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Improving Results with Business Performance Accelerator (BPA)

Today, many bankers are failing to meet their performance and productivity goals. Here is how this reality can be changed.

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Improving Results with Business Performance Accelerator (BPA)

  1. 1. Financial Institutions Consulting Improving Results with Business Performance Accelerator (BPA) May 2014
  2. 2. 1 Business Process Accelerator (BPA): Market Opportunity BPA brings the power of Big Data combined with FIC’s expertise to business banking Today, many bankers are failing to meet their performance and productivity goals: • Cost pressures continue at banks • 20-25% of business households at many banks are single product • Despite investments in sales management and training, bankers continue to call on the wrong prospect with the wrong offer • Women and minority businesses remain elusive targets • Many banks fail at finding customers that meet risk quality and rate requirements • Business owner opportunities, key to customer “stickiness”, are missed • A sizeable number of customers categorized as consumers are in fact businesses; banks failing to identify these targets miss cross-sell and pricing opportunities • A recent McKinsey report states that banks using Big Data generated 11% revenue growth versus 6% for others
  3. 3. 2 Business Process Accelerator (BPA): Its Focus BPA allows senior management to better target sales activities and achieve productivity improvements as branch and business bankers aim at the right customers and prospects with optimal offers BPA’s focus can include: • Uncovering businesses currently operating with consumer DDAs • Identifying consumers who are also business owners with accounts at other banks • Highlighting and quantifying business wallet share opportunities • Setting priorities for marketing based upon client specified criteria • Directing calling activity on a branch specific basis, providing top priority customer and prospect names • Providing lending and wealth management opportunities aimed at business owners • Uncovering specific customers and prospects that “look-a-like” the bank’s most profitable customers • Recommending changes to marketing strategies, products, sales practices, organization, and other areas impeding success
  4. 4. 3 Business Process Accelerator (BPA): Unique Information Characteristics • Offers access to over 35 million risk-rated, geo-coded businesses in the U.S. and Canada; over 30% more than credit bureaus • Only source for bank branch data that includes estimates of small business and deposits at the branch level • Provides wealth and wallet share information on over 20 million owners and executives, twice other sources • Identifies ethnicity/gender of executives, over 600K Hispanic and 1.1 million women-owned or managed businesses • Data attributes include: – Customer life cycle– historic and future growth rates – Financial product use propensity and share of wallet penetration
  5. 5. 4 Business Process Accelerator (BPA): Demonstrated Benefits “I reduced my marketing costs by almost 30% by no longer sending out thousands of direct mail pieces. Our response rates went from 1.2% to well over 4%. … At Umpqua Bank, we reduced our marketing expenditure, but, more importantly, we were able to get our external sales force focused on the right prospects while focusing on the right ‘next’ products for our existing customers… I would not take on a marketing job for a bank without this analysis to drive my marketing efforts.” – Ric Carey BPA Examples: • Identified close to 10% of client business deposits in “high risk” area and recommended specific action steps. • Quantified the extent of another client’s concentration risk and suggested required action steps • Determined the best small and midsize candidates for equipment financing on a risk-adjusted basis
  6. 6. 5 Business Process Accelerator (BPA): Information Requirements In order to complete this analysis, ideally, the bank will provide the following data concerning the current customer set: • Name, address, and telephone of current customers • For both deposits and loans, average monthly/quarterly/annual balances outstanding by product • Ideally, deposit balances broken out by major type, e.g., DDA, Money Market, Time Deposits, CDs • Loans broken out by CRE, C&I, and equipment finance • Fees paid and source of payment, e.g., cash management • Relationship duration, that is, years being a customer • SIC or NAICES code • Internal credit rating (with explanation of rating system) • Any available customer profitability analysis
