measuring for success: redirect your kpi’s - cuna · pdf filemeasuring for success:...
Post on 06-Feb-2018
221 Views
Preview:
TRANSCRIPT
Measuring for Success: Redirect Your KPI’s
David Potterton, Research Director
CUNA Technology Council
September, 2014
“My own mother even pays bills on her mobile phone and never goes to those expensive mausoleums you see all over town that traditional banks have.”
Stock Analyst Supporting a“BUY” rating for Everbank on CNBC SquakBox – July 31, 2014
Changing Banking Models Hitting the Mainstream
Tipping Point: Teller Transactions and Cross-Sell
Ratio Down
0
2000
4000
6000
8000
10000
12000
Median
2008
2012
Branch Transactions Median
0
1
2
3
4
Median
2008
2012
Median Retail Products per Household
Source: The Cornerstone Report: Benchmarks & Best Practices for CUs
Business Model Under Attack
Gather Deposits Lending
Expensive Branch Network and Overhead (NIE)
Noninterest Income
Deposits fund loans
Returns for Shareholders/
Members
Earn spread between loans and deposits
Leverage deposit accounts for cross selling opportunities to generate fee income.
Use noninterest income to offset overhead costs.
Funds to Reinvest in the
Business
Customer Experience Disrupters
Online BanksAlly and USAA have
redesigned the customer
experience to make banking online or
from a mobile device extremely
simple and convenient for their
customers.
Source: Trulia.com
All In One App
Lending DisruptersMortgage Lending
Impact: Interest Income, Origination Fees, Loan Growth, Cross-Selling Opportunities.
When people change the way they shop for homes, it is likely to impact the way they shop for mortgages as well.
One Click…
Source: Trulia.com
Median 75th
PercentileUser Value
Active Internet Banking Users as a % of Checking Accounts 70% 80%
% of Active Mobile Users as a % of Checking Accounts 7% 19%
% of Direct Consumer Loan Apps Taken Through the Call Center 23% 34%
% of Direct Consumer Loan Apps Taken Through the Internet 16% 29%
% of Mortgage Applications Taken Through the Internet 23% 66%
Channel Migration is Accelerating
Source: The Cornerstone Report: Benchmarks and Best Practices for CUs
Delivery Redirect is about facing up to the tough choices concerning resources, the sales force, and new organizational capabilities that financial institutions must address in order to be viable in 2020 and beyond
Delivery Redirect is not about just migrating transactions but REVENUE PRODUCTION –the optimal mix of channels and resources • to successfully influence the
buying behavior of current and future consumers and businesses
• to drive new and cross sell/upsell revenue
”Channel Of Choice” Is Impractical –Delivery Redirect Is Strategic• It costs too much money to offer
all functionality through all channels
• Rather, institutions need to think about the “right channel” for their members
• It’s not about transactions, but buying interactions and balancing member/customer experience, cost, and security
As Delivery Redirect efforts begin, keep the following Brutal Truths in mind
Stop Trying To Please All Your Customers/Members • Not everyone customers will like their
financial institutions Delivery Redirect efforts
• Perhaps it just wasn’t a good fit from the beginning or these customers are stuck in a banking model which is not in the best interest of the institution’s customer base as a whole
• Those banks who know their target segments well will win
It’s Revolution Not Evolution• Executives will need to make some very strategic and tough choices
in order for their institution to be one of the winners in 2020• The need for speed is paramount as newer and more nimble
competitors continue to challenge the status quo• Technology companies are reaching over into financial services so
banks and credit unions need to think more like technology start-ups
Members Buy The Channel Experience Not Products • Members are focused on channels as this is the way they interact
with their financial institution• In this channel centric (and increasingly mobile) relationship, it’s time
to re-think organizational alignment and focus on capabilities per channel rather than products
Divest to Invest• Delivery Redirect means casting off those channels which no longer
make economic sense• This is not a pure cost play however• Money saved from Delivery Redirect should be utilized to improve
delivery capabilities which promise higher returns in the future
The Branch Will No Longer Be The Primary Channel For Customer Acquisition • There will continue to be physical channel niche players but the
number of branches and physical locations will continue to shrink (and in some cases disappear)
• This traditional method of branding, customer awareness, and acquisition needs a new strategy
• Successful financial institutions will help customers and prospects “discover” their great services and how easy it is to do business with their firms
• Measurability– Is there an clear, objective definition of the metric?– Can the metric be measured and reported in a timely fashion, e.g. it is
“actionable”?• Peer comparisons
– Do we need to compare ourselves to a peer group to analyze performance?
• If yes, is there a common definition peers use and objective third party data available?
• If no, what is our internal “base” against which we will measure performance or progress?
