ft business scenarios v2

Creating Business value with Customer Flow of Funds Analytics

May 2, 2023 © FlowTracker Analytics Inc. Proprietary & Confidential 2

• Customer Insight & Marketing– Optimizing return on marketing

investment– Prioritizing customer experience

initiatives– Improving accuracy of customer behavior

prediction– Efficient detection of customer behavior

changes

• Product Management– Optimizing “teaser rate” campaign

effectiveness– Optimizing revenue across the product

portfolio

• Sales – Aligning sales performance targets

to growth drivers– Managing sales force compensation

• Finance / Risk / M&A– Funding the transition to digital– Forecasting and monitoring liquidity

risk– Reducing AML compliance cost– Valuing and monitoring liability

portfolio acquisition

Business scenarios

FlowTracker creates value in many functional domains of the bank. The common thread is better business decisions are based on understanding what customers are actually doing over time.


CUSTOMER INSIGHT & MARKETING

May 2, 2023 4© FlowTracker Analytics Inc. Proprietary & Confidential

Optimizing return on marketing investment

Anne, Vice President Marketing, at a $100bn Super-Regional Bank.

Anne knows that Return on Marketing Investment (ROMI) is the number one indicator of success for her group. At the top of her agenda is growing the Retail Banking business through targeted acquisition, cross sale and retention of customer balances.

Anne’s team has developed a host of KPIs for marketing but none of them seem to get to the essence of the growth drivers she is responsible for. In fact the sales and retention stats she reads appear to be inflated and don’t reconcile to portfolio growth which is her primary goal. Anne wants to measure what she manages effectively and have confidence she is optimizing the investments she is responsible for.

ProblemAnne’s KPIs don’t enable her to directly measure sales, cross sales and retention.

She lacks confidence that the ROMI her team reports on campaigns is actually being realized, let alone being optimized.

SolutionFlowTracker was implemented to enable Marketing to provide account level customer sales, cross sales and retention statistics Ann’s team can use to quantify and value new business, retention of existing business and the marginal gains or losses from cross-sales across the Retail bank.

OutcomeWith the new insights gained from FlowTracker information, Anne’s group is now able to allocate Marketing spend to where it generates real growth.

In addition, her team’s ROMI analyses have enabled cost savings by highlighting where product substitution reduces profitability overall.


Prioritizing customer experience initiatives

James, Vice President CRM Strategy, at a $100bn Super-Regional Bank.

Designing customer experience journeys is a cornerstone of the bank’s competitive strategy. James knows customer journeys differ across Customer Segments, and the bank needs to be selective in prioritizing the investment in design and implementation.

James has to balance the needs of Product Management stakeholders while setting the strategic agenda for Customer Experience development. He needs sales, cross sales and retention facts to justify which opportunity areas are prioritized, and to enable continuous improvement of the CX program.

ProblemJames needs to know which customer experience journeys drive growth and how much they contribute to enable prioritization and monitoring. Product and Channel analyses lack the insight into customer behavior demanded of a customer centric strategy.

SolutionFlowTracker was implemented as an add-on to an existing CRM Data Mart returning customer behavior information to the DM for analysis and reporting.

FlowTracker data was used to quantify the relative impact of customer journeys on sales, cross-sales and retention.

OutcomeJames was able to prioritize Customer Experience Journeys for development based on quantified business impacts.

As the CX Journeys are implemented, James is able to measure results, test and continuously improve designs based on objective metrics.


Improving accuracy of customer behavior prediction

Phil, Director Customer Insights at a $15bn Regional Bank.

Phil heads a team of Data Scientists who have a great track record building predictive models that score customers’ propensity to buy – or abandon – at both the product and relationship levels. They know model accuracy directly impacts financial results, and are seeking new ways to gain insights ahead of competitors.

Phil’s team recognizes their models are only as good as the target definition and the predictive variables they have on file. IT wants to invest in unstructured social data, but Phil believes they can get more value from the data they already have.

