January, 2007
Challenges and Strategies for 2007
2007 is shaping up to be a tough year. Margin pressure will continue, low cost deposits are more difficult to acquire, home equity and mortgage lending continues to lag prior years, and all the easy sources of retail fee income are gone.
What are the key issues to watch? Here are 4 strategies that can make the difference between winning and losing in the year ahead.
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The Hunt for Low Cost Deposits. The battle for deposits will remain intense. Most of the deposit growth in 2006 came from increases in money market and other high rate deposits, placing further pressure on the margin. But there is a science to improving deposit growth -- and it starts with very focused strategies built around specific, local market opportunities. Anyone can buy growth with rate promotion, but industry leaders eschew broad brush marketing in favor of very granular, targeted strategies. We can help with BankPowerSM which integrates sophisticated retail shopping analytics, local marketing and sales management to identify and capture the best opportunities for growth.
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Debit Card Will Drive Retail Fee Income. Over the past several years, growth in retail fee income was fueled by ratcheting up deposit fees. That strategy has pretty much run its course because of adverse consumer reaction as well as shifting transaction patterns. Where will fee growth come from? Debit card transaction volume will grow exponentially in 2007-2008, and Best Practice banks have leveraged success with targeted initiatives designed to increase card usage. These initiatives complement rebate or rewards programs, and are usually more cost efficient.
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Keep More Customers by Improving Customer Retention. In the continuing struggle to acquire new customers, we often don't pay enough attention to insuring we keep all the customers we have. As the old saying goes, close the back door before you let more in the front. In this age of intense banking competition, Best Practice banks have paid close attention to improving the customer experience -- and it is paying off. While we all know that improving the customer experience should -- theoretically -- result in greater customer retention and revenue, it is not easy to get the mix right. Not every problem customers encounter has the same impact. In other words, some are significantly higher irritants than others, and are bigger drivers of dis-satisfaction and attrition. In our work, we have developed specific predictive financial models that can help you decide where to focus your retention efforts, so that you'll know that your investment in improved service really results in improved revenue.
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Improve Multi-Channel Distribution Efficiency. Call Centers, bank branches, ATMs, Internet. What's the right mix, and how should these channels be integrated to generate the most efficient market growth? Simply adding more branches or ATMs in a market may -- or may not -- help. Sometimes more well placed ATMs can be as effective as building new branches, but at a significantly lower cost. Our work in helping banks improve their branch, ATM and Call Center efficiency can help you focus your human and financial capital where it will generate the greatest return.
For further information about our work in helping banks and credit unions create sustainable, profitable growth, please call 616-454-9443.
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Peak Performance Consulting Group is one of the leading consulting firms specializing in financial services. For additional information please email info@peakconsultinggroup.com, call us or visit our web site.
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(c) Peak Performance Consulting Group, 2007