Using Analytics to Grow the Small Business Portfolio

Using Data Analytics
to Grow the Small
Business
Portfolio
Knowledge Takes
Us Further

© 2015 Saggezza Inc. All rights reserved
Agenda
• Data analytics- the new competitive advantage
• Financial institutions leading the pack
• Key Steps to Becoming a Data-Driven Organization
1. Set Goals - determine priorities for analytics
2. Assess Talent - semblance of data analytics expertise
3. Uncover Valuable Insight - turn data into actionable insights
4. Action - take prescribed action on newfound knowledge
5. Create a data-driven enterprise – prepare for a
cultural transformation
• Data Driven Organization in Action: 13 Action Items to grow
the Small Business Portfolio

Transform Tight Margins & Low Loan Growth
Enhance Revenue, Franchise Value & Culture
Data Analytics – The New Competitive Advantage
Turn Challenges into Triumphs
THE FINANCIAL
INSTITUTIONS
INDUSTRY
Increased Competition, Customer Churn
Effective Marketing and Customer Satisfaction
Manage Regulatory Scrutiny
Better Risk Management, Business Decisions;
Strategic & Operational

Why Advanced Analytics? Across industries, companies that use
analytics effectively are more successful than their competitors
7%
Peer group 3%
8%
Peer group 1%
10%
7%
Peer group 3%
3%Peer
Peer group 5%
12%
2001-2013 CAGR
SOURCE: big data full pack FINAL

5
Large banks have built “Next Product to Buy” capabilities to predict
customer needs, pushing up to 60% of their sales of some products
SOURCE: US Banking Product survey, 2014
80706050403020100
Savings account
Credit card
(primary)
Home mortgage
Home equity
line of credit
Wealth management/
Investment products
Lowest
bank
Average Highest
bank
Capital One
Citibank
JP Morgan Chase
Wells Fargo
Bank of America
▪ Instead of waiting for
consumers to come to them,
larger banks are aggressively
predicting needs
▪ Helps larger banks capture a
larger share of the 50% of
consumers who added a
financial product in 2013
Most
successful
bank for each
product is top
5 bank who
has invested in
analytics

Wells Fargo Leading the Pack
Launches
Big Data
Lab
Surpasses
1 Billion
Electronic
Statements &
Receipts
Appoints First
Chief Data Officer
600 Staff
$100 Million
Budget
2012
2013
2014 Play Offense &
Defense
Target Missing Areas
Predict Fraud
Show Missed
Opportunities
A. Charles
Thomas
People think, if you bring together all
this data, does that mean you're going
to try to sell me more stuff? My
answer is, we should be trying to sell
less stuff. In other words, relevance
and timeliness are really critical.
Source: American Banker, Jan 2015

The Future of Data Analytics:
Necessary Strategy for All Financial Institutions
SOURCE: McKinsey Global Institute

• 64% of CEOs cite loan demand as the top concern in ‘16, up from 44% in ‘15
o Increased pressure from non-traditional competitors
• 48% of CU CEO’s cite “improve sales & marketing methods” as a priority for ’16
• 67% of CU CEO’s cite “use technology for better member service / competitive
differentiation” as a ‘16 priority
Source: “What’s Going on 2016: Cornerstone Advisors Take on Community Bank & Credit Union Priorities
and Technology Plans” Cornerstone Advisors, 1/2016
Why Data Analytics?

Key Steps To Becoming a Data-Driven Organization

Reaching The Summit: Step One

• Assess top priorities for data analytics. Data analytics should be an integral part of strategy
by 2016 and beyond.
• Set goals to improve sales, customer service, cost reduction, regulatory compliance, risk
management and competitive edge. What are future goals, how will you get there?
• Establish a plan to collect and organize data and a way to measure how data analytics can
create long-term value.
• Align business goals and internal culture to maximize data.
• Big data isn’t just for IT folks. In fact, it should be used, primarily, by CXO, Line of
Business leaders and customer facing staff.
• Start the climb now.
Step One: Determine Priorities, Set Goals, Formulate a Plan

Step One: Determine Priorities, Set Goals, Formulate a Plan
The Goal– become a more
significant contributing member
of the local economy by
providing capital and enabling
financial services to small
businesses thereby enabling
them to grow and thrive.

