In a rising rate environment that is coupled with strong economic growth achieving deposit goals is the best way to … These tools can help identify specific fee, balance and service combinations that customers prefer. The second opportunity is to encourage more profitable customer behaviors, channel usage and transaction activity. In-depth conversations with the senior leaders on the topic, “What is our core business?”, is the preferred starting point.An evaluation of the overall performance of the core business follows. Global Banking … Overdraft (OD) fees have been severely constrained, and the situation will only worsen as new regulations from the Consumer Financial Protection Bureau (CFPB) further limit this important source of revenue. For many years, corporate strategy languished in banking circles. But that tide is changing. Full automation of collector actions and borrower outreach allows banks and credit unions to increase loan volume and process required collections steps faster, with the same or fewer staff members. Low interest rates continue to put pressure on margins. Editor Note: David Kerstein has updated this article. Here are five suggestions for such a different approach: Change the customer acquisition model. Â. We expect checking account economics to improve with rising interest rates. He can be reached at [email protected]. There are multiple ways to monetize data. Although conventional wisdom commonly warns of the death of retail banking, community banking is alive and well… but could be doing much better. CARM-Pro™ Collection and Recovery Manager – Professional™ is a dynamic debt collection system that maximizes your collections team’s productivity, enabling them to work more past due accounts than ever before. Collectors can then efficiently customize and schedule all debtor outreach via automated, tracked and recorded delivery of email, postal mail, SMS and dynamic voicemail. The sold, insured, and guaranteed loans that your bank or credit union maintains are under more scrutiny than ever before. Bank of America Corporation’s generic strategy for competitive advantage (Porter’s model), intensive growth strategies (Ansoff Matrix), and business models are designed to ensure that … They are large enough to acquire the necessary talent pool, but small enough to create a “one-bank” model that avoids the silos that impede larger financial institutions. Another type of specialist will be masterful at cross sales … IBS pioneered customizable debt collection technology to solve the critical challenges of increasing bank profitability, growing loan volume, and reducing risk for all financial institutions. Increasing deposits is essential to sustainable, profitable growth strategies. The type of growth or expansion options you choose will dictate your potential funding options. To get the most out of growth, banks need to define what growth they want, how much-increased risk they are willing to take and how to allocate resources to accomplish that required growth. 1.   Lending to clients or members with low credit scores can result in greater delinquencies, but financial institutions can minimize this risk by leveraging CARM-Pro™ to enforce more aggressive debt collection policies. ARM-Pro™ debt collection software enables community banks to increase net income by improving debtor communications. Collectors can leverage the power of CARM-Pro™ debt collection software to automate much of the manual labor of collection work. However, there is a tendency to think that consistent process in customer conversations somehow indicates a “robotic” interaction. Shifting customer activity out of the branch reduces cost-to-serve, improving product profitability. In addition to reducing process costs, automation tools can help improve staff … Standardized neighborhood marketing programs build on micro-market analytics to focus the right tactics on the right trade areas. This helps banks and credit unions manage credit risk and maintain reliable audit records. Collector workflows automate customized borrower outreach, to encourage faster payment and ensure that no communication steps are missed. Local search engine optimization (SEO) ensures prospects will find you online. We believe community and regional banks have a unique opportunity to leverage a diversified financial services model. Sales effectiveness is not just a function of knowledge, but also of discipline and coaching. Then CARM-Pro™ will execute efficient workflows and sequencing of all required compliance steps. Five strategies for growing revenue. These prospects are “findable” in that targeting strategies can locate prospects with a high potential for consolidation. CARM-Pro™ diligently enforces your financial institution’s strategy by enabling your collectors to store and leverage the data you require into unlimited inclusion and exclusion debtor selection parameters (for any action – communication, work list, etcetera) within CARM-Pro™. Furthermore, the “no fee zone” is expanding. Indiana, Penn.-based First Commonwealth Bank re-entered the mortgage business. This scalable, user-friendly software also allows for unlimited collector assignments, and quickly adapts to enforce changes to the ever-changing economic environment, policies and regulations that affect your debt collection and recovery strategy. … Lack of the right sales process and lack of the right predictive analytics that target the right customer. Financial institutions are simply unable to charge for services that were once common sources of profit.   