Posted on Wed, Jan 25, 2012 @ 07:02 AM
Author: Kris Bishop, kbishop@profitstars.com
Is there ever a reason to keep an old legacy system or a data archive you’ve acquired through a merger around long-term?
Could there ever be value in maintaining the legacy hardware and software for research from an old system … for the next 10 years?
The surprising answer is probably “yes,” there are times when it makes sense to keep the old system around for the long term; however, it’s important to identify early in the process whether it makes more sense to keep an old system or archive than it does to convert the information today. How do you go about doing so?
In my opinion, there are really only a couple of reasons why you might decide not to convert the legacy data to your current, go-forward platform – or a research system that is designed to handle the import, archive, and research of huge quantities of legacy data. Those reasons are cost and convenience.
Cost
Cost can be the determining factor when you have a small amount of data to convert. It’s fairly common for most people to not think about the time and effort that goes into the setup and data mapping processes, which could be about the same degree of effort for a small amount of data as it is for a large amount. Conversions require a unique skillset and experience, and just because the amount of data is small doesn’t mean the install, setup, conversion, data mapping, or uploading process will be a small task. The reality is, you have the same number of reports or document types to be mapped and imported regardless of the amount of data.
Since it takes the same amount of time to set up a conversion system for a small amount of data as it does for a large amount, it is likely that you would get more efficiency from the conversion system if you have one large block of data to convert versus several small conversions. If the amount of data is too small, the time requirements could possibly make it too expensive to convert the data. The cost to maintain the existing research configuration should also be considered when determining if retention is a more financially feasible solution over converting the data.
On the other end of the scale, it may make more sense to keep the acquired system around when there is a large archive system in place that’s built on newer technology than your current go-forward platform – especially if the acquired system may not yet be fully depreciated. In this instance, it’s worth taking a look to see if you should “upgrade” your current system with the acquired platform or just leave both systems in place. We have seen cases where there were 80 or more different access points or system APIs coming into the acquired archive, all of which were newer than the acquiring bank’s systems. In this case, it may be more convenient to leave both systems in place and not retrain your entire organization on the new system.
However, the last thing your IT staff wants to do is maintain an already dated system for another 10 years! They don’t want the hassle of trying to keep the hardware up and running for a system that may be rarely accessed. And you can guarantee that at some point during that 10 years (average amount of time to retain a check archive) two things will happen:
1) Your hardware will fail. And it will fail at the most inopportune time, like during tax season or when you are working a large subpoena request involving one of your most valued clients. And when you go to repair the old system, you might not be able to find more of those old drives you need to get you back up and running, or you might discover that the controller card you need isn’t made any longer. That’s when you also learn that you can’t put the 10-year-old software on a new machine or on a new version of Windows. It’s just not that easy.
2) If you are going through the expense of paying system maintenance on the acquired system, the software vendor will require you to upgrade to the latest version of their system. Most companies are not going to support a version of the software that’s two or more releases behind. And when they do, you must also buy new hardware to support the new software and latest release of an application you are only using for research.
Convenience
There are times when your old system may have a viewer application built onto the DVD or CD which houses the data. In this case (and since CD and DVD readers aren’t going away anytime soon), it would be more convenient to just use what you have. I would, however, recommend making copies (at least two) of the data for long-term storage, so you are not relying solely on the CDs.
The bottom line is that it’s best for most legacy data to be archived into one system. Whether it’s your go-forward system or one that’s built for long-term archive and research of legacy data, having everything in the proper place makes the total cost of ownership much lower; improves your security, audit, and compliance; enhances your overall IT management strategy; and improves customer service. Sometimes the “cost” of not doing something ends up being more expensive than the “price” of doing it right the first time.
Posted on Wed, Jan 18, 2012 @ 06:26 AM
Author: Brad Dahlman, bdahlman@profitstars.com
Did you know that, according to a recent J. D. Power and Associates study, 8.7% of customers switched their primary bank in the past year? Think about that … 8.7% of your customers left last year, and just to “maintain” your client count you need to attract that many new clients.
Now think about it in a different way. The loss of some of these clients hurts much more financially than the loss of others. As a profitability expert I know that, for most banks, over 180% of their profit comes from the top 20% of their clients. Losing these top clients really puts a dent in the bottom line. Therefore, financial institutions need to focus their retention efforts on their key clients in order to yield the greatest benefits.
