Western Independent Banker - May/June 2013 - (Page 19)

By Dan Shannon Alternative Revenue Strategies to Improve Bank Profitability COMMUNITY BANKS TODAY are facing steep challenges in sustaining profitability, particularly margins on checking and depository account products. We believe there are six strategies bankers can employ to increase revenue in these areas, focusing on non-interest income sources. Optimize Product Offerings One initial strategy executives should consider is to restructure existing deposit products and services. This includes both product redesign and quantitative impact analysis – efforts that lead to the creation of relationship packages for the most profitable customers and prospects. Unique packages for consumers and small business can help secure desirable profitable relationships. The key to developing the most effective product and market strategies is developing an understanding of your customers. Who are they demographically? What services do they use and what are they likely to buy? What payment options do they prefer? How profitable are they? A product optimization project should launch from a clear, structured customer segmentation. Enhance Fee Collection Efficiency Focusing on the areas surrounding fee collection is another strategy that can yield significant rewards for many banks. Improvements in billing and collection practices will help reduce billing slippage, waivers and refunds − collectively contributing to increased revenue and margin improvement. Your fee collection efforts should focus on areas such as account analysis practices and policies, special fees on depository and branch services and collection effectiveness. Business owners’ consumer accounts could also be put into through account analysis to provide a more complete picture of product usage and servicing costs. This particular strategy starts with an assessment of all bank fees. These findings are then compared to fees common in financial institutions of similar size and background. The GL account should be rigorously evaluated as well. Outside fee collection experts can provide useful insight if your bank needs expertise in this area. Optimize Service Pricing (Value) Pricing analysts should look to align service fees to both enhance income and improve your bank’s competitive position. This third strategy encompasses treasury management and commercial services analysis and value pricing in order to ensure maximum revenue contribution. Current overdraft pricing and automated decisioning tools can also be evaluated to ensure existing revenue is optimized while ensuring practices and policies are in compliance. Although the concept of value pricing is not new to banking, many institutions opt first for competitive, cost-based pricing tactics. While competitive boundaries do exist, savvy banks have discovered solid opportunities, particularly in the commercial market, to price select services based on the customer’s perception of value. Introduce New Products and Services With the introduction of new valueadded products and services, banks can both grow fee income and position themselves as leaders and innovators in their markets. Banks need to understand both their market dynamics and also have access to an inventory of income generating products including offerings such as: • Expedited payments • Mobile wallet • P2P payment • Treasury management for small businesses New products should be evaluated for cost of delivery and their impact to reduce channel expense. Taking a prudent and plan-based approach will help banks introduce these products with revenue expectations beyond those of “we need this product to match the competition.” Enter New or Expanded Markets Another strategy for a bank to consider is the evaluation of the market opportunities for the unbanked and under-banked continued on page 20 While competitive boundaries do exist, savvy banks have discovered solid opportunities, particularly in the commercial market, to price select services based on the customer’s perception of value. Western Independent Banker May/June 2013 19 http://www.wib.org

Table of Contents for the Digital Edition of Western Independent Banker - May/June 2013

A Message from the Chair
Data Mining for Profits in 2013
Banks Must Face Their Own Fiscal Cliff
Boost Your Bottom Line with Lending Process Enhancements
Managing Interest Rate Risk to Achieve Strategic Profitability
Moving Mobile Banking Toward Acceptance – and Profitability
Alternative Revenue Strategies to Improve Bank Profitability
Analyzing Customer Performance to Increase Bank Profitability
WIB Service Corporation Report: Secrets to Success in 2013
Professional Development Resources
Welcome New Members
Index of Advertisers/ Advertiser.com

Western Independent Banker - May/June 2013

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