ProblemCustomer Sales and Attrition are not separable from product substitution in Phil’s data, clouding the target models predict.

Acquiring new data sources is costly with uncertain results. Gaining more insight from existing data is what Phil really needs.

SolutionPhil implemented FlowTracker Cloud SaaS, backfilling 36 months of time series analysis.

Existing models were updated to redefine sales and attrition targets as pure “new” and “lost” business. Phil’s team also added the new customer behavior events into their models as predictors.

OutcomeWithin 120 days a full 36 month history was available for inclusion in predictive modeling. Phil’s team discovered their new models gained 30% in accuracy due to target redefinition and FlowTracker customer behavior events had significant predictive power when added to existing models.


Efficient detection of customer behavior changes

Phil, Director Customer Insights at a $15bn Regional Bank.

In addition to Predictive analytics, Phil’s team use Event Triggers to detect and respond to changes in customer behavior. To date they have had significant success with a solution that analyzes daily transactions to detect unusual deposits and withdrawals.

Distribution channel leaders in Branches and the Call Center claim that as many as half of the intervention leads that are generated from the solution are “false positives”, meaning the transaction is only one side of an internal product switch. Phil needs to differentiate between opportunities for action and transactions that can safely be ignored to improve the usefulness of the leads he is generating.

ProblemFalse leads generated by analyzing transactions flood distribution channels with low quality leads for interventions.

Transactions fragment customer behavior into multiple unrelated events. Analysis of transactions to re-assemble the parts into a coherent customer behavior is extremely difficult.

SolutionPhil started using FlowTracker customer behaviour events generated as the source of Event Triggers leads.

Daily balance “snapshots” uploaded to FlowTracker SaaS are processed overnight and fed into the lead distribution pipeline.

OutcomeBranches and the Call Center both confirmed that the reduction in leads – and the increase in quality was a welcome change for transaction trigger events.

As a consequence the percentage of leads being actioned increased from 45% to 85%.


PRODUCT


Optimizing premium rate campaign effectiveness

Felix, Vice President Deposits, at an $38bn Regional Bank.

He is running “teaser rate” campaigns to acquire new Term Deposit business. Primarily he wants to attract new money to the bank and maximize the return from his marketing investment.

Felix asked his analytics team to determine how much growth is coming from outside the bank versus internal product substitution, and how long it stays with the bank but they struggle with the complexity of mapping transaction flows across products in the bank. After six months of detailed data analysis at a cost of $500,000, Felix still doesn’t know if he’s creating real growth or even getting a positive return on investment.

ProblemProduct substitution effects cloud analysis of marketing campaign effectiveness.

Felix can’t maximize his investment returns without knowing what is working and what isn’t at the individual account cash flow level so he can adjust the campaign designs.

SolutionFelix uses FlowTracker to analyze flows of funds during and after campaigns.

FlowTracker identifies where new money is getting generated, how much is retained, and where product substitution has negative effects.

OutcomeFelix is able to quantify his ROMI from new money, retention rates and the incremental benefits of product substitution precisely for the first time.

His campaigns are refocused on segments and geographies producing the most value, increasing ROMI by 20%.


Optimizing revenue across the product portfolio

Felix, Vice President Deposits, at an $38bn Regional Bank.

Felix needs to meet volume and revenue targets across all the Deposit and Investment products offered by the bank. His team has modeled price elasticity of demand on a product by product basis but he is concerned that optimizing product pricing may not produce the best results for the portfolio overall due to product substitution effects.

Felix knows product substitution can be as much as 35% of account level growth, but his systems don’t enable him to measure the cross-product flows accurately at the customer and account level, which is the key data he needs to include cross-elasticity in his portfolio pricing optimization program.

ProblemPrice Optimization algorithms produce compromised results unless cross-product flows of funds are measured and modeled separately from other flows.

Felix needs this holistic portfolio demand view to optimize across the portfolio as a whole.

SolutionFlowTracker produces customer behavior events that measure the volume of funds flowing between accounts (therefore products) separately from money flows to/from the bank.