  7. 7. 6 Business Process Accelerator: Analytic Work Flow Technology Infrastructure: Information Processing & Delivery Engine OXXFORD DATA BASES OXXFORD MODELS Client Report Generation Survey Proprietary Private Public BPA MODELS BPA DATA BASES External Data Sources Client Institution Data Insurance Loans Mortgages Credit lines Benchmarks Behavior Competitor Market •Product Volumes •Portfolios (optional) •Tabular, graphical and mapped display •Several means of information delivery BPA PROCESSING RECOMMENDATIONS FOR ACTION
  8. 8. 7 Business Process Accelerator: Possible Timeline BPA provides specific recommendations on priority targets and approaches for success within a short timeframe WEEK 0 WEEK 1 WEEK 2 WEEK 3 WEEK 4 WEEK 5 WEEK 6 WEEK 7 WEEK 8 WEEK 9 WEEK 10 WEEK 11 WEEK 12 Action Step Determine project goals/ key issues to resolve Phase 1 – Profiling Current Customer/Quantifying Potential Complete data request Evaluate data/request adds/changes Begin data analysis Develop segmentation analysis by key drivers Profile current customers vs. market potential Present recommendations/implications Phase 2 – Building Wallet Share Analysis Complete profitability modeling clusters, including industry, regions, products Develop predictive models focusing on: Likelihood to be approved for credit Likelihood to respond to product offering Present recommendations on next product to sell and related implications for priority action Phase 3 – Growing the Business with Priority Look-a-Likes Provide priority target names, based on customer profitability and other key characteristics Note: Check-in calls take place during the following 3-, 6-, and 12- months
  9. 9. 8 Implementation and Tracking Progress Good analytics are not sufficient for bottom line success. Banks need to ensure that they are able to execute effectively to take advantage of the direction and insights that BPA provides. Current Status– Does the bank need to address product, organization, or other areas? Roadblocks– What needs to change to allow for effective implementation? Tracking– Are the analytics being used to change behavior and generate better results? How is the bank performing on a handful of key metrics after 3-,6-,12-months? What is working and what needs to be improved? Rather than a formal consulting engagement, FIC emphasizes a number of ”light touches” based largely upon analysis of existing internal plans and selected phone interviews and targeted questions, allowing us to provide our clients with experience-based insights and recommendations. We also build follow-up review calls into the BPA process.
  10. 10. 9 Business Process Accelerator (BPA): Value-Added to Client Implementing BPA effectively will increase revenues, lower operating costs, and improve customer relationships. BPA can: • Increase revenues by selling more products /services to existing customers and attracting new customers • Lower operating costs and improve efficiency in business generation: leads, underwriting, marketing • Improve sales force effectiveness through tighter customer evaluation and related targeting • Enhance profile of overall customer portfolio: risk, geography, industry, profitability • Broaden profit concentration away from a few major customers • Encourage greater customer loyalty as a result of expanded relationship • Provide specific and actionable recommendations to ensure successful implementation of effective sales programs BPA relies on the richness of the Big Data analyses and critical practical recommendations that FIC and Oxxford uniquely provide
  11. 11. 10 Business Process Accelerator (BPA): Key Personnel For 20 years Financial Institutions Consulting (FIC), a New York-based management consulting firm, has provided fact-based advice and counsel on issues related to growth and profitability in commercial banking to clients around the world. • Charles Wendel, President of FIC, began his career with Citibank and worked with Schroders and Bankers Trust. Prior to founding FIC, he was a consultant with McKinsey and Co. and Mercer Management Consulting. • Since its founding in 1980, Oxxford Information Technology, FIC’s partner for BPA, has specialized in providing analysis on the business market to financial services companies. • Working with FIC, Oxxford focuses on using advanced information technology and analytical techniques to turn data into actionable recommendations. • Ray Greenhill, President of Oxxford, has extensive experience in market research and strategic planning beginning with his work at Booz-Allen and his heading the corporate planning group at a Fortune 500 company. He is considered an authority on advanced technologies and databases for market segmentation and prospect analysis.