In 2020, almost all financial institutions saw record growth in Small Business Administration lending with the Paycheck Protection Program, mortgage origination and home equity loans, and deposits. A slowdown in that momentum is already evident in 2021, especially with more traditional lending and interchange revenue.
So what? Banks and credit unions are going to need to rely on other sources to drive revenue in 2021, and growth analytics should be at the top of the list. Here are five quick wins institutions can realize using business analytics:
Let’s say you want to get more wallet share for credit cards. Pull your ACH files going to Capital One and mine these for your customers or members who have these cards. Rinse and repeat for the other major card providers and you have a list of potential follow-ups. Segment the outgoing ACH payments by amount and volume so you can use a human to follow up for the high dollar/high volume=high interchange revenue customers and members. Use direct mail or electronic communication for the lower dollar/lower volume members and customers. Persistence is key in your follow-up, so ensure your expert growth team tries at least three times to get in touch with your high value customers/members.
Want to get more auto loans? Create a list of the largest direct and indirect loan providers in your region and search the ACH records and Addenda records for the keywords “car” and “auto.” If your institution has a history of payments over the years, you can calculate which loans are close to being paid off and use that list as a campaign for a new auto loan. If you see a new payment, place an outbound call with the customer or member to see if they have the best rate. If the payment is high, place an outbound call to the customer or member to see if you can help them lower their monthly payment, increasing customer retention.
The same principle applies to investment accounts. Use keyword search terms like “Merrill Lynch,” “Charles Schwab,” etc., until you have covered the major investment houses. Sort by dollar amount and pass the high dollar outbound transfers to your wealth management team for follow-up. See if your institution’s personalized investment strategy offers better insight for the customer or member.
One trigger many institutions monitor is the expiring CD. But what about the movement of money from money market accounts or savings accounts into the checking account? Significant dollar movements can indicate that a customer or member is about to jump ship or make a major purchase where another product might be of service. Are your personal bankers or member service representatives looking at this data daily and calling these clients to see if their financial needs have changed? If not, you might be missing out on business growth by retaining customers or cross-selling at the right time.
With many American households struggling from month to month, account balances can fluctuate significantly over the course of a pay period or two. However, is your institution monitoring your typical high balance checking accounts for decreases? Do you have floors established for your demand deposit accounts and share accounts that typically keep an average daily balance of over $20,000 to see if these clients are looking elsewhere for services? The cost of funds on these accounts is nearly free for almost all institutions, so these are deposits that deserve to be protected. Are your branch managers and other leaders aware of these accounts and what to look for? If so, how often are you checking in with these customers or members offering them actionable insights? I often hear that CSRs, MSRs, and private bankers are so busy. The Cornerstone Performance Report shows that the open to close ratio currently hovers at 1.2:1 for most institutions. That means that for every 12 accounts your team is opening, 10 are being closed. Can you proactively stop the loss of voluntary churn with a better outbound effort?
These examples are just a few of the ways institutions can leverage growth analytics to increase revenue in 2021. Got more ideas or want to discuss more? Contact me.
One thought on “Five Ways to Use Advanced Analytics to Drive Revenue”
Another excellent article from the people at Cornerstone. John’s comments are on target as we see the same thing daily and, as he knows, he’s only touching the tip of the iceberg. For example, our clients use this level of data not only to understand the customer/member behavior but also as the basis to delineate the profitability of the customer/member by persona, delivery channel, loan officer, credit score, etc., or combinations thereof. After all, just because you see a negative change in behavior does not necessarily mean it’s bad for the institution. If a value destroyer is showing signs of leaving you might just let them go.