Financial institutions who increase their loan portfolio by lending to borrowers with lower credit scores gain a higher interest spread and greater interest income. However, this high-end collection system technology allows for earlier and more frequent debtor communication, and manages risk to avoid a corresponding increase in losses and to gain a greater yield on higher interest loans. Another is to create new … Why is penetration so low? Sean C. Payant, Ph.D., is Chief Consulting Officer at Haberfeld Holdings, a data-driven consulting firm specializing in core relationships, customer, and profitability growth … Set Yourself Apart from Competitors (in a Good Way!) This boosts productivity so much that it frees collectors to work prior charged-off accounts – thus increasing bank profitability by recovering non-interest income. The grass isn’t always greener on the other … Every bank or credit union has its own unique banking strategy for growth. However, increasing loan volume by lending to borrowers with lower credit scores yields a higher interest spread, thus more interest income.Â. Historically, banks used direct mail to generate inquiries and branch lobby management to drive sales. The bank of the future will have specialists who can call on business accounts and regularly pop one million-dollar checking account after another. Many banks have recognized that they need a truly differentiated … Lower credit scores can also lead to high delinquency rates.  When financial institutions lower their standard for credit approval in conjunction with enforcing more aggressive collection policies on new loans, they can minimize delinquency risk by leveraging powerful CARM-Pro™ debt collection technology.  CARM-Pro™ ensures consistent follow-through with frequent, multi-channel debtor communications that lead to faster loan repayment. However, direct mail is increasingly less efficient as customers communicate by text and email. Simple presence in the community doesn’t automatically create gravity and attraction – that requires more focused programs. With CARM-Pro™ you can now “soften” your credit standards, open a much larger market, and allow your bank to successfully manage credit risk with high end collection system technology. Financial institutions have two levers to press in that scenario: improved pricing analytics that build revenue, and improved cost drivers that reduce delivery and service expense. Banks are hungry for growth: hungry for new customers, for deeper and more profitable relationships with existing clients and for better alignment of expense against revenue opportunities. Sales excellence should focus on consistent, structured conversations at account opening and other significant client discussions. Tools exist to predict how customers will value financial products, and what price they are willing to pay, with a high degree of accuracy. Peoples Bancorp of Marietta, Ohio, has thriving wealth management and insurance subsidiaries. PNC Bank took a similar approach, which enabled them to drive more branch traffic and acquire accounts at a lower cost. In addition to the financial fallout, COVID-19 is reshaping the global banking industry on a number of dimensions, ushering in a new competitive landscape, stifling growth in some traditional … This website uses cookies and third party services. This proven software’s comprehensive … This empowers collection agents to fully comply with your institution’s policies, as well as state and federal regulations, to minimize the risk of non-compliance. It makes them more efficient to operate, but also means they lose the marketing “billboard” impact of a large facility. 4 The future of growth and the banking industry In the complex environment that defines the banking industry, the simple fact remains that strong customer relationships are still the most important contributor to a bank’s growth … But its growth is expected to slow over the next two years, making for a … Start at the Top. CARM-Pro™ debt collection and recovery technology by IBS is the sought-after solution for banks and credit unions seeking better banking strategies for growth. Most bankers understand that excellence in … At the same time, encouraging non-branch transactions increases interchange fee income and helps offset declines in OD and other miscellaneous fees. Diversify services. This robust debt collection system enables your collection staff to execute your financial institution’s collections strategy. Sales effectiveness is not just a function of knowledge, but also of discipline and coaching. CARM-Pro™ automatically records all actions taken by each collector, by date and time. When collectors leverage CARM-Pro™ technology, key collection steps are automatically completed and documented. With compliance seemingly always at the forefront, policies … Banks and credit unions can easily and accurately manage credit risk with CARM-Pro™ debt collection software.  This is because CARM-Pro™ efficiently streamlines and automates all the collection tasks defined by your internal policies and external entities (investors, insurers, and guarantors).  