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Monitor These Data Points for Improved Financial institution Growth & Service—Part 1

Posted January 2, 2019 - Steve Swanston

This article is the first 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 performance.

In today’s highly competitive environment, financial institutions cannot rely solely on growing new account openings 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 result from elements beyond the institution’s control (such as job loss, relocation, etc.).

Financial institutions must, instead, look for ways to increase existing account transactions, 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 accordingly, especially at account opening.

 Data Point #1: Debit Card Take Rate

Getting your financial institution’s debit card into the hands of your account holders 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 Study 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, so 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.

The next article in this series will focus on the importance of monitoring Reg. E opt-in percentage and ways to improve it.

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.