Top Takeaways From the Performance Analytics Workshop

July 23, 2020  |  Marcus Rothaar

Raddon typically hits the road in June to host workshops across the western half of the country for participants in our Performance Analytics program. With COVID-19 putting a temporary halt to these in-person meetings, we shifted our workshops to a two-day online event with more than 900 financial services professionals. A sign of the times, 61 percent of attendees logged in to the event from their home offices, as did the Raddon team of presenters. Below are a few of the topics discussed as financial institutions continue to grapple with the short- and long-term implications of COVID-19.

Focus on Service

As highlighted in this previous Raddon Report article, while the U.S. economy is showing positive signs, recovery is likely to be inconsistent and spotty. Actions by financial institutions will be critical to how quickly consumers and businesses regain their confidence. Leaders from three high-performing institutions spoke about keys to their organizational success, and a few consistent themes emerged:

  • The importance of culture and making sure every employee fully understands the organization’s vision and strategy, and the role that each individual plays in achieving success. Specific initiatives included hiring for culture fit rather than experience alone, promoting from within, brand ambassador programs providing mentors to new employees, and extensive investments in employee training
  • Delivering on a consistently excellent service experience. For example, can you outperform your competition on mortgage application turnaround times?
  • Being disciplined in managing to a well-defined business model, even when it means sacrificing growth or earnings at times when it’s not a strategic fit
  • Building the organization’s brand within markets served through a focus on financial education and helping consumers save money

In any time of uncertainty, the front line of the institution – those who work directly with members and customers – can be the catalyst for turning negative into positive. One workshop attendee discussed the work his institution has done with the Raddon Training and Development group and shared how his staff has risen to the occasion during the pandemic. The example was a reminder that when you take care of your employees, they’ll take care of your customers or members.

Focus on Lending

With more than half of financial institutions surveyed by Raddon reporting significant declines in loan applications since the onset of COVID-19, rebuilding the lending engine was a key area of focus discussed during the workshop.

Attendees were polled during the workshop, and 36 percent said they were seeing improvement in automobile loan applications in the second quarter. Another 35 percent reported a decline from the first quarter. The majority (79 percent) of attendees were continuing to see an increase in mortgage volume as homeowners look to seize on the low rate opportunity to refinance mortgages.

While most institutions reported a slowdown of lending amid periods of shelter-in-place orders, a few institutions reported an uptick in consumer borrowing. The CEO from a Texas-based institution shared her organization’s recent lending successes, attributing several record-breaking months during the pandemic to the ability to be nimble thanks to digital lending tools and strategies put in place in previous years. Even with branch closures during COVID-19, the institution never missed a beat with loan volume as it relied on the efficiency of automated loan-decisioning software and a newly created (prepandemic) full-time digital lender role.

Beyond the short-term implications of COVID-19 on loan volume, institutions identified several long-term effects. Do any of these statements ring true for your organization?

  • We don’t know how to create loan demand
  • We’ve been too reliant on auto dealers to create loan demand for us
  • We don’t know how to brand around lending
  • We focus on product when consumers focus on need

One significant difference between the current recession and the recession ending in 2009 is the industry’s loan wallet share, which is the percentage of a consumer’s total outstanding loans that reside with the institution versus with competitors. Account data from more than 350 financial institutions participating in the Raddon Performance Analytics program reveals the average loan wallet share has improved from 23 percent to 32 percent in the past decade.

As loan wallet share improves for an organization, it becomes increasingly more difficult to find loan needs within the existing account base. Although the theoretical ceiling is 100 percent wallet share, Performance Analytics data indicates the strongest performing institutions top out around 43 percent. The takeaway: Financial institutions may be more challenged for organic loan growth and may need to seek alternative paths while better targeting their marketing.

For example, one organization is leveraging transaction data from Raddon Predictive Analytics to identify individuals making competitor loan payments or using other competitor services such as person-to-person or bill pay. By identifying the competitor product being used and shaping offers around other key life indicators sourced from the transaction data, the organization can create a very narrow and specific offer – one that can’t be achieved with shotgun marketing. Using this same data, the organization can identify individuals using payday advance loans and proactively start a conversation about services to help better manage cash flow and debt levels.

Focus on Payments

Another priority focus is the changing payments landscape. In the short term, reduced consumer spending is negatively impacting interchange revenue. According to the Fiserv SpendTrend® report, year-over-year consumer card-based spending was down 17 percent in March, 34 percent in April and 23 percent in May. The overall impact to interchange revenue in 2020 will depend on how quickly consumer spending returns to more normal levels. Card providers need to consider whether consumers are placing more emphasis on mobile payments or other contactless payment options than they did before the pandemic. When polled during the workshop, most respondents said they either offer contactless cards now or have plans to do so.

COVID-19 also has caused an increase in mobile wallet in-app e-commerce activity. The SpendTrend report shows a doubling of mobile e-commerce transactions performed through mobile wallets between mid-March and mid-May (not including in-person transactions done at the point of sale). In the long term, a key challenge for card providers is remaining top of wallet as the number of payment apps and subscription services proliferate and more payments evolve from in-person standalone transactions to autonomous transactions integrated into the digital experience.

Focus on Branch Transformation

As highlighted in this recent Raddon Report article, the pandemic has taught consumers of all ages they do not need to go into a branch to use their bank or credit union account. Financial institutions need to consider the role that branches will play in their delivery ecosystem. Key strategic questions for every financial institution to consider are:

  • Has COVID-19 altered how consumers view and use branches?
  • Has COVID-19 accelerated adoption of digital banking among previously resistant segments?
  • What role should branch locations play in future growth goals?

One short-term phenomenon that may become a longer-term trend is branching by appointment only. Two-thirds (65 percent) of the institutions in our COVID-19 survey of nearly 200 financial institution executives indicated they had shifted to in-branch services by appointment only at some or all locations. Among those polled during the workshop, 34 percent said they expect some form of branching by appointment to remain in place even after pandemic restrictions are lifted. Another 29 percent expect their current branching by appointment to be a temporary service only.

One attendee shared his institution’s experience with videoconferencing. Although the service has been in place for 10 years, it’s been particularly valuable to provide remote assistance during periods of physical branch closures. Another attendee shared his institution’s experience with expanding virtual teller capabilities to mobile devices, encouraging consumers to use their own phones or tablets to interact with the institution. As things reopen, the challenge and opportunity is to continue encouraging consumers to use this technology when it’s available, helping branches become more than just transaction centers.

COVID-19 has challenged us all, but it can also serve as an opportunity to reevaluate your business model and perhaps do things differently. Every institution has an opportunity for your brand to shine as you help your customers and members navigate these difficult times.

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