FlowTracker events, coupled with rate data enable cross-elasticity of demand to be included in PO models.

OutcomeBy including cross-product flows in his PO models, Felix can now optimize across the entire product line with confidence.

In addition, FlowTracker enables Felix to include post-pricing flow analysis to enable continuous improvement of the Price Optimization program.


SALES


Aligning sales performance targets to growth drivers

Angie, Sales Director Retail Banking, at a $12bn Community Bank.

Angie knows she could be more effective if she was able to overcome two key limitations: a) sales targets are assigned on the basis of previous results, without insight on the trends at the customer level in the specific branches; b) She cannot see

whether some sales officers achieve their targets by cannibalizing certain products in their portfolio. In other words, she cannot truly say she pays for performance and worst the branches have retention issues as sales officers find their scorecards are arbitrarily set.

ProblemBranch portfolios vary greatly even within regions. But Branch does not have sufficient granularity into how customers use the funds. As a result, sales targets can be unrealistic at times and sales officers compensate by repositioning their customers portfolios rather than looking for new business in their markets

SolutionAngie’s “experiment” shed light into the dynamics of the portfolios of the branches in her region. She is using the information to rebalance the scorecards for the remaining quarters. The reports also isolated the customer’s portfolios that only rebalanced and whether they are concentrated on specific sale officers

OutcomeExplainable sales targets have increased sales officers engagement, which Sarah expects will increase retention.

The adjustment of the scorecards will also result in up to 35% savings in compensations from false sales results.


Managing sales force compensation

Sarah, Vice President Sales, at a $15bn Community Bank.

Sarah manages three different sales forces who earn commission as part of their compensation – investment and mortgage sales forces get paid for new business, while the Branch Relationship Managers get bonuses on both sales and retention.

Variable compensation has been a successful motivator for sales staff in the past, but the bank is increasingly concerned that there appears to be a disconnect between sales volumes reported and portfolio growth that shows on the books. Sarah needs to ensure the bank is getting what they are paying for, and that the right behaviors are being encouraged by the compensation plans.

ProblemSales compensation is being paid on new accounts and account growth which includes “old money” that is being moved amongst products and reported as sales.

This dilutes the rewards that can be paid for new money and encourages product churn which is ineffectve.

SolutionSarah started using FlowTracker SaaS in the cloud to analyze and report on the dynamics of customer behavior.

FlowTracker reports separate new money, true attrition and cross-product flows at the individual account level, balanced to changes reported in the financials.

OutcomeSarah initiated a re-engineering of the sales force compensation programs. She eliminated compensation on “old money” and redirected the savings into richer rewards for new money growth.

Sales comp costs are flat but Sarah is now generating 50% higher ROI to the bank.


FINANCE / RISK / M&A


Funding the transition to digital

Jeff, Chief Financial Officer, at a $35bn Regional Bank.

Jeff is a tech-savvy Financial leader who sees the potential of Big Data, Machine Learning and In-session decision making to transform his bank’s customer experience from “push” campaigns to “client pull” based on real time interactive dialogue.

Jeff needs to ensure the Bank’s Digital strategies are producing tangible results and manage shifting investment physical channels to digital at the right time and in the right amounts to maximize the growth of the bank. His IT and Business partners are divided between the old and new technologies and he needs facts to support his decisions and help his colleagues embrace change.

ProblemUnit sales reports, conversion rates and marketing metrics don’t tie into the Financials and don’t enable comparative analysis that would inform resource allocations.

Jeff’s bottom line need is he needs the portfolio growth facts to manage and direct funding to Digital initiatives.

SolutionJeff compared growth, attrition and cross sales metrics across comparable customer segments to quantify the return on Digital and Traditional capabilities.

FlowTracker analytics enabled him to create a fact based business case for investment allocation decisions.

OutcomeNot only is Jeff confident the allocation of resources to digital is justified, he can now track and report on the incremental benefits ongoing.

The tough decision to reallocate resources from the “old” to the “new” is based on facts that all Executives can accept.


