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Q: Are Certain Drawings, Raffles, and other Promotions Involving Prizes Illegal?

A: Yes. If a promotion meets the definition of a lottery under Wisconsin Statute Section 945.01 it is illegal.

While this law is not new, WBA has recently received many inquiries as to whether a bank can run various types of promotions from a marketing standpoint. WBA recommends working carefully with the bank’s own counsel to determine whether any prize based promotion is legal.

Wisconsin law prohibits illegal lotteries. The three elements of a lottery are a prize, a winner determined at least in part by chance, and consideration. This applies even where only banks employees are participating. The most debated element is that of consideration. Consideration in this context is defined as anything which is a commercial or financial advantage to the promoter. As this term is quite broad, we recommend caution when determining whether to run a promotion. 

Furthermore, Federal law prohibits any arrangement whereby three (3) or more persons advance money or credit to another in exchange for the possibility or expectation that one or more (but not all of the participants) will receive by reason of their advance more than the amounts they have advanced, the identity of the winner being determined by any means—including a random selection, a game/race/contest, or any record or tabulation of a result of one or more events in which any participant has no interest except for its bearing upon the possibility he/she may become a winner.

By, Scott Birrenkott

As the Federal Reserve executes its strategy to slowly raise rates, net-interest margins will continue to compress. That compression makes non-interest income a key element in bank success as the primary source of earnings growth. Wisconsin banks must explore practical strategies to increase non-interest income without alienating customers or experiencing regulatory compliance violations. 

Pursue Fee Income

Since fee income is a common source of non-interest income, it is a popular first choice for many institutions. The first step in this strategy is to evaluate the bank's current fee structure. "Banks should evaluate loan fees regularly, along with new product and services fees," said Kirsten Spira, banking attorney at Boardman and Clark, LLP. "Banks may determine that their fees are below the market rate, and even a slight adjustment could improve the bottom line without losing your customer base." It's also important for management to monitor the rate at which fees are actually collected. "Management might be surprised at how often fees are waived or not collected," said Spira. "In addition to loss of revenue, this collection issue can raise compliance concerns, as well, such as fair lending, et cetera."

Of course, it is difficult to introduce or raise fees without generating a negative reaction from customers. One way to do so is to use opt-ins, according to Shane Bauer, first vice president/security officer at Bankers' Bank, Madison. "Offer different flavors of a product starting with 'free' and then charge for incremental benefits the customer values," he suggested. One example would be to offer same-day ACH as a paid upgrade to the bank's already-existing payment options. "It's the bank equivalent of Economy Plus seating," Bauer explained.

Expand or Diversify Offerings

Another popular option to generate additional non-interest income is to expand or diversify the bank's current slate of product and/or service offerings. This strategy includes options ranging from fees generated from SBA loan packaging services or secondary market sales to wealth management and trust services, or even add-on products like credit insurance, GAP and debt protection. Because there are so many options, banks must take care to select line(s) of business that match up with their customers' needs and price sensitivity. "The most important thing is offering the right variety of properly priced products," Bauer advised. "Develop products based on a demonstrable need from customers, not just based on what everyone else is doing."

Banks considering this strategy face the key decision of whether to grow their product/service line organically or find an independent company to acquire. The choice between organic growth or acquisition depends on the bank's unique circumstances and how quickly they want to grow, according to Nate Zastrow, executive vice president and CFO, First Bank Financial Centre, Oconomowoc. "For example, we knew that wealth management was an area that needed fast growth, so we found a firm to acquire," he explained. "On the other hand, we grew our mortgage lending from within, over time." 

Another popular source of non-interest income is credit card lines of business. "Card programs offer banks a variety of ways to increase fee income, from interchange fees paid to an issuer for card transactions to profitable pricing in merchant services," said Bauer. Since cards—both on the issuing and merchant side—are volume businesses, Bauer advises banks to grow their card business with the right partner to strengthen relationships. 

