Monitor These Data Points for Improved Bank and Credit Union Growth & Service

Steve Swanston, Executive Vice President

In today’s highly competitive environment, financial institutions cannot rely solely on growing new account openings in order to stay ahead of the competition. The truth is, community institutions are extremely adept at retaining account holders once they come in the door. In fact, the majority of account closures are the result of elements beyond the institution’s control (such as job loss, relocation, etc.).


Financial institutions must, instead, look for ways to increase transactions of existing accounts, primarily through driving debit card activity, which can make up for flat or even negative account growth. The key to doing so is to consistently monitor and measure critical account data points and then modify your procedures, especially at account opening, accordingly.


Data Point #1: Debit Card Take Rate


Getting your bank or credit union’s debit card into the hands of your customers or members at account opening may be one of the most important activities that happens at the new account desk. Do you know the value—the additional dollars added to your revenue—that linking an active debit card represents? (Read on for the answer!)


The most recent Federal Reserve Payments Study shows that non-prepaid debit card transactions (those debit card payments generally associated with accounts at financial institutions) grew by 12.4 billion from 2012 to 2015, driving almost all of the growth of the larger debit card category. (The Federal Reserve Payments Study 2016.)


Further, the TSYS 2016 U.S. Consumer Payment revealed that debit is the preferred payment type for everyday spend transactions, such as supermarket/grocery, gas station and discount store purchases, as well as for bill payments. In fact, the average debit card user swipes a debit card 86 times more per year now than in 2009!


Overwhelmingly, consumers have decided they prefer to transact their daily purchases with a debit card; and financial institutions need to embrace this fact and ensure they provide their debit cards to account holders for greater service and income.


The Value of the Take Rate

According to Velocity Solutions client data, high-performing financial institutions must maintain a debit card “take rate” of approximately 85–90%. At this take rate, use of the debit card makes a significant impact on the number of transactions and the bottom line.

As an example, one of the company’s high-performing clients found that standard accounts that have a debit card associated with them are worth $138 more per year in overdraft and interchange fees to the institution than accounts that have no linked debit card. For premier accounts, the difference is even more impressive at $173.

Do you know your debit card take rate by branch? If so, be sure to keep branch managers abreast of their performance and improve onboarding procedures, if necessary, including periodic, personalized outreach to account holders based on their debit card activity. Just as important, communicate the economic value the debit card brings to each account.

Above all, if you do not routinely monitor your financial institution’s debit card take rate, start now.

Partner with an Expert

Using account holder transactional data to improve financial institution performance has never been more important. According to Gallup, organizations that leverage consumer behavioral insights outperform peers by 85% in sales growth and more than 25% in gross margin.

If your financial institution is unable to extract actionable account data, consider partnering with a third-party provider that specializes in aggregating and analyzing financial institution data, developing revenue- and service-enhancing strategies that capitalize on the findings, and providing training to ensure the strategies are implemented enterprise-wide.

It is no secret that the value of an account holder increases over the lifetime of the relationship with your financial institution — the longer the relationship with a consumer, the better chance that consumer will become profitable. But account holder profitability is heavily dependent on retention and the ability of the financial institution to maximize the time it takes to recover acquisition costs (approximately two years, according to industry reports).

One effective way to boost account holder profitability is to increase the transactions on existing accounts. The most obvious place to start is with the preferred transactional device for everyday purchases: the debit card.

Increasing debit card activity helps strengthen the connection between your account holder and your financial institution and can boost growth within that critical first two years. To start, financial institutions must analyze key account holder data points and use them as guidance in establishing procedures, especially at account opening, that will lead to increased debit card transactions.

Another highly valuable piece of data your financial institution should monitor is your Regulation E Opt-in Percentage.

Data Point #2: Reg. E Opt-In Percentage

The importance of obtaining a Reg. E decision at account opening cannot be overstated. Without this decision, your institution cannot serve account holders who desire for you to authorize transactions that may result in an overdraft fee on ATM and one-time debit card transactions. Without this decision, some of your account holders are undoubtedly experiencing declined debit card transactions for which they probably blame your financial institution, especially if they have not made a Reg. E decision or are unaware it is even an option.

If your data shows high opt-out rates or low opt-in rates, then there likely are many of your account holders who are unable to use their debit cards the way they prefer.

The only way to know if you have account holders who cannot access their debit cards the way they prefer is to continually evaluate Reg. E decision percentages on a branch-by-branch basis. Talk to high-performing branch managers to learn their Reg. E procedures and replicate those actions across other branches, with the goal of having a compliant conversation designed to serve the account holder best. Likewise, if opt-in rates seem high, monitor account opening discussions to ensure employees are not using coercion tactics or being incented in any way to steer an opt-in decision.

The Value of the Decision

Provide periodic Reg. E training, including educating frontline staff about the value of obtaining a Reg. E decision. The account holders who use and value the overdraft service not only are happy that their transactions are authorized, but they provide income that allows your financial institution to offer a new account holder an account that is free or close to free.

In addition to the economic benefits of a Reg. E decision, you must educate your financial institution employees about how declined debit card transactions affect an account holder’s perception of the institution. When an account holder’s debit card is repeatedly declined, especially at the point of sale, the chances are very good that the account holder will abandon using the debit card, choosing a more reliable way to transact. In fact, a declining rate of debit card transactions is one early indicator that an account is on its way to becoming inactive.

Isolating the accounts with declining debit card swipes — along with accounts that have experienced a debit card decline without an accompanying Reg. E decision — and reaching out to them in a personalized, relevant way can save the account and potentially lead to increased account profitability.

Partner with an Expert

Harnessing and applying your account holder data is essential to providing meaningful interactions and services, which can lead to greater retention and overall account profitability. According to McKinsey & Company, using data analytics to personalize relationships can increase a company’s operating profits by about six percent.

If your financial institution is unable to extract actionable account data, consider partnering with a third-party provider that specializes in aggregating and analyzing financial institution data, developing revenue- and service-enhancing strategies that capitalize on the findings, and providing training to ensure the strategies are implemented enterprise-wide.