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Transforming Data into Insights: March 2018 Performance Analytics Workshops Recap

May 3, 2018
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Raddon recently wrapped up another round of workshops for participants in our Performance Analytics program. More than 1500 financial services executives attend these sessions each year to collaborate with peers and discuss strategies to improve performance.

Performance Analytics participants receive a comprehensive benchmarking analysis that measures performance across all areas of their organization. This data serves as the foundation for the discussion and insights at the workshops, but the power of the data is augmented tremendously through the dialogue we are able to have in these sessions. We learn best from informed interaction.

In that spirit, we asked a few of the Raddon workshop facilitators to provide a recap of some of the interaction that took place at the March sessions. There were definitely some key themes that emerged across these 17 regional workshops (well, technically 16 workshops thanks to the nor’easter that brought mounds of March snow), but also striking are some of the differences that exist from region to region.

Our recap panel includes:

  • [AV] Andrew Vahrenkamp, Senior Research Analyst
  • [EW] Eric Wittekiend, Senior Account Executive
  • [GU] Greg Ulankiewicz, Senior Research Analyst
  • [JT] Jan Trifts, Strategic Advisor
  • [LC] Lynne Cornelison, Research Analyst
  • [MR] Marcus Rothaar, Senior Research Analyst
  • [MS] Marcy Scanlin, Strategic Advisor

One of the reoccurring themes was a heightened awareness and focus on deposit strategies.

With rates on the rise due to the Federal Reserve’s incremental rate increases, effective deposit management is emerging as a critical component of organizational success. 

  • [MS]: Many of our deposit discussions focused on how to anticipate the perfect time to raise deposit rates in the current competitive environment, in an effort to not only attract new money, but also retain existing deposit dollars.
  • [GU]: At one of our Midwest workshops, we talked about the convergence of rising interest rates and increased market volatility.   The implications of these dynamics is that financial institutions can and should be promoting the stability and security of their term deposit products against these market swings as consumers may becoming apprehensive about investing their money.  At the same time, this also means that banks and credit unions need to be thinking about their investment services offerings as an extension of their overall deposit strategies.
  • [EW]: There was much discussion around the need to train the front-line staff to have greater comfort in talking with customers about deposit products. Many tellers and CSRs have never opened or even talked about a CD, as most FIs have been understandably focused on loan growth for the last decade.
  • [JT]: In response to a case study we presented highlighting one FI’s approach to driving deposit growth through creative marketing and promotions, we had a lot of discussion on how to effectively handle the deposit conversation with customers. The consensus was to ask the consumer what their savings goal is and the time frame needed to get there. The consumer really doesn’t care or necessarily understand what the product is (savings, CD, money market); they just want to meet their goal of getting into that new home, new car, vacation in the warmth, etc.
  • [JT]: Workshop attendees also suggested that FI employees and staff would be the ideal place to test promotions that encourage positive savings habits, so that they’re better able to understand the benefits and ease of starting a savings habit, and can thus communicate this to prospective depositors. Programs such as this can help grow deposits in addition to helping better the financial lives of the 46% of consumers (per a 2015 Federal Reserve study) who are unable to handle a $400 emergency expense.
  • [AV]: I continue to be amazed at how little effort the industry spends in deposit management.  Nearly every financial institution has a VP of Lending. Far fewer have a VP of Deposits: someone tasked with managing the product line which fuels their business. Designing products, pricing rates and fees, guiding marketing, developing staff knowledge – understanding the rate risk tolerance of consumers and market and managing appropriately. Anyone can grow deposits with a big rate; it’s growing with the right rate that is challenging.
  • [MR]: There was frequent mention of the challenges associated with competing for deposits not only with the bank down the street, but also with online entities. The competitive environment is vastly different from the last time the industry operated in a rising rate environment given consumers’ ever increasing reliance on the internet. Several institutions discussed the need to develop strategies to differentiate themselves from online providers through new product innovation and creative marketing.
  • [EW]: Attendees at the workshops discussed the risks associated with having 86% of deposits with 15% of households that average 72 years old, and are developing plans to address this risk. Effective pricing strategies were an interesting area of discussion as well, with some variability from market to market on how aggressively the institution needed to price short-term and long-term CDs.

