Let’s play a Sesame Street game. Which of these things is not like the other (we’ll sing it for you, if you’d like)?
1. Peter Pan
3. An accurate estimate of your financial institution’s checking account cost of acquisition
The answer is #3. Because it doesn’t exist.The other two are real: Conagra makes Peter Pan peanut butter, and startups valued at more than $1 billion are referred to as unicorns.
A few years ago, Andera (now a part of Bottomline Technologies) surveyed financial institutions and asked, “On average, what does it cost your FI to acquire retail checking accounts?” About four in 10 respondents couldn’t even give an answer. Those who did were asked how accurate (i.e., within a given margin of error) their estimate was. Six in 10 couldn’t answer that question, and just 12% said they believed their estimate to be within +/- 10%.
We fancy ourselves to be open-minded around here, so if you’d like to argue that Peter Pan really doesn’t exist, or that unicorns are just a figment of our imaginations, we’re open to your arguments. If you want to argue about the reality of an accurate DDA cost of acquisition (COA), however, bring it on.
Here are the top reasons why FIs don’t have an accurate checking account COA:
Some bankers respond to this by saying, “Getting an accurate cost of acquisition isn’t our biggest challenge – we’re more focused on calculating the overall marketing return on investment.” But that ignores the fact that, in order to calculate an ROI, you need to accurately measure the investment – which is the COA.
So what? Why does this matter? Cost of acquisition is a strategic – and not just a marketing – metric. If you know your true costs of acquisition (please note the plural use of the word “costs” as it applies to different DDA customer segments), then you might find that:
Many chief marketing officers at mid-size banks and credit unions that we’ve spoken with recently don’t seem too keen on improving the accuracy of their DDA COA estimates (if they even have one at all). Too much work to calculate it? Too expensive to calculate? No doubt that Marketing will need the help of Finance and other departments to create a more reliable estimate of DDA COA.
But that’s all the more reason why CMOs should advocate for it. It’s a metric that captures the cross-channel nature of account acquisition and a way for the CMO to better collaborate with the CFO and heads of other departments.
It’s that time of year when Cornerstone Advisors conducts its annual survey of bank and credit union executives to identify key issues and technology priorities for the coming year. The ensuing report will help in your planning efforts and provide great fodder for discussion in your executive team and board meetings.
The survey only takes 5 to 7 minutes to complete, and in addition to receiving the report, participants will receive complimentary registration to our 2016 Insights webinar in January where we will present the highlights of the survey results.
To access the survey,
Thank you for participating.