Considering Customer Loyalty: Gerard du Toit and Maureen Burns of Bain and Co. argued the banks that best leverage customer loyalty are those accelerating the digital transformation, catering to select demographics and actively selling products to new and existing customers. In terms of building customer loyalty, Simon Zhen of suggested it was too early to charge for teller service. Meanwhile, BankThink Deputy Editor Jeanine Skowronski argued 5% cash back was an overrated selling point since these credit card rewards programs are often too broad, too niche or too complicated for consumers. Moreover, fluctuations and requirements associated with 5% rotating category cards "can frustrate consumers," she writes. "They get the sense that their issuer is trying to take advantage of them, and they don't like having to spend hours to maximize rewards." One reader agreed. "The consumer sees the 5% headline and this creates an expectation, and this expectation is then not fulfilled," he commented. "The issue is indeed one of being able to set and maintain a sustainable rebate." But another reader argued some of these cards are worthwhile. "While I agree that the rotating 5% categories are probably overrated, the cards with fixed 5% categories are certainly not," he wrote. "Being able to reliably get 5% rewards on gas, groceries, restaurants, bookstores (including Amazon), my cell phone bill, internet service, etc. is a pretty sweet deal that is easily quantified."

The Changing Risk Environment: Resident Risk Doctor Cliff Rossi warned banks to beware of risks colliding. "Traditionally, bank risk has been organized and managed according to risk type. Credit risk departments rarely connected with their counterparts in operational, market or liquidity risk functions, for example," he wrote. "Yet actions taken, or not, in one area clearly have material consequences on the whole institution – as well as the industry." Meanwhile, in the second of two book excerpts, Karamjeet Paul of Strategic Exposure Group urged financial firms to grab extreme risk, known as tail risk, by the, er, tail. "Financial institutions traditionally manage risk with a one-dimensional focus, even though a second dimension arising from extreme tail risk has very different implications," he wrote. "Traditional risk management, based on probability theory, works well for revenue models because – priced properly – compensation for quantifiable uncertainty can drive the revenue engine. And, the cost of being wrong may be the loss of profits."

Columnist Potpourri: Longtime contributor Dave Martin of Financial Supermarkets Inc. declared sales territories an endangered species while Peter Holland of the University of Maryland Law School Consumer Protection Clinic suggested buyers of defaulted consumer debt should have to disclose forward flow agreements. And John Bowman, the former acting head of the OTS now with the law firm Venable LLP, argued Fair Isaac's dominance of credit scoring is a systemic risk. As Bowman disclosed, he has a dog in his fight, since Venable works for a Fair Isaac competitor, but the thesis was provocative. "In the crisis of the future, a single point of failure may rest on a legacy third-party credit score system dominated by a single provider that presents a large, and largely unexamined, risk for our financial system," he wrote. "We need to address that risk today."

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