Creating a Balanced Portfolio, Optimized for Growth While Protecting Deposits In the wake of recent turmoil spurred by deposit concentration, banks are facing amplified threats and increased scrutiny to their financial stability. While customer segmentation is likely accessible in lending customers, is it as accessible with deposit customers? Targeted data insights will enable banks to proactively identify potential weaknesses, withstand uncertain market conditions and capitalize on opportunities for expansion. Amid increasing interest rates, economic uncertainty, and heightened public concerns, banks must also answer: • Who are my stickiest and most loyal customers? • Are there early warning cues to signal attrition or runoff? • Is our portfolio exposed to concentration risks? • Are there channels most optimized for bringing in the stickiest deposits? • Do we have an overconcentration of the customer base in a given vertical industry segment? There’s an increasing need and sense of urgency for organizations to have a clear approach to finding and sharing data — macroeconomic conditions, heightened by industry fragmentation and the outflow of customers to non-traditional institutions, only further that need. But when these data elements work in concert with one another, banks experience increased upsell of products and services, reduced customer churn, decreased cost to serve, enhanced customer lifetime value, and mitigated risk of deposit runoff. Consider these strategies: • Accelerate prospecting: Target the customers and personas that mirror your most valuable customers. • Drive upsell/cross-sell opportunities: Position the right product for the right client at the right time. • Align support to value: Manage costs by providing appropriate support to customers based on the value they bring to your business — while driving certain segments to self-service models. • Improve investment targeting: Technology, customer engagement and talent. • Provide accurate information: Use for assessing stability and opportunities for growth. • Monitor Market Trends: Spot and reduce portfolio risk and integrate external trends into analyses. • Optimize Opportunities: Generate balanced deposit inflow and predict deposit runoff. Conclusion The macroenvironment will pressure banks to grow and, ultimately, to effectively segment their customer bases. Banks will need to have firm customer segmentation, optimized to highlight where areas with the most revenue and cross-promotion can occur. Between different types of households, small and mediumsized enterprises, and larger commercial accounts, having a deep understanding of each client and their potential revenue will help teams prioritize and adjust the customer experience in a way that facilitates long-term relationship building and growth. Bank lending teams will also be asked to grow portfolios in the face of a slower loan growth period. Knowing your customers and being able to predict their needs is more important now than ever. Just as important, the ability to leverage data and segmentation often reserved for lending and applying it to deposit management will be essential for any bank seeking to outperform competitors and serve both their clients and stakeholders. Josh is a director in West Monroe’s banking practice, based in Los Angeles. He has over 20 years of experience driving enterprise transformation through digital enablement, business process optimization, and technology implementation. Josh specializes in creating digital strategy and roadmaps for mid-market banks, enhancing operating models, implementing enterprise-wide software, and data & analytics. Utah Banker 25
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