NOVEMBER 20249A roadmap is essential for bank executives seeking to address what we believe aligns with one of today's key business challenges--deposit strategy--while also accommodating the top priorities of technology leaders, including data monetization and generating greater value with fewer resources.Begin with the End in MindSuccessful analytics initiatives begin with defining business success and outcomes, championed primarily by business leaders and subsequently supported by technology teams and partner vendors. As straightforward as this may seem, many financial institutions falter from the outset due to the lack of clear success metrics, ROI benchmarks, and resource allocation, often stemming from insufficient top-level commitment. This lack of commitment is starting to reverse course. To illustrate, let's delve into a framework for a successful deposit data analytics initiative in the present landscape. Consider the likely scenario where a bank must replace $250 million of attrition in non-maturity deposits at today's rate of 1.00% with wholesale funds or CD specials at 5.5%. This translates to an additional interest expense exceeding $11 million. The problem is unmistakable, and the ROI benchmark is glaring, but the subsequent challenge is to maximize deposit strategy outcomes and determine the role of data analytics as the guiding light.Leveraging Data and Predictive Analytics for Competitive EdgeIn the realm of deposit analytics, accessing competitor deposit rates and historical deposit pricing data is common. Yet, a pivotal question emerges: Can this retrospective analysis alone foster a competitive advantage and deliver a substantial ROI? How can data and analytics effectively combat deposit attrition, or is this erosion of deposits an unavoidable pattern? Can deposit product pricing be optimized in a more innovative way? Our experience underscores that successful deposit analytics strategies encompass a robust historical dataset alongside forecasts of future trends with actionable insight.Data to Support Your NarrativeOver the past year, how much deposit attrition and migration has your institution witnessed? Where did these deposits go? Why did they leave? How will the portfolio evolve going forward? Regrettably, many institutions take the easy route of weaving a qualitative story that implies inflation or disintermediation into higher yielding Treasuries or money market fundsas the sole drivers of deposit attrition. Is this story true? Institutions driven by data acknowledge the necessity of substantiating their storyline with concrete evidence. In fact, the true return on investment may hinge on differentiating between relationships that shifted to Treasuries or moneymarket funds and those relationshipswho can be targeted for meaningful growth opportunities or comeback campaigns. Defensible PredictionsMost deposit data analytics concentrate on historical analysis, offering limited foresight into future scenarios. This stems from a mix of factors encompassing resource constraints, data availability, and a prudent skepticism towards anything reminiscent of clairvoyance. Data-centric institutions comprehend that an immaculate prediction is not the ultimate yardstick for success. Instead, the emphasis lies in forming rational and defensible predictions that steer strategic decisions. For instance, institutions might harness predictive analytics to gain deeper insights into specific deposit attributes, optimizing pricing efficiency, isolating deposits at risk, and informing the path for new product initiatives. Tools in The ToolkitThe upcoming year is positioned to present one of the most demanding environments for deposit acquisition in recent history. Advanced data-driven technologies, including predictive analytics, have progressed more rapidly than anticipated by many in the industry, resulting in significant returns on investment. Institutions that proactively engage in the appropriate data-driven initiatives will unlock a distinct, enduring competitive advantage. BCAdvanced data-driven technologies, including predictive analytics, have progressed more rapidly than anticipated by many in the industry, resulting in significant returns on investment
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