OptiRate for Banks & CreditUnions

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Profitable Customer Acquisition for Banks and Credit Unions. Traditional marketing strategies are ineffective and inefficient resulting in significant missed opportunities for Community Banks and Credit Unions. OptiRate offers a unique approach that enables Banks & Credit Unions to attract profitable customers at a fraction of their current customer acquisition costs.

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OptiRate for Banks & CreditUnions

  1. 1. Profitable Customer Acquisition CONFIDENTIAL & PROPRIETARY
  2. 2. Does your Bank need to do any of the following? Ø  Grow the number of customers who have more than just 2-3 products? Ø  Improve asset growth? Ø  Improve profitability? Ø  Grow your footprint without spending millions on adding new branches and staff? Ø  Reduce marketing costs or make your marketing spend much more efficient? CONFIDENTIAL & PROPRIETARY 2
  3. 3. All of these imperatives are highly correlated to thesize and quality of your Bank’s customer base Asset Yield NII Assets COF Deposits Service Fee Profit Net Fee Customers Income Service Cost # Services Staff Operating Distribution Expenses Channels Regulatory CONFIDENTIAL & PROPRIETARY 3
  4. 4. But traditional customer acquisition strategies areprohibitively expensive and fail to generate theneeded volumes $200+ CPA 5 Purchases 10,000 emails $500 - $750 CPA 2 Customers 5,000 ad impressions $300 - $600 CPA 25 – 50 responses 10,000 DM pieces $1,000+ CPA CONFIDENTIAL & PROPRIETARY 4
  5. 5. The high cost of Marketing initiatives is shocking –especially given the opaqueness of the quality of theacquired customer Advertising Costs – Savings, CDs Advertising Costs – DDAs Advertising costs as percent of new funds Advertising costs as percent of new funds 32 of the 50 largest Retail Banks 32 of the 50 largest Retail Banks 1st Quardrant 0.25% 1.92% 2d Quardrant 0.44% 5.00% 3rd Quardrant 0.88% 33.00% Bottom Quadrant 5.56% 286.00% By comparison, the average 12mo CD rate is 0.40%Source: Banks’ New ROA – Return on Advertising, Aite Group, March 2009 CONFIDENTIAL & PROPRIETARY 5
  6. 6. The QUALITY of customer acquisition programs is far from assured, despite the high cost and risk Destroy 80%+ of Customer 130% Base Profit Earn 10% - 20% of Customer 230% Base ProfitSource: Jack Henry December 2012, Customer Profitability Distribution CONFIDENTIAL & PROPRIETARY 6
  7. 7. It doesn’t take much to have a large impact –Just a 5% change in customer base can moveprofitability by nearly 40% 20% of 160% customer base 140% 80% of customer base 40% 120% Gain Profitability 100% 37% 80% loss 60% 40% 20% 0% Baseline 5% decrease in 5% increase in profitable profitable customer base customer base CONFIDENTIAL & PROPRIETARY 7
  8. 8. Q: What are the best tactics to grow the 20% of customer base that is capable of driving growth & profitability?•  All Consumers are SHOPPERS, and All Retail Banking Products are Marketed based on Price•  Price is the KEY factor for customer acquisition CONFIDENTIAL & PROPRIETARY 8
  9. 9. Loans are an attractive first product sale, but competition is fierce and growth is non-scalable Loans •  Intense competition •  Pricing / terms dictate winsCompetition •  Too much $ chasing to few deals •  Larger competitors “buying” deals •  Difficult to reach target customer •  Time consuming Customer •  One-at-a-time effortSegmentation •  Prospecting “in the dark” •  Very high acquisition cost •  Lack of required quality ROI and quantity of leads •  Requires experienced loan officers •  (mostly) Strong ROI •  Likely cross-sell opportunities Cross-SellOpportunities CONFIDENTIAL & PROPRIETARY 9
  10. 10. Checking Accounts offer limited opportunity to engage with the right customer on the right terms Loans Checking Accounts •  Intense competition •  Highly competitive •  Pricing / terms dictate •  Commoditized Product wins •  Pricing (fees,Competition •  Too much $ chasing to incentives) wins few deals •  ‘Me too’ offerings •  Larger competitors “buying” deals •  Difficult to reach target •  Segmentation difficult customer •  Offering unattractive to •  Time consuming most profitable Customer •  One-at-a-time effort customer demographicSegmentation •  Prospecting “in the segments dark” •  Very high acquisition cost •  High Acquisition Cost •  Lack of required quality •  Mostly unprofitable and quantity of leads customer segment ROI •  Requires experienced •  Negative ROI loan officers •  (mostly) Strong ROI •  Likely cross-sell •  Customers likely to be opportunities open to cross-sell Cross-Sell message •  But most will notOpportunities want / need additional services CONFIDENTIAL & PROPRIETARY 10
  11. 11. Most Checking Accounts generate non-recoverable operating losses Average DDA Revenue DDA Revenue and Costs by Account Balance 2 Profiles of $800 60% Profitable Customers $7 $30 $25 50% $600 Average Revenue % Customers 75%+ Customers Generate 40% per Account $138 Operating Loses $16 $400 30% After $20 reduction Average Checking Account Costs related to Durbin 20% $120 $200 After $30 reduction 10% related to Reg E Opt-In $0 0% Fee ge d me eg nt OD han prea nco mR ccou NSF < $500 $500 - $1,000 - >$3,000 terc erest S ther I ear-Ter king A Transactors $1,000 $3,000 it In Int O :N cDeb Less Che Avg Average Account Balance Revenue % Customers Source: Affinion Source: Revenue: Top Trends in Retail Banking by Celent % Customers: Action Marketing Webinar “The future of Checking – Fee or Free?” CONFIDENTIAL & PROPRIETARY 11