Without CARM-Pro™, even the most experienced collectors do not perform and fully document every single required action at the required time. In our perspective, A Profit Growth Strategy for Small Business Banking, we detail a new strategy to grow share in this high-profit segment by effectively targeting the competition's best customers, … Consumers report a similar willingness. But achieving that growth is a difficult challenge. Finding topline revenue growth is the core issue facing the industry, and this begs for new pathways to success. For example, the concept of “neighborhood marketing,” pioneered by Umpqua Bank, is based on embedding local micro-market strategies into the marketing and sales process, which can significantly reduce customer acquisition cost. There has long been a disconnect between the willingness, even preference, of customers to consolidate multiple relationships at their primary financial institution, and banks’ ability to effectively execute strategies that accomplish this. In the contemporary banking environment, state and federal regulators increasingly emphasize collection compliance. Community banks are more dependent on deposit fees compared to larger institutions and this makes them vulnerable to a transactional model where consumers acquire low margin products from their primary bank but use specialized providers for high-margin products, such as investments and loans. BAI Banking Strategies Your trusted source for actionable insights and groundbreaking ideas. The best strategy to increase a bank or credit union’s loan portfolio is to create clearly defined policies, reduce credit standards, and use CARM-Pro™ debt collection technology to diligently enforce them. Executive managers and board members are typically uncomfortable with lowering their institution’s credit approval standards. © 2020 Intelligent Banking Solutions, Inc. All Rights Reserved, Banking Strategies for Growth: How to Grow Income & Reduce Risk, Increase Bank Profitability with Customizable Debt Collection Technology, Increase Loan Volume and Decrease Delinquency Risk for Your Bank or Credit Union, Execute Your Banking Strategies for Growth with Scalable Collection & Recovery Solutions, How to Mitigate Risk in Banking: Use CARM-Pro™ Debt Collection Software, Frequently Asked Questions About Banking Strategies for Growth, Pre-alert debtors of reoccurring near term (future) payments due, Initial contact immediately at past due status, Much earlier subsequent debtor communications, More frequent debtor communication during the delinquency, Communicate to debtor via any debtor preferred communication channel: email, SMS, USPS, deliver pre-recorded blended voice messages or simplified dialing, Provides additional communication channels (pre-recorded voicemail, SMS, email), Expands the collection period beyond the daily hours that collectors are typically in the office, Increases the probability of debtor contact and subsequent follow-through with payment, Reminds borrowers of payment deadlines and holds them accountable. Companies: Our Global Banking business works with virtually every company in the S&P 500. The consulting firm encourages banks to better evaluate... 2) Increase productivity using … As one C-level banker stated in response to our recent industry survey, “What we’re doing now isn’t working anymore; we have to take a different approach.”. The process of identifying profitable growth opportunities most often begins with the Core Business1, that is, the products, services, customers, channels and geographic areas that generate the largest proportion of revenue and profits. BAI is Bank Administration Institute and BAI Center. The Right (and Necessary) Policies. That translates into fewer natural sales opportunities. CARM-Pro frees up time for collectors to work prior charge-offs and recover non-interest income that increases bank profitability. Scalable CARM-Pro™ empowers bank & credit union executives to proactively implement bank branch growth strategies. Combined with focused sales processes and product-bundling strategies, these methods produced an 85% improvement in household when implemented by one of our clients. Collection steps that are missed, performed late, and improperly documented can lead to fines, penalties, and litigation losses for your financial institution. A framework is presented for thinking about the various avenues through which banks can pursue growth. New Bank Strategies Require New Operating Models Disruptions in banking are pushing banks to take more explicit strategy decisions. The lower acquisition cost is not just an end in itself, but it also allows for re-allocation of investment to future digital growth strategies. During the go-go 1990s and most of the 2000s, too many bankers pursued indiscriminate growth, had a broad appetite for risk and … BAI © 2020 All rights reserved. In our survey, 78% of respondents reported that improving sales skills was their bank’s primary strategy for growth. However, as the economy strengthens, these gains may be offset by competitive pricing pressure. Staging of customer traffic patterns, merchandising placement and teller referrals were keys to a robust sales process. Yet, in the past, investment in training has not been sufficient to reverse the downward trend in branch sales productivity. Staff productivity. Attack is the best form of defence, and growth strategies may help banks to remain competitive in a fast-moving and rapidly-changing financial services landscape. As an example, a large regional bank that we know used data analytics and market research to successfully restructure demand deposit account pricing, resulting in a net increase of over $60 million in revenue. CARM-Pro™ user-friendly software also provides enhanced executive-level tracking and reports that support your bank or credit union leaders’ efforts to develop and enforce banking strategies for growth. Any reduction of credit standards typically raises concern among executive management. San Antonio, Tex.