage of debt consolidation and to be a step ahead of the game. Debt consolidation is designed to help those individuals that have piled on a fair bit of debt to relieve the burden of multiple bills and to allow them to focus on budgeting and managing their lives. Debt consolidation can help anyone that is looking to get back on the path of financial freedom if they are able to have the wisdom to stick to it.