U.S. Bancorp letting customers have a hand in product design

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U.S. Bancorp relied on an important source of information as it developed a new small-business rewards credit card: its customers.

The $465 billion-asset company turned to co-creation to plan its Leverage card, inviting several dozen small-business owners to join the process. Satisfied with the outcome, U.S. Bancorp will likely increase efforts to include clients in the product planning process.

“Insights are the key to innovation,” Heather Wolfsmith, head of the Minneapolis company’s small business card division, said during an interview at American Banker’s Small Business Banking conference.

“With deeper insights we’ll have an opportunity to build more innovative products,” Wolfsmith said. “Co-creation brings all parties together. You’re not relying on the banker to be voice of the customer.”

Co-creating has been touted by banking consultants as an effective way for financial institutions to think more like startups.

For U.S. Bancorp, the process began with a pair of challenges, Wolfsmith said.

The company wanted to capture more business from higher-revenue companies and operations that spend a lot of money on items such as raw materials and inventory. At the same time, clients were appealing for a new product where they could earn more rewards for large expenditures.

“We saw an opportunity there,” she said. “We knew we wanted to launch a new product.”

During March and April, U.S. Bancorp held co-creating sessions in Southern California and Portland, Ore. Each was attended by 10 to 15 business owners, representing a diverse field of industries that included plumbing, advertising and retail.

Participants, chosen because of their supply chain needs, were recruited by U.S. Bancorp’s bankers.

“We really handed over the reins to our customers and asked them to create their own ideal credit card product — with some limits,” Wolfsmith said. “They were asked to build a product that maximized their benefit but was still profitable for us.”

U.S. Bancorp learned several things from the sessions, Wolfsmith said.

Small businesses needed a card that would be easy to use and would put them in control. Participants also wanted a program that recognized that each business has different spending needs. Finally, participants said they wanted to hear from their peers about the product, rather than a banker.

“Most banks have gotten the memo that small business is the fastest-growing customer segment … but you still see a lot of legacy products born from a consumer platform that focuses on ancillary expenses,” Wolfsmith said.

U.S. Bancorp relied on small businesses to set up the program, including the advertising agency, public relations firm and the printer.

“Every step of the way we used small businesses,” Wolfsmith said. “We really wanted to put our money where our mouth is and advocate for small businesses, in terms of giving them business.”

U.S. Bancorp has relied on co-creation for another project — the September launch of its online lending portal. The planned process included clients and bankers, along with the company’s software engineers and its credit and compliance teams.

The portal project reduced data entry points by 70% and has allowed U.S. Bancorp to approve more loan applications within a day, said Sam Castle, the company’s business banking regional manager.

Co-creating “has also helped with employee morale,” Castle said. “It tells us that the bank is really listening by bringing in the people who call us and give us feedback. … It has been really refreshing.”

U.S. Bancorp is apt to rely more on co-creation, particularly at a time when banks and nonbanks can quickly replicate a successful product or service, Wolfsmith said.

“I would expect us to continue that approach so we can continue to evolve,” she said.

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