1. Set the over all objective
Profit? - Assets / balances? - Membership? - All of the above?
2. ID Loan but no deposit relationships
3. Commercial but no retail / retail but no commercial
4. ID where we are not the primary FI
Action Item #1: Define Growth

Action Item 2: Divide portfolio into WAR groups
By loan “type”, renewing in the next 3 to 6 months:
1. Above the Weighted Average Rate
2. Below the Weighted Average Rate; member with positive contribution
3. Below the Weighted Average Rate; member with negative contribution
Total Loan Portfolio Above WAR Below WAR

Below the Average Rate –
Negative vs. Positive Member Contribution
1. If the member contribution is positive . . .
2. If the member contribution is negative . . . is there a strategic reason for the pricing?
3. If not, easy data driven Action – we need to get the rate up, expand the relationship
properly or not renew. Not renewing is a negative contribution member is accretive.

Above the Weighted Average Rate
1. Contact well before loan renewal date to renew early
a) Ward off competition
b) Your best members are someone else's biggest targets
2. Focus on retention – more on this later

Action Item #3: Ideal Prospect Profile
1. What characteristics describe your best members?
Geography, # of teller transactions, recurring ACH deposit, recurring debit card trans, high
volume debit card trans, fees, high balance, multiple products, tenure with the credit union, use of
mobile, Ipad app, average monthly deposits, number of internet banking logins, payroll
processing, merchant relationship, corporate card, or a “right mix” of products and services?
2. What is the “right” or “ideal mix”? Most likely, a couple equations result.
3. What are the metrics that most closely correlate with success?
4. What characteristics equate to a positive contribution member?
The goal is to focus business, relationship and referral development on the right members
at the right time while knowing the next product or service to elevate other members - -
the dashboard helps but best answer results from statistical modelling and more on that
soon.

Reaching The Summit: Step Two

Top Considerations For Your Data Analytics Journey:
Staff and budget
• Do you have the budget to hire, train, retain and manage data-savvy tech and analytics
personnel?
Data Collection
• Do you have a centralized data platform from core, loan origination, excel feeds, card
platforms, mortgage systems (8 feeds for a $600MM CU & 4,000 for GS).
Data Compute or Analytics
• Do you have the technological capabilities to collect, cleanse, access, refine and transcend
data warehouse? What data analytic tools are needed to prepare and present data in an
actionable way that guides decision-making?
• To statistically and quantitatively identify “best action” creating a feedback loop that
impacts the lists of segmented members?
Step Two: Assess Talent & Capabilities

Critical Components of Building an Analytics Solution
• Data Warehouse vs. Big Data
• Data increases in size
• Collect multiple sources of data
• Ingest external data sources
• Transformation data into
information and information
into an asset of the institution

Action Item #4: External Prospect Data
CONTACT
TITLE COMPANY NAME MAILING ADDRESS CITY PRIMARY SIC CODE PRIMARY SIC DESC SEC SIC CODE 1 SEC SIC DESC 1
OWNER NEW ATTITUDE PO BOX 255 BARNEVELD 723106 BEAUTY SALONS
MANAGER MOHAWK ELECTRO-TECHNICS INC 8063 STATE ROUTE 12 BARNEVELD 367901
ELECTRONIC EQUIPMENT &
SUPPLIES-MFRS 369902
ELECTRIC EQUIPMENT-
MANUFACTURERS
OWNER BELLINGER'S INC 8584 STATE ROUTE 28 BARNEVELD 753801
AUTOMOBILE REPAIRING &
SERVICE 554101
SERVICE STATIONS-
GASOLINE & OIL
J & L PROFILING LLC 6866 STATE ROUTE 31 DURHAMVILLE 154213 BUILDING CONTRACTORS
PRESIDENT C T EXPRESS INC 5755 STATE ROUTE 46 DURHAMVILLE 421304 TRUCKING
MANAGER TKM TRANSPORT 5769 STATE ROUTE 46 DURHAMVILLE 495302 GARBAGE COLLECTION
J & L PROFILING LLC 6866 STATE ROUTE 31 DURHAMVILLE 154213 BUILDING CONTRACTORS
PARTNER ROGER & RUSSELL LOOMIS INS PO BOX 45 NORTH BAY 641112 INSURANCE
PARTNER ROGER & RUSSELL LOOMIS INS PO BOX 45 NORTH BAY 641112 INSURANCE
OWNER EDDIE'S RESTAURANT PO BOX 502 SYLVAN BEACH 581208 RESTAURANTS 581203 ICE CREAM PARLORS
OWNER EDDIE'S RESTAURANT PO BOX 502 SYLVAN BEACH 581208 RESTAURANTS 581203 ICE CREAM PARLORS
OWNER SYLVAN BEACH DELI MART INC 1104 MAIN ST SYLVAN BEACH 541103 CONVENIENCE STORES 581208 RESTAURANTS
OWNER JK AUTOMOTIVE SVC & SALES PO BOX 361 VERONA BEACH 753801 AUTOMOBILE REPAIRING & SERVICE
OWNER TOTAL BODY FITNESS 8022 STATE ROUTE 12 BARNEVELD 799101 HEALTH CLUBS STUDIOS & GYMNASIUMS