Trust companies can also be a good source of non-interest income, but often take a long time to reach profitability when grown organically. If this is an area where the bank has identified opportunity, finding a trust company to purchase may be a better strategy than building from the ground up.

Evaluate the Risks

As with any new strategic direction, bank leadership must carefully evaluate the risks associated with their non-interest income strategy prior to implementing it. Predictably, regulatory compliance is of the highest concern for most institutions. "The current regulatory environment does not leave much room for creativity," said Spira. "Leadership should consider the regulators and make sure the strategic plan takes into account the legal restrictions on products and fees." She recommends that bank management work closely with compliance staff and the bank's attorneys to ensure any new fees, products or services are compliant. "State and federal regulators look closely at fees and add-on products, and the CFPB has a keen eye on strategies employed for the sale of add-on products," she added. 

Not having a well-defined strategy creates massive risk with any new business endeavor, and generating non-interest income is no exception. "It's important to be clear on what you want to accomplish and have a plan for getting there," said Bauer. "Banks need to identify value-added services that customers are willing to pay for and explore ways to offer them." Proper planning allows for flexibility, as well. First Bank Financial Centre has a rolling three- to five-year strategy that is evaluated and adjusted quarterly, according to Zastrow. "If something is working we go deeper and if something isn't we scratch it and move on," he said. Because no bank can be "everything to everyone," it is important for product and service offerings to be consistent with the bank's strategic plan in pricing and delivery. 

Identifying your customers' tolerance for new or higher fees, as well as their appetite for expanded products and services is another key risk. Spira pointed out that many non-bank competitors offer consumers a wide variety of digital services at no charge, and that has transformed bank customers' expectations. "The marketplace is increasingly competitive, consisting of bank and non-bank competitors, and a customer base that expects more for less… including electronic access to all banking products and services without additional fees," she said. One way to mitigate this risk is by placing customer satisfaction at the center. "Our strategy wasn't dollar-driven," Zastrow explained. "It was more focused on delivery channel and product base, building up a complete suite of products for our customers. From that, the non-interest income grew." 

Finally, verifying that the bank has the appropriate infrastructure and staff expertise to capably deliver the new product or service is also essential. "Having the expertise is key, and that's where having the right people comes in," Zastrow said. In order to successfully offer a new fee-generating product or service, the bank must either acquire the expertise needed or grow it over time, according to Bauer. "The bank needs to be clear on what it is willing to devote in time and resources and be realistic in its expectations," he said. "Success will come from the right planning and execution, including tasking the right team internally and contracting with the right vendors where needed."

Bankers' Bank and Boardman and Clark are WBA Gold Associate Members. 

By, Amber Seitz

Events

Most customers prefer single service providers for all their important needs and challenges. However when it comes to their finance needs, very few banks are effective at presenting themselves as a single service provider and struggle to coordinate wholistic solutions. Banks ideally would like to be a “one stop shop” for their customers but fail to properly engage their staff and their customers. The easiest way to grow your bank is by offering more valuable solutions to your existing customers and improving collaboration between departments.

At the conclusion of this session participants will understand how to explore their customers broader needs, offer more valuable solutions, and create highly effective market teams across the bank.

Target Audience: All employee involved in the customer service areas of the bank

Presenter
Joe Micallef, Grow Up Sales Consulting

Registration Option
Live presentation $330

Recording available through July 18, 2022

The sales activity may be high but the conversion rates are low. Many deals sit in pipeline limbo consuming our time with little idea of when they may convert. How effectively and efficiently are we engaging prospects throughout the sales process to ensure we clearly understand their needs, their genuine intention to buy and any objections they may have? What closing techniques are we implementing to ensure we maximize our chances of conversion? Are you discounting your price to convert more deals? Improve deal conversion and stop wasting time on indecisive or unprofitable prospects by developing a more effective approach to meeting, qualifying, and persuading customers.

At the conclusion of this session participants will discover how to create, present, and convert more compelling proposals that demonstrate great value and result in more profitable new business.