  12. 12. Few consumers switch Banks; switchers are moreselective and exhibit limited loyaltyCustomer Acquisition Retention / Wallet-Share8.7% Consumers who switched their primary 43% Customers who purchased additional Bank in 2010 banking products from their primary Bank 1.9 Number of Banks considered during a 63% Banks that experienced greater price sensitivity switching process in from their customer 2010 base Banks reporting8 - 12 Number of Banking providers used by a 59% decreased customer typical consumer loyalty / more “shopping around” CONFIDENTIAL & PROPRIETARY 12
  13. 13. CDs provide for easy differentiation to attract the most profitable customer segment Loans Checking Accounts CDs •  Intense competition •  Highly competitive •  Limited competition •  Pricing / terms dictate •  Commoditized Product •  Commoditized Product, wins •  Pricing (fees, but can be highlyCompetition •  Too much $ chasing to incentives) wins customized few deals •  ‘Me too’ offerings •  Pricing wins •  Larger competitors “buying” deals •  Difficult to reach target •  Segmentation difficult •  Ease of targeting most customer •  Offering unattractive to profitable customers •  Time consuming most profitable •  Ability to target Customer •  One-at-a-time effort customer demographic consumers in selectedSegmentation •  Prospecting “in the segments geographies dark” •  Very high acquisition cost •  High Acquisition Cost •  Low acquisition cost •  Lack of required quality •  Mostly unprofitable •  Strong ROI assuming and quantity of leads customer segment aggressive cross-sell ROI •  Requires experienced •  Negative ROI effort loan officers •  (mostly) Strong ROI •  Likely cross-sell •  Customers likely to be •  Customers likely to be opportunities open to cross-sell capable of supporting Cross-Sell message additional products & •  But most will not servicesOpportunities want / need additional •  Requires a structured services & aggressive cross-sell effort CONFIDENTIAL & PROPRIETARY 13
  14. 14. What if there was a risk-free, performance-basedsolution that delivers the RIGHT consumer segmentto bankers?FI Needs Consumers Want ü  Attractiveü  Grow Affluent Rates Customers ü  Screens HNW customers via large high(er)-yield CD depositü  Increase ü  Real-time profitability account open ü  Pays for all marketing &ü  Build customer transaction costs ü  Safe & Sound base in new FIs territories ü  Provides a turn-key solutionü  Decrease ü  Unbiased ü  Real-time campaign marketing costs advice management CONFIDENTIAL & PROPRIETARY 14
  15. 15. FIs are positioned to focus on valued-added cross-sell activities with consumers most likely to respondto the offers OptiRate is your “virtual” branch that does not stop delivering resultsENGAGE Your Bank’s WOW!Prospective Customers Relationship ManagementACQUIREAffluent CustomersIMPROVEProfitability Through NII AndCross-SaleEXPANDInto New Markets BeforeDeveloping BranchesCOMPETEEffectively Against OtherFinancial InstitutionsSLASH Enabling your Bank to refocus its efforts on cross-Marketing Expenses sell of customer base that is highly likely to be receptive. CONFIDENTIAL & PROPRIETARY 15
  16. 16. Consumers have unbiased ability to identify Banks &Credit Unions that value their business High-yielding CDs Simple & intuitive UI Safe & Sound Content to attract and Financial Institutions inform consumers CONFIDENTIAL & PROPRIETARY 16
  17. 17. OptiRate-referred customer base is more cross-sell friendly and thus more profitable with 50%-80% lower customer acquisition cost FI Benchmark OptiRate Customer Acquisition Customer Acquisition FI Cost Cost Savings Branch $328 $70 $258Customer Acquisition Online $143 $70 $73Customer Acquisition Source: Online and branch acquisition costs: Brintech, Cass Bettinger & Associates and Amalfi Consulting, WIB Newsletter, November 2009 CONFIDENTIAL & PROPRIETARY 17
  18. 18. Return on investment is achieved one the transaction $1,400,000 Just 1,000 new 6% Asset Yield Customer $1,200,000 relationships can yieldIncremental Net Revenue $400k - $800k 5% Asset Yield annually $1,000,000 4% Asset Yield $800,000 $600,000 $400,000 $200,000 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Number of Customers CONFIDENTIAL & PROPRIETARY 18
  19. 19. Next StepsGetting started is simple & fast… We offer Simple New Affluent agreement 1,000+ Customers No Incremental net long-term $500,000+ revenue commitments 4 week go-live with limited IT $20 Million+Improved liquidity resources Campaign $$$ Millions Convert into funding wholesale management PROFITABLE @ ~1hr / mo customer relationships CONFIDENTIAL & PROPRIETARY 19
  20. 20. Affluent Customer Acquisition Serge Milman Serge.Milman@OptiRate.com 415.260.3403 (c) www.OptiRate.com/Banks | http://BankBlog.OptiRate.com 800.319.6784 x600 (o) CONFIDENTIAL & PROPRIETARY 20
  21. 21. About OptirateLeadership Team Partners Robbie Vann-Adibé, Chairman Serge Milman, Founder / CEO Associations Kay Nichols, Advisor ç EVP, FIS Global Bryce Miller, Advisor ç SVP, Community Bank CONFIDENTIAL & PROPRIETARY 21

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