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

80 70 60 50 40 30 20 10 0

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 Summit Reaching 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

[email protected]

(786) – 859-4100

Or

[email protected]

(404) 748-1597

Any Questions?

mailto:[email protected]















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

[email protected]

(786) 859-4100







Using Analytics to Grow the Small Business Portfolio

Technology

Transcript of Using Analytics to Grow the Small Business Portfolio