I know earlier buzzwords such as management information systems, data warehouse and business intelligence may still reside in your brain’s cache memory, but stay with the program please. The cool, roll-off-the-tongue phrase is big data, and if you really want to impress the opposite sex, say your bank is pursuing a “Hadoop” initiative.
While the syntactic evolution of buzzwords is fine entertainment, I would like to argue that bankers today are suffering from poor implementations of the most basic management reporting and data mining. I would like to argue that we should prove we can handle small data before we hope to graduate to expensive new tools used by rocket scientists and drug researchers. For this reason, Gonzo bankers, I offer up Cornerstone’s Eight-Point Small Data Assessment. These are key areas where a bit of focus, development and analytic support in your bank could greatly improve business performance. Is your bank taking advantage of data sitting latent just a few clicks away?
For this eight-point assessment, imagine if you will a CEO flipping through a crisp executive summary of the information I am about to describe and ask yourself, “Would that totally rock?” Then ask yourself, “How well does my bank provide this information today?”
Point #1: Sales Data – Banks need simple dashboard reports that summarize new business development. Imagine a report that each month shows new retail households acquired, those lost and a net growth number. Add to this detailed net household and checking account growth by branch versus established retail goals. Sprinkle in a bit of loan production and cross-departmental referrals and you’ve got a hell of a sales report.
Point #2: Relationship Data – If every bank wants to emulate Wells Fargo’s share-of-wallet push, then why not act like it? Banks need to elevate some measure such as “services per household” and make it visible in reporting every month by region and branch. A leading indicator measure of “new customer services per household” should also be reported (typically sliced after 90–120 days of being a customer). This indicator illustrates if the bank is improving share-of-wallet performance on new sales activity. In addition, leading banks are beginning to feed relationship offers via the branch and Web channels based on relationship matrices fed into the marketing engine.
Point #3: Customer Experience Data – Every bank brags that it differentiates in customer service, but where is the small data reporting to prove it? Bank management needs to ensure that it is elevating customer satisfaction or “Net Promoter” scores in its reporting and break down these scores by region and branch. In addition, other service-level metrics such a loan turnaround time, channel uptime and complaints received can help add to a customer experience dashboard.
Point #4: Channel Data – Banks are investing millions in new channel capabilities, but where are the management reports that summarize the migration of our channel delivery? Best practice organizations have built channel scorecards that summarize the number of customer “touches” across all delivery channels (branch, ATM, call center, voice response, Internet and mobile) and how this mix is changing over time. Some leading organizations are also tracking the average transaction cost per channel.
Point #5: Payments Data – Protecting payments revenue is a high priority for banks, and management reporting should be geared to support this strategic priority. A payments scorecard is a good way to summarize the volume of bank payment transactions of all types (checks, debit, credit, bill pay, ACH, wire and P2P). In addition, tracking overall non-interest income per checking account each month as well as interchange per debit and credit card is important for monitoring revenue. Cornerstone’s most innovative clients are even building true P&L statements around their payments businesses. Finally, leading banks are mining payments data to search for targeted marketing opportunities. For example, several Cornerstone clients are mining customer bill payment and ACH data to see where other lenders are being paid and then targeting loan offers to this segment of customers.
Point #6: Profitability Data – Banks can literally talk for decades about profitability information without ever implementing something that gains executive management credibility. It’s time to cut the crap. Whether it’s Sendero, ProfitStars or CorePROFIT, banks need to get at implementing the 90 percent solution to organizational, product and customer profitability and integrating these figures into management discussions. Cornerstone has clients that have made this reporting part of their operating cultures – there’s no excuse not to have this information in 2012.
Point #7: Efficiency Data – One of the most important duties of management today is to effectively allocate resources and drive stronger operating efficiencies. Best practice organizations have developed formal key performance indicators (KPIs) around efficiency across every operating group and report these metrics on a quarterly basis. Industry benchmarks from The Cornerstone Report and others can be used to set reasonable goals in each operating group, and formal capacity models can be leveraged to hold managers accountable for efficiency. Although millions of dollars of efficiency can be unlocked with this management discipline, this type of reporting is sorely lacking across our industry.
Point #8: Fraud Data – Bankers may groan about the growing cost of fraud, but it is very rare that metrics are reported consistently to executive management. Dashboards that summarize checking, card, loan, identity theft and other types of fraud versus budgeted losses can be very effective at keeping a bright light on this growing cost. This type of information can also be very effective in justifying the investment in new fraud tools and analysts to support fraud prevention.
Looking at these eight points of small data, how well is your bank doing? Cornerstone finds that most banks have material shortfalls in this type of management reporting. Banking executives should be placing a lot of healthy pressure in their organizations to shore up this blocking-and-tackling type of reporting. None of the reports described in this article require expensive and sophisticated technology. Instead, banks that create this type of information possess is a relentless “digger” attitude to get pragmatic information reporting operational in their organizations. They use inelegant tools such as data marts, Excel pivot tables, Monarch report tools and entry-level interns to strip, organize and present critical information to executives. They work with their core vendor and I.T. groups to make interfaces, downloading and report population as painless as possible. In the end, these Gonzo bankers focus on the power the information has when small data is presented consistently in a usable format so that real accountability can be enforced and management actions taken. One of the first steps in designing an overall data strategy is for executives to specifically design what executives want to see on their daily, monthly and quarterly dashboard reports. It’s amazing how few I.T. departments take the time to conduct this type of business analysis with their executive teams.
Bankers may think they are swimming in data and need a new power tool (i.e. “bit data”) to deal with it. The truth is that bankers have always been swimming in data – it’s just the disc storage is bigger these days. Instead of being allured by big data buzzwords, bankers who win in the next few years will roll up their sleeves and start extracting the great value that can come from inelegantly working with small data.
Whether your goal is to build a customer experience dashboard, payments or channels scorecard, management reporting tool or just increase your organization’s overall efficiency, why not enlist assistance from the experts at Cornerstone Advisors?
Over the past decade, Cornerstone has worked with hundreds of banks and credit unions to help them harvest, analyze and utilize their small data in meaningful, measurable and profitable ways.
Contact us today to learn more.