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Achieving Success in a Changing Operating Environment: June 2018 Performance Analytics Recap

July 19, 2018
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In June, Raddon hosted its quarterly workshops for participants in the Performance Analytics program.  These workshops provide a forum for financial services executives, senior leadership, managers and department personnel to discuss the latest industry issues and assess their organization’s performance through the program’s peer benchmarks, trend analysis and customer segmentation schemes. 

In this most recent round of workshops, we hosted our first CEO Roundtable, a Performance Analytics workshop exclusively for C-level executives.  This session, held in the nation’s unofficial – though indisputable – innovation capital of Silicon Valley, emphasized high-level strategy and focused on topics most germane to those in the C-suite.  At this session we had discussion on leveraging transaction data.  This proved to be a fascinating topic which got the group thinking about other untapped opportunities that might be hiding in the treasure trove of data to which financial institutions have access.  We also discussed the value of knowing how well your customers’ transactions interconnect them into a network, which sparked a great conversation around data strategy and data governance.  All in all, this was an outstanding workshop that we will continue to host. 

As we did in our last recap, we asked our team of presenters to highlight some of the key issues and interesting topics discussed in our June sessions.  With that in mind…   

A central theme at the CEO Roundtable and all our workshops revolved around the notion that the industry is at an inflection point and organizational success will be defined by the institution’s ability to evolve and effectively navigate these changes. 

This is not to say that the themes of “yesterday” are suddenly irrelevant; but economic, demographic and technological forces nonetheless compel institutions to reimagine their strategies and prepare for a financial services industry that is poised to look radically different in the next 5 to 10 years.

For instance, as Marcy Scanlin, Strategic Advisor, noted, many institutions are keenly focused on refreshing their brand to appeal to new customers and a younger demographic with unique needs and expectations, while at the same time continuing to resonate with existing customers – many of whom hold valuable relationships and may be comfortable continuing to conduct their banking in more traditional ways.

Along those lines, Eric Wittekiend, Senior Account Executive, found that a lot of discussion centered on the shift from physical to digital delivery.  Institutions are challenged to invest in and build an effective digital platform while continuing to leverage branches as sales and service centers, optimize their performance with in-branch technology and develop staff to engage in more meaningful customer interactions.  Eric observed that some institutions are giving consideration to assigning a Millennial as a “virtual branch manager.”  These employees focus on households who reside outside the branch footprint, or are simply inclined to conduct most of their banking through the online or mobile channels.  Accordingly…

Finding, developing and retaining quality staff was another hot topic of discussion.

Given a much tighter labor market, Lynne Cornelison, Research Analyst, heard many clients express significant challenges in finding quality applicants and then being able to extend an offer to qualified candidates before they obtained a job offer elsewhere.  Several institutions noted that, today, frontline staff need to know an incredible array of information and also must possess a much different skill set than those who served in these roles in the past. 

Emphasizing this challenge, yours truly found that some institutions have been looking for talent from outside the financial services industry.  In particular, applicants with a background in the health care industry seemed to be a source for finding quality frontline staff, given their innate ability to effectively interact with others on personal level.  And while this skill may meaningfully translate to financial services, there is still a need to train these personnel on all things banking, and then to retain them after investing significant time and resources to develop this knowledge-base and skillset. 

Of course, the topic of growth – quality growth – continues to be an important discussion point.  To that end, as shown in the above illustration, deposits are quickly emerging as a critical focal point for growth.  With interest rates on the rise after such a protracted low rate environment and loan-to-deposit ratios now averaging almost 85% versus 68% at the low point in 2012 (Source: Performance Analytics), an institution’s ability to compete on deposits will be instrumental in retaining and attracting customers. 

This topic led us to a discussion on how – or rather whether – primary financial institution (PFI) status is able to support cross-sell efforts.  Data from our Relationship Survey program shows that the primary checking account continues to correlate strongly with PFI status; however, the attribute with the strongest correlation to PFI status is in fact future deposit intent.  In other words, today, the most essential factor in whether a consumer considers a financial institution to be primary is the one which they are most likely to bring their future deposit business.  Notably though, future loan intent does not show a significant correlation to PFI status.  This suggests that just because a customer considers a financial institution to be primary that does not translate to a likelihood they will open future loan business with that institution.  In turn…

We discussed how you can build loyalty to deepen customer relationships

Karen Kislin, Account Executive, noted that this topic elicited a lot discussion at the workshops.  As part of this discussion, Karen highlighted an interesting finding from a recent Raddon Research Insights study The Keys to Loyalty: How USAA Engenders Loyalty in Its Members through Service and Branding. 

As the chart above shows, when there are no service issues, the Net Promoter Score (NPS) for customers of financial institutions in our Relationship Survey program is comparable to USAA Members surveyed in our Research Insights study.  However, the NPS for USAA members who experienced service issues was significantly better than customers with a service issue at other financial institutions (read more on this study here).  This finding demonstrates that a key factor in USAA’s member loyalty lies in the institution’s capabilities in problem resolution.  With this in mind, workshop attendees discussed ways to more effectively track service issues and how quickly and sufficiently they are resolved.

In summary, with the industry at an inflection point in so many critical areas, there was no shortage of energized discussion at our June workshops.  Thank you to the more than 350 attendees from over 100 institutions who shared their perspectives on the insights garnered from the Performance Analytics data that equip program participants to refine their strategies, operations and marketing initiatives.