Forecasting and monitoring liquidity risk

Paul, Vice President Risk Management Office, at a $10bn Regional Bank.

The regulatory environment has kept Paul and his colleagues busy as of late. The risk management office hast implemented processes to ensure that the financial and risk reporting do not contradict each other, but the reporting is at a macro level which does not shed light into the trends within the retail accounts. While the bank has managed

ProblemRisk committee cannot demonstrate to FDIC or the board they have a 360° understanding of the Retail portfolio dynamics, i.e.: Flight to Liquidity trend, trajectory of the financial positions, changes in product risk profile.

This is impacting the bank’s valuation which makes it a target and limit is options

SolutionPaul will trial FlowTracker to monitor the behavior of the retail accounts. Using data sets over different periods of time, he will identify patterns to improve his predictive model.

He is liaising with the Branch Banking team to sponsor the trial. This standardizes the tools used across the bank.

OutcomeInsight into the flow of funds and the stability of its deposit base has enriched the reporting to the analyst which is reflected in the buy recommendations and the banks improved valuation.

Both, shareholder sentiment and the regulator evaluations is improving

to significantly clean it’s portfolio, lessons learned indicate they need to do a better job of identifying early signs of shifting risk profile of their customers. Both regulators and the board are reporting that management can only be reactive to the changes in the retail accounts liquidity position.


Reducing AML compliance cost

Paul, Vice President Risk Management Office, at a $10bn Regional Bank.

Paul’s AML team has been growing rapidly and he’s getting pressure from his business partners to reduce the cost of compliance, while still ensuring the bank stays ahead of the risk of Money Laundering actions.

He knows the transaction analytics and case management tools they’ve implemented detect and monitor suspect cases sufficiently, but experience has shown there are far too many “false positive” signals coming from their detection algorithms. Paul needs to focus on real risks to contain costs.

ProblemFollowing up on false positive AML cases is costing Paul a lot of money. His peers are frustrated with the spiraling compliance cost which is diverting investment away from growth initiatives.

Paul needs to reduce the incidence of false positives to contain costs.

SolutionPaul’s team uses FlowTracker to screen down the volume of customers whose transactions require investigation.

Now the team focuses on large transactions only when there is a corresponding external flow detected by FlowTracker.

OutcomeBy layering FlowTracker’s customer behavior perspective on top of his existing AML detection regime, Paul was able to reduce case volume by 35%.

The cost savings have been redeployed into revenue generating initiatives.


Valuing and monitoring liability portfolio acquisition

Zach, Vice President M&A, at a $100bn Super-Regional Bank.

Zach sees a huge opportunity to grow through acquisitions as the industry goes through a wave of consolidation over the next 5 years. He is strategically seeking out and acquiring banks with solid core deposits that will mitigate rising interest rates.

Zach has a critical need to ensure that the deposit bases he’s buying are of high quality and have minimal attrition as the acquired client base is merged into his bank. Financials and Treasury liquidity and duration reporting give him the macro story but he wants to understand the portfolio dynamics before and after the deal and include quantified targets for retention and growth in deal terms.

ProblemZach needs to monitor, analyze and report on deposit quality in prospective acquisitions before and after the deal is struck.

In a perfect world, Zach would like to get raw data from the banks to do his own analyses using a tool that can be set up fast and easily.

SolutionProspective banks send masked client account data from their CIF’s to FlowTracker “as a Service” in the cloud.

Within 4 weeks the FlowTracker team runs the analytics process and provides standard reporting plus complete datasets to both banks securely to support negotiation and tracking.

OutcomeZach can now evaluate the customer behavior dimension of prospective target banks consistently, securely and quickly.

This information enables Zach to asses the quality and price the portfolio more precisely and ensure retention terms are complied with until close.


THANK YOUWant to know more? Please contact Dave McNab:

[email protected]

+1 (416) 708-2069

http://www.flowtrackeranalytics.com

mailto:[email protected]

http://www.flowtrackeranalytics.com/

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