To reduce the attrition of key clients I suggest a three-step approach:
#1 – Identify Key Clients
#2 – Quantify the financial impact of key client attrition
#3 – Develop strategies targeted at retaining these clients
Step #1 – Identify Key Clients
The first step in this approach must start with determining which clients are “key” for your organization’s financial success. To do this you must have a system in place to calculate client profitability. Client profitability systems allow you to identify and segment clients into various profit tiers. Below is a decile profitability report from a $700 million bank with 27,000 clients. The report shows how much profit comes from each 10% increment of customers. For this bank, each of the clients in the top decile represents $4,623 per year in average profit, so losing one of these clients really hurts!
Step #2 – Quantify the financial impact of key client attrition
Let’s assume that your attrition rate is only 5%, which is significantly less than the 8.7% average according to J. D. Power. Continuing with the numbers in the earlier example, losing 5% of your key clients (those in the top 10%) would result in 135 lost clients (27,000 clients x top 10% x 5% attrition rate = 135). Based on an annual average client profitability of $4,623 per year, the impact of losing these 135 clients costs the organization $624,105! A huge impact on the bottom line for a $700 million bank.
What if by knowing who your key clients are, and building in targeted retention strategies, you could reduce the attrition rate from 5% to 1%? That 4% reduction in attrition (for these key clients) would result in 109 fewer key clients lost which could be worth $503,907 to your organization!
Each 1% drop in key client attrition will save this bank 27 key clients and almost $125,000 annually!
Step #3 – Develop strategies targeted at retention of key clients
Now the big question: how do you effectively manage these relationships to reduce the attrition rate? I suggest that you:
• Segment these clients into various profit tiers (or ranks)
• Build a series of “benefits” associated with each rank
• Feed these ranks into your core and CRM solutions
• Train your employees on how to extend these benefits to key clients
For many banks and credit unions this is a new concept, so I will illustrate.
The most important question to ask during this process is: would these benefits create a significant relationship between us and our clients that would reduce the attrition rate? If the answer is ‘yes,’ then you have the makings of a program to curb key client attrition; if the answer is ‘no,’ then I would encourage you to re-think the benefits and identify those that have more significance to your clients.
Clients are the financial institution’s most important asset. Getting a better understanding of client profitability, segmenting clients, and building retention strategies are critical for your financial institution’s success. I encourage you to work toward identifying and retaining more of these key clients.
Posted on Wed, Jan 11, 2012 @ 07:17 AM
Author: Aaron Lindsey, alindsey@profitstars.com
With the introduction of the Dodd-Frank Wall Street Reform and the Consumer Protection Act in 2010, along with a congressional response to the financial crisis, there are a number of new changes transforming the financial services industry. In particular, the establishment of the Bureau of Consumer Financial Protection (BCFP) has brought stricter oversight for financial institutions.
What does this mean for thrifts’ regulatory filing? Institutions will be required to begin filing the FDIC-supervised Call Report instead of the Thrift Financial Report (TFR) for quarterly reports, beginning March 31, 2012.
Filing the Call Report is a task that requires numerous regulatory revisions that necessitate a high degree of accuracy. Limiting the impact of filing requirements on productivity requires breaking down processes to simplified tasks and streamlining them for effective execution. The FDIC only accepts the form electronically, so it is even more beneficial to implement a software solution specifically designed to automate and manage these tasks effectively, allowing your energy to be focused on day- to-day operations.
When choosing a software solution, the following features are essential:
• A Call Report filing program with strong customer support
• Native TFR line item mapping
• Comprehensive and automatic data- and edit-checking for regulatory compliance
• Ability to quickly map and link line items from your general ledger system
These features will save you a lot of time when you’re down to the wire, and it guarantees a successful, error-free Call Report submission.
Transitioning to Call Report filing for your thrift is a necessary requirement that can become an opportunity to streamline your filing processes, while leveraging additional resources to improve your productivity.
Posted on Wed, Jan 04, 2012 @ 07:18 AM
Author: Dave Foss, President, dfoss@profitstars.com
Celebrating the New Year should be a lot easier now than a year ago. There is still a lingering question about whether the economy will relapse, but the general tone of our industry is more at ease now than it has been in years. Finally, you deserve to take a deep breath and be hopeful as we