Target Audience: Sales leaders working with commercial, small business, and retail customers

Presenter
Joe Micallef, Grow Up Sales Consulting

Registration Option
Live presentation $330

Recording available through June 21, 2022

This session will provide you with a step-by-step approach for defining, developing, and delivering a superior customer experience. It identifies the key challenges to delivering a superior customer experience. It focuses on how to define the superior customer experience your financial institution wants to deliver and how to measure if you are consistently delivering it to your marketplace. It also describes how to use a Customer Experience Steering Committee to oversee the implementation of this strategy.

After the foundational elements are covered, the session focuses on mapping the customer experience in key delivery channels, such as the branch, face-to-face, online, etc. The session then brings together the mapping process with customer journey mapping that factors in key aspects of the overall customer experience. This process leads to the identification of key issues where improvement is needed in each dimension of the customer journey. The customer journey mapping information can also be used to develop tactics for your marketing plans.

Topics will include:

  • How to use a step-by-step process to define, develop, and deliver a highly differentiated, consistent customer experience
  • How to set up a Customer Experience Steering committee and who should be on it
  • How to define the superior customer experience that your organization wants to deliver (from the customer’s perspective)
  • Identify ways to measure whether your organization is consistently delivering the superior customer experience that is envisioned
  • Identify the infrastructure needed to support and deliver a superior customer experience
  • How to map the customer experience in different delivery channels
  • How to use a delivery channel assessment tool to identify where improvement is needed
  • How to map the overall customer journey
  • How to use the information gathered from customer journey mapping when developing a marketing plan

Target audience: Any employee of the bank who is involved in or responsible for developing, implementing, or delivering your bank’s customer experience approach.

Presenter
Lance Kessler, Lance Kessler & Associates

Registration Option
Live presentation $330

Recording available through June 17, 2022

It is universally understood that asset\liability management (ALM) is a critical function for management of your financial institution’s performance.  Understanding and measuring the financial risks assumed by your institution and the associated rewards is the essence of good financial management.

For decades, industry net interest margins have under pressure due to lower interest rates and increased competition.  With growing pressure from non-bank players offering “banking” services, using the ALM process to measure and more importantly, MANAGE, your performance and risks to your institution’s return has never been greater.

This course provides attendees with a basic understanding of the asset\liability management process.  In the session we cover the role of Asset/Liability Management (ALM) as well as the fundamental components to an effective ALM process to measure and manage key risks.

This webinar will cover

  • The role of the ALM process in financial institutions
  • Options to measure risks we care about in the ALM process
  • Measurements do we use to address ALCO risks,
  • The common faults in community FI risk assessments

Participants will

  • Understand the overall framework of Asset/Liability Management
  • Analyze the key risk areas ALCO must manage
  • Explain the role of income simulation, duration and economic value measures
  • Explain the different between static and dynamic value at risk measurements
  • Define Income at risk and value at risk
  • Understand the role of liquidity risk management
  • Outline key variables impacting the results

Target Audience
CEOs, CFOs, ALCO members, controllers, chief risk officer, chief retail, funding officers.  This session is intended for individuals that are new to the ALM process.

Presenter
Susan Sharbel, Abrigo

Registration Option
Live presentation $330

Recording available through May 2, 2022

Virtual currency continues to emerge as a hot button for BSA/OFAC risk. In this session, you will learn how virtual currency operates and its place in the fiat currency world. We will provide details on the U.S. banking system’s role in processing these transactions and upcoming regulatory changes that will allow financial institutions to serve as currency exchangers. We will also review how to differentiate investors from exchangers and provide guidance on how to identify these  transactions. We will discuss FinCEN and the U.S. Treasury advisories regarding the risk virtual currency transactions could present and explore monitoring protocols and SAR filing responsibilities relating to virtual currency transactions.

Target Audience
Anyone involved in virtual currency transactions

Presenter
Robin Guthridge, Wipfli LLP

Registration Option
Live presentation $275

Recording available through April 25, 2022