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Monitor These Data Points for Improved Financial Institution Growth & Service—Part 2

Posted January 4, 2019 - Steve Swanston

This article is the second in a two-part series that focuses on the importance of account holder data and how financial institutions can capitalize on it to improve account opening procedures and overall institution performance.

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.

In the first article in this series, we focused on Data Point #1: Debit Card Take Rate. 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.

Steve Swanston

As Executive Vice President of Sales, Steve is responsible for defining the firm’s sales strategy via both organic and acquisition growth in order to maximize market share, as well as identifying and developing strategic partnerships with industry groups and channel partners.