The Financial Brand Insights - Fall 2022

Here’s a typical breakdown of NII and interest expense from a checking account with an average monthly balance of $4,000.

Which brings up the next question you should ask: “Where will next year’s profit come from?” Analyzing Account Holder Behavior to Find Opportunity In the chart below (bottom of page) you can see data from an actual Kasasa ® client in 2021. We were looking for “what new activity was produced by account holders?” In other words, who was generating transactional income and opening new consumer (auto, home, personal, etc.) loans? These four account holder segments reveal some remarkable findings. If you compare Group 1 and Group 4 you see a high contrast in nearly every metric. While Group 1 is the oldest and holds the most deposits, they also generate the least annual profit — it’s reasonable to assume they’re financially mature and are winding down their economic activity. Group 4 is clearly far more transactional, has high lending needs, and has the most NSF events (not that we’re aiming for that). The answer to where next year’s profit will come from is “younger, more transactional consumers.” The Future of NII Is the Future of Income in General The four-part formula mentioned earlier can be used to transform your approach to generating revenue across the board: 1. Use consumer segmentation and predictive analytics. Broaden your definition of account holder relationships. Understanding consumers and anticipating their needs allows you to deliver a world-class account holder experience. Look at how consumers fit into the entire balance sheet, not just cost of funds

or interest income — include non-interest expense, products per relationship, transaction volume, and loan-balance-to-deposit ratios. Recognize that consumers have different product entry points and it’s your job to communicate all the ways you can help them.

Annual marginal income/expense

Super generic account

Average balance Debit card txn/mos. NSF events/year Interest

$4,000 15 1.5 0.10%

2. Implement flexible retail products. Select products and tools that drive

$55.80 $45.00 [$4.00]

engagement (such as interchange). Products that are tailored to consumers’ needs can give you control over your balance sheet when the economy is in flux. Financial literacy has its place, but it’s far more effective to offer products that lead consumers into beneficial behaviors. The best products deliver a win-win for your bank and the consumer. 3. Continuously monitor and optimize programs. Engage with new relationships from the start and monitor for the behaviors that you want — you can even incentivize behaviors that fit into your goals. The ability to analyze and respond quickly to shifts in consumer behavior will help you improve profitability and long-term growth. 4. Leverage consulting and enterprise tools that drive results. Armed with micro and macro perspectives on the industry as a whole, as well as enterprise tools, you can stay ahead of your competition. You can also improve marginal engagement with existing relationships through communication, especially 1:1 tools such as SMS text and customized email campaigns using behavioral triggers. As you examine your institution’s strategy for generating NII, you should aim to make your account holders feel as empowered as possible. Recall that consumers often feel frustrated and overwhelmed by NSF fees. How can you turn that service into something that feels like a value-add instead of a penalty? What products and services can you offer that help account holders reach their financial goals and feel good about their money? While I can’t answer these questions for you, if you follow the four-part formula outlined above, you’ll uncover the answers that fit your account holders and your goals as an institution. ▪

You would need to double the monthly debit card transaction volume of that account in order to offset lost NSF fee income. Consumers might use their debit cards more if you ask them really nicely, but they’re not going to double their point-of-sale purchases overnight. Seems like interchange isn’t a very sustainable option then, right? Not so fast. Let’s look closer.

Free Report:

What NII Strategies Are Community Banks Using to Succeed?

Getting the Most Out of Marketing Automation

The road to a more diverse income stream isn’t paved with a single solution. It takes a comprehensive strategy with four primary components: 1. Use consumer segmentation and analytics. 2. Implement flexible retail products. 3. Continuously monitor and optimize programs. 4. Leverage consulting and enterprise tools that drive results. The trouble that many banks find themselves in comes from looking too narrowly at their account holders and underestimating the potential of products that drive profitable behaviors.

As a financial marketer, you may face several challenges, including relying on legacy systems, poor technology integrations, changing compliance and regulations, and a lack of access to important data. This 17-page research report from Act-On tells you what you need to know to make the most of your marketing automation software.

Account segment Group 1 Group 2 Group 3 Group 4

Avg. deposit balance

Account profit quartile

Avg. annualized NSF events

Avg. monthly debit card txn

Avg. loan balance*

Avg. age

$32,798 $12,049 $8,241 $6,558

66.6 51.6 45.4 41.8

4 [lowest] 3 2 1 [highest]

0.0 0.0 0.0 1.3 $0.00 $0.17 $0.69 $18,310 *New loans opened in the time frame after the launch of our products 1.6 0.9 11.9 49.1

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THE FINANCIAL BRAND INSIGHTS FALL 2022

THE FINANCIAL BRAND INSIGHTS FALL 2022

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