Reaching The Summit: Step Three

Deploy a system that
transforms every day
data into valuable
insights
Understand customer
behavior trends and
purchasing influences to
sustain a competitive
advantage
Identify specific
customer segments
where there is untapped
potential for
profitability
Step Three: Uncover Valuable Insights & Opportunities
Once you collect and cleanse the data, you then need to use your
interface to make valuable insights.

Action Item #5: Who is a buyer?
Overlay UCC Data w Ideal
Prospect Profile
1. ID lien expiration data
2. Note Competitor
3. $ of lien = loan amount
For Retail or Mortgage:
Imagine Zillow Zestimate
updated quarterly

1. Ask for referrals from
top performing
relationships
2. Referrals of prospects
neighbors and
business partners
3. Show expertise in
industry
Action Item #6: Business Development Plan

Reaching The Summit: Step Four

• Build upon descriptive and predictive analytics. Predict what will happen, when it will
happen, why it will happen and what the best course of action is to optimize outcomes
and manage risk.
• Focus efforts on the most promising opportunities resulting in an immediate and
sustainable boost to revenue or business goals.
• Segment customers, predict behaviors, identify and target tailored messages for
effective marketing.
• Determine the optimal action AND measure, stamp and track the action’s impact.
• Incrementally develop best practice by comparing performance of different actions
against a control group.
Step Four: Take Prescribed Action on Newfound
Knowledge Drive ROI

Hardware Infrastructure
Compute, Memory, Storage
Software Infrastructure
Enterprise-ready Open Source
Data Services and Science
Domain Specific Models, Logic and Algorithms + Integrated tools
Business User Experience
User-Centered Design and Visualization + API to other viz tools
Productivity Platform
Collection, Implementation, Operations, Preparation/ETL/ELT, Access
= Decision Enablers
End Goal: Build Advanced Data Science for Deterministic
and Probabilistic Decision Making
Prescriptive
Analytics
Predictive
Analytics
Deterministic or
Prescriptive
Decision Making
Cause-and-Effect
Probabilistic
Decision Making
Likelihood Scenario
Inquisitive Analytics
Descriptive Analytics
Data Management

With Advanced Analytics –
statistically identify Action to Success and Best Practices
Do you send a “welcome to the Credit Union”
letter at 2 weeks / 2 months?
Make it specific, make an offer, track the success of
the Action / offer
Can you define and measure success of an Action?
Can you present specific messages via Internet and
mobile channels?
Power next product model at the teller line?
Do you segment areas of opportunity and do you
know the best action to take?

Action Item #7: Organic Growth
Grow the line of business- not just lending
1. Loans but no deposits?
2. Primary relationship?

Action Item #8: Reduce Losses
Small business that write a high volume of checks but don’t have positive pay
1. Sell Positive Pay – improve retention and non-interest income
2. or member signs limitation of liability – won’t as CU for help should they
experience check fraud
Or fee waivers for members with a negative contribution

Action Item #9: More Organic Growth
Grow the line of business not just lending
1. Small business but no merchant services with Credit Union
2. Search transactions- identify all small business accounts with ACH deposits that
include description “MC” or “Visa” or “merchant” or “services” or “settlement”

Action Item #10: Even More Organic Growth
Grow the line of business not just lending – do they use Cash Management Services?
Payroll processing, number of cash management log-ins, remote capture, corporate card, etc.
Define success as increase in loyalty measure, non-interest income, or member contribution
By Officer, Branch, Region, new accounts this year, new members with loans & shares this year
Select Small Business Account Select “without” (x) type of service