The demography shifts that are occurring in the U.S. and how these changes are influencing the financial services industry once again proved to be top of mind for many of the workshop attendees.

  •  [GU]: We had a lot of discussion about the imminent force of Millennials charging towards home ownership.  One interesting angle on this topic related to the need for institutions to discover and understand the life stage and goals of their potential Millennial home borrowers.  Consider that first-time home buyers will all have unique inclinations as it relates to this momentous life event. 
  • [GU]: Aspiring home owners with children or with intentions to have children in the near future may be looking at this purchase with a longer-term view, in which case products like fixed-rate 15 or 30-year mortgages may be more appropriate and attractive for these borrowers, particularly while interest rates remain largely favorable.  Conversely, another segment of this market may be viewing their purchase as more of an initial "launch pad" for their future endeavors.  In these cases, adjustable rate mortgage offerings will likely have greater appeal given the lower cost to the borrower.
  • [MS]: At many of the workshops, there was a distinct diversity of needs and approaches, which led to lively discussions and idea exchanges. For example, at one workshop we had an institution serving a more affluent base with customers financing private planes, while another institution at the same workshop had a higher concentration of lower income consumers and was thereby focused on how to effectively compete with payday lenders in their market. While the demographics of each of these two institutions was vastly different, they were both focused on how to best demonstrate that they understand the distinct needs of their customers.
  • [MR]: With the leading edge of Gen Z just starting to reach adulthood, attendees considered the relevance and appeal that the current menu of traditional bank products might have to younger consumers. For example, will products called “checking accounts” have any relevance to an individual that has never written a physical check in their life, but instead use Venmo as their preferred means to move money? Product rebranding and innovative marketing were suggested as critical components to earning the business of the generation that is just now entering the financial mainstream.
  • [LC]: Mobile has increasingly become a larger part of the discussion for financial institutions. Workshop attendees discussed using mobile to their advantage to remain relevant and offer that seamless experience that consumers are demanding across all delivery channels. The demographics of mobile users was also discussed, as older generations may actually represent the largest growth potential, due to mobile already reaching near ubiquity among younger consumers. The group debated if older households would embrace mobile banking more rapidly than they took to online banking, which took approximately five years to become normalized by age.

Many financial services executives also recognized that earnings can no longer be managed on auto-pilot and were focused on the need to diversify earnings and find new avenues for growth.

  • [LC]: Household growth seemed to universally be top of mind, regardless of workshop location. However, the ways in which participants were looking to grow varied based on several factors, including their current share of wallet. As the Performance Analytics data shows, the typical financial institution only controls less than one-third of their customers’ deposit and loan dollars. For institutions with much higher share of wallet, strategies start to shift to focus more on new household growth, while lower share of wallet institutions tend to be more focused on opportunities that exist within their current customer base.
  • [EW]: We had some discussions on growth through mergers and acquisitions. One credit union attendee had recently purchased two small out of state banks, and discussed the benefits this had in diversifying their balance sheet with an influx of commercial accounts. Some of the challenges discussed with mergers involved how to effectively blend in staff from two institutions that may have different corporate cultures.
  • [AV]: I was struck by the pessimism about making borrowing easy for small businesses.  Many of the FI executives in attendance seemed certain that since the regulators require so much background information on commercial lending, they simply shouldn’t attempt to handle the potential disruption from places like Square. One went so far as to suggest that any business willing to take a 30% APR loan just because it only took a couple of clicks wasn’t the sort of business they wanted to target. The counter to this is the opportunity lost to help that business potentially save hundreds or thousands of dollars by borrowing under more traditional terms. Through our discussion, it became clear that there’s a need to simplify the loan process for those wishing to compete with alternative lenders in the commercial lending space.

Thank you to the more than 550 March workshop attendees from 150 financial institutions that took time away from the office to spend the day with us. Your willingness to share your success and challenges with the group is what makes Performance Analytics more than just a data analytics program – it helps bring the data to life and allows us to transform numbers on a page into real insights.

For our Performance Analytics clients west of the Mississippi - registration is now open for our next series of workshops in June. We look forward to the conversation!