• Reporting Levels– Is this a corporate-level metric or do we need to shoe it at a more
detailed level (e.g. by branch, by employee)?
Setting Performance Metrics – Key Issues
Sales and Growth
RiskCost and Efficiency
ObjectivesCustomer Acquisition, Loyalty and RetentionTools• Experience and Process Mapping• Service Level Standards• Customer Satisfaction Surveys
Sales/Growth Metrics• New relationships by channel• Account applications by channel
– Deposits– Loans (consumer, mortgage)
• Cross-sell by channel
Cost and Efficiency Metrics• New accounts closed per employee
– Deposits– Loans
• Blended cost per new account acquisition• Self-service transactions as a % of total transactions• Accounts serviced per branch/call center employee• Blended cost per servicing transaction
Risk Metrics• Losses by channel• Delinquencies by channel• Number of Risk FTE’s per asset size• Dollar amount of risk spending by asset size
Sales and Growth
Risk
Cost and Efficiency
First Step• First understand your organizations business strategy; long-term vision,
business model, brand, objectives and priorities, in order to realize the impact to your channels especially across Channel Performance and Potential
Branch• Full Service• Sales Branch• Tech Branch• Loan Production Office
• Identify the impact of various factors related to rationalizing the branch network– Strategic Objectives– Market Demographics– Branch Performance Metrics
• Determine the best-fit, future state strategy for each branch location– Traditional Branch– Social/Service Branch– No Branch/Closure– Kiosk Branch
• Identify the ATM locations that are delivery positive Net Income– Maximize capital investment
decisions: infrastructure, lease, outsourcing, and surcharge-free strategies
• Identify functionality required that best meets the FI’s channel strategy goals per location– Image & Video/Audio
• Maximize ATM marketing benefits – Onscreen and physical
ATM/Self Service
• On Premise/Off Premise• Kiosk/Remote Teller
• Assess transactions and productivity and sales performance
• Assess technology, routing and tools/reporting
• Assess staffing/skills model • Evaluate emerging tech capabilities
(chat, text, video)
Contact• Contact Center• Automated Voice
Response• Video banking
• Assess current remote offerings versus local, regional and national competitors
• Assess internal ownership structure of the remote channels
• Recommend changes to offerings and/or organization to fill functional gaps and align with strategy
Electronic• Online• Mobile• Social
Channel Performance• User Value – How much do customers value the channel?
– Your transaction data, channel usage metrics, and available survey metrics should help you answer this question
• Efficiency Value – How cost effective is the channel?– Compare your direct cost (staff, facility, other unallocated) to your
deposits as well as your direct cost to non-interest income plus funding credit
• Sales Value – How is the channel contributing to production?– Understand your open/close ratios, number of new accounts overall
and by type (e.g. checking), value of direct consumer/small business loan production as well as investment and mortgage referrals
In developing your action plans for each channel, keep the following in mind:
Branch ATM/Self Service Call Center Web Mobile
User Value
# of service transactions 275,000 345,000 43,000 281,000 34,567
% of transactions 27% 34% 4% 27% 3%
# of deposits 81,000 14,200 0 0 1,823
Sales Value
# of new deposit accounts 653 0 112 78 0
# of consumer loan applications 600 0 255 345 0
# of mortgage applications 70 0 24 145 0
# of investment referrals 56 0 14 9 0
Efficiency Value
Total Monthly Direct Cost
$2.6 million $695,000 $221,000 $127,000 $51,000
Direct Cost Per Transaction $9.45 $2.01 $5.13 $0.45 $0.78
The Delivery Channel Scorecard
Go Forth• Survey the organization regarding current channel volume/usage/ capabilities
• Utilize external research and internal user data to assess the market potential of all delivery channels
• Interview executive and delivery channel managers to understand the organization’s strategy and current channel priorities
• Complete a thorough benchmarking and assessment of delivery channel capabilities versus both peers and best practice leaders
• Facilitate a Channel Planning session with key stakeholders
• Develop a formal Delivery Channel Road Map
• Develop specific Action Plans around each component of the Delivery Channel Road Map
• Determine financial impact and develop a Delivery Channel Scorecard with performance goals and KPI’s to accompany the Delivery Channel Plan
American Banker calls GonzoBanker a “hip and flip” email newsletter.
Don’t miss out – sign up for your FREE subscription today at www.gonzobanker.com
A collection of observations, ruminations, predictions and random thoughts on financial services from the team at Cornerstone Advisors
GonzoBanker™ is a publication of Cornerstone Advisors, a Scottsdale, Arizona-based consulting firm specializing in best practices strategy, technology and process improvement
for banks and credit unions.
Visit our Web site at www.crnrstone.com
top related