White Clay Insights - Flipbook - Page 2
CUSTOMER PROFITABILITY
INSIGHTS
K EY ME TR ICS
11%
11% of commercial clients at
community banks drive 48% of
risk-adjusted revenue and 53% of
customer lifetime value.
38%
Figuring out who considers your bank their primary institution is the first step to
boosting income. The second step is making unprofitable customers profitable.
Only 38% of community bank
commercial relationships are
transacting relationships.
Source: White Clay
When relationship managers for Encore Bankshares meet a new client,
KEY TAKEAWAYS
they know their incentive plan will reward them for bringing the client’s
whole relationship to the bank, not just a loan.
• A financial institution’s most profitable
customers are the ones who consider that
bank to be their primary institution.
• The most profitable commercial
clients are usually those with the most
transactions, often through the use of
Treasury management services.
• Banks should change employee incentives
to emphasize bringing in noninterestbearing deposits and capturing the
customer’s entire relationship.
• Banks must tailor a strategy to different
types of customers to boost profitability.
• The shift to a data-driven financial
institution that acts to bring in profitable
customers requires a cultural change that
can take up to three years.
The incentive plan reflects how the bank wants its customers to view it. “Let
us not just be your bank, but let us be your financial partner,” says Erin Simpson, chief operations officer at the $3.5 billion bank in Little Rock, Arkansas.
As interest rates on many loans remained low, and deposit costs rose, margins compressed at many banks. That has made it painfully clear that banks
must focus on the profitability of their existing customers, not just acquiring
new ones. Today, institutions such as Encore have implemented new tools to
ensure that more of their customers treat them as their primary bank — the
place they go to for most, if not all, of their banking business.
The Importance of Data
One frequent problem for community banks is knowing how many of their
customers consider them to be their primary bank, and how many of those
customers are profitable. Gut decisions often replace the data. For instance, one
customer of Scott Earwood, head of the community bank division at White
Clay, assumed the bank had the primary relationship of most of its customers.
But the institution had done a series of acquisitions over the years and found
out that it was the secondary bank for most of its customers. It turns out, such
data matters.
There’s a strong relationship between customer primacy and profitability, says
Mac Thompson, founder and CEO of White Clay, which offers a software solu-
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