-based Frost Bank has a well-integrated approach to delivering financial services, even dropping the term “Bank” from their branding in favor of “Frost: Banking, Investments, Insurance.”. Banks need to re-establish the branch as a destination, a place where people want to go versus a stop for an infrequent errand. One powerful tool to enhance value is to identify account “twins” and consolidate them into a single, higher value relationship. In order to execute your treasury agenda, gaining senior-level buy-in is crucial. According to the … Fifty-five percent of the owners of small and medium sized enterprises are willing to consolidate their personal and business relationships at the same financial institution, according to a BAI Research report. Utilize data analytics to improve fundamental product economics. Furthermore, branches are becoming smaller. Yet, we know that the majority of balances are not consolidated. The few “experience leaders” emerging in retail banking are generating higher growth than their peers by attracting new customers and deepening relationships with their existing customer base. … This involve… This includes discussion of market penetration, market development, product development and diversification together with evaluation … The best way to mitigate risk in banking is to leverage CARM-Pro™ to enforce your financial institution’s policies and protect the integrity of your banking process using automated debt collection software. Get more work done, with the same staff, deploying comprehensive CARM-Pro™ automation capabilities. Every bank and credit union develops clearly-defined lending standards. It also decreases risk by not compromising the frequency of follow-up communications with delinquent debtors. Several community banks are gearing up credit card operations. You can also raise external … Integrate your current banking policies, compliance strategy definitions and requisite collector actions to CARM-Pro’s unlimited database, and leverage full or collector action initiated work flows. Collectors gain a comprehensive 360-degree view of all borrower accounts, including the status of delinquency and data from their institution’s primary servicing system, which saves time and ensures compliance. We see continued growth in our digital and mobile channels, with 37 million digital banking users; nearly 27 million are active mobile banking customers. Growth strategies Banks can’t ride fee income gravy train much longer Noninterest income has bolstered profits this year. Most bankers understand that excellence in operational process is best achieved by consistency. The road ahead cannot be a matter of, “train them on products and let them figure it out.”. McKinsey recommends that banks: 1) Improve risk management with powerful analytical tools. Mr. Kerstein is president of Austin, Tex.-based Peak Performance Consulting Group, which specializes in community and retail banking strategies. Early analysis suggests potential reductions in OD revenue in the range of 25% to 50%, with the impact beginning in late 2016. Efficient workflows and automated outreach allow for earlier and more frequent debtor communication. Jeanne Pinder Sep 26, 2019 Digital transformation’s top 10: The impact factors that matter As new fiscal … Customers are already migrating toward self-service channels, but the most expensive channel, the branch system, remains the primary point of contact. CARM-Pro™ debt collection and recovery technology by IBS is the sought-after solution for banks and credit unions seeking better banking strategies for growth. This scrutiny necessitates risk mitigation with stringent debt collection processes and consistent follow through, as a single compliance error can expose your bank to the risk of significant loss. The opportunity is compelling. Expand relationship depth. If bank financing isn’t possible, you’ll need to use your own internal funding. Change the customer conversation. According to the most recent FDIC Quarterly Banking Profile, “revenue growth has been modest and net interest margins continued to decline.” Although interest rates will inevitably start to rise when the Federal Reserve raises rates and this will help loan yields, it will also trigger competitive pressure on deposit rates, limiting improvement in the margin. For example, earlier and more frequent outreach, via the debtor’s preferred method (email, SMS, voice, or USPS) helps increase net income by reducing delinquencies, preventing some loan charge-offs, and lowering operating costs. This proven software’s comprehensive features empower financial institutions to grow their loan portfolio, increase income, and reduce risk. Fewer customers are visiting branches as routine monetary and service transactions migrate to other channels. Umpqua’s marketing spend, measured as a percent of assets, is only 65% of the industry average because of its adoption of neighboring marketing. The first is for a bank to use its internal data more effectively for its own operations by adding new analytics capabilities. 100% Committed to Bank and Credit Union Collection and Recovery, Home » Banking Strategies for Growth: How to Grow Income & Reduce Risk. Highly … There are barriers to the development of … Use your own internal funding, direct mail to generate inquiries and branch lobby management drive... Execute efficient workflows and automated outreach allow for earlier and more frequent debtor communication issue facing the industry and... Retail banking strategies routine monetary and service combinations that customers prefer credit unions seeking banking. 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