Fifth & Final Step to Reach the SummitReaching The Summit: Final Step

Data analytics offers more than just metrics of a Credit Union’s performance—analytics can be
the key to enhancing and maintaining a vibrant workplace culture.
• A great addition to an intuitive and relationship model
• Decision-making process becomes more transparent and fact-based
• Goals are aligned when team members see the value and power of data analytics
• Specific lists, with quantitatively proven best action, equates to earnings through incentives
• Sparks the entrepreneurial spirit and promotes “Learning Organization”
• Employees gain an increased sense of value and ownership when able to solve challenges and
quickly act on opportunities identified through data analytics
• Incentive and reward plans are integrated to strategic goals as analytics tracks action, outcome and
ROI
• Credit Union attracts the best area performers
Reaching the summit- Cultural Transformation

Action Item #11: Loyalty
Calculate a “Loyalty Measure” for each relationship
1. Provide early warning to relationships that may
be leaving
a. Transaction volume down
b. Decreasing digital engagement
2. Determine the most retentive product
a. Make sure this product is used by above WAR relationships
Imagine increasing average member life from 4.5 to a 6 year
average life- has a significant impact on member contribution and
franchise value

Action Item #11: Loyalty Measure
1. Loyalty Measure equation begins
based on intuition, national stats and
best practices
2. Loyalty Measure is statistically
derived and is unique and specific to
each individual CU
3. The equation may become equations
as different geographies, product
mixes, average life, member
contribution or other characteristics
warrant a more specific equation

Action Item #12: Learning Organization
Culture of recurring best practices
1. Who performs best with small business
a. Where are they successful
b. What do they do differently
2. Share a case study of success
a. Supporting data drives interest
b. Document case study?
c. Have a role-play GoToMeeting?
d. Lift the performance of all

Baker’s Dozen – Item #13: Daily Feedback
1. Incentive Compensation Scorecard to
keep focused
2. Estimate / forecast production
a. ID any issues early while there is
time for correction
3. Information to team members,
downstream and management
4. Ensure incentive compensation
supports strategic objectives
a. Adjust based on feedback and
analysis

The Ascent to the Summit

Recap of Action Items
1. Define growth objectives
2. 3 groups for WAR
3. Ideal Prospect Profile
4. Add external data
5. ID who is a buyer
6. Plan on how to get access
7. Grow the LOB, get the deposits
8. Reduce losses
9. Grow the LOB, merchant services
10. Expand the footprint, cash management
11. Loyalty Measure, combat attrition, focused
cross-sell, increase average life
12. Learning organization, share the success
13. Daily Feed back through incentive module

If you have any additional questions, please reach out to me directly at
Steven.Simpson@Saggezza.com
(786) – 859-4100
Or
Blair.Gatchel@Saggezza.com
(404) 748-1597
Any Questions?

About Saggezza
Saggezza is a global solutions provider with deep links and insights into the
technologies shaping the next generation of business. We help ambitious
businesses unlock the power of their enterprise data to accelerate growth and
uncover opportunities. We combine software development and implementation
expertise with our next-generation data analytics platform to turn our
customers into data driven enterprises. We have offices in North America,
Europe and Asia. For more information, visit www.saggezza.com.
North America
Global Headquarters
200 West Madison Street,
Suite 1800,
Chicago, IL 60606
Tel: +1 800 460 5912
Tel: +1 312 267 2929
West Coast Region
3945 Freedom Circle,
Suite 630,
Santa Clara, CA 95054
Tel: +1 408 427 3435
Europe
United Kingdom
63–65 North Wharf Road,
Paddington,
London,
W2 1LA
Tel: +44 20 7680 8630
Asia Pacific
Bangalore
Unit 3, Level 3, Block B,
Bagmane Laurel,
Bagmane Tech Park,
CV Raman Nagar,
Bangalore 560 093
Tel: +91 80 42838585
Fax: +91 80 41161358
Chennai
IIT Madras –
Research Park,
9th Floor,
Kanagam Road,
Taramani,
Chennai – 600113
Tel: +91 44 66800900
Tavistock Place
Sunderland, Tyne and
Wear SR1 1PB
United Kingdom
Contact
Steven Simpson
SVP Financial Institution Solutions
steven.simpson@saggezza.com
(786) 859-4100

Using Analytics to Grow the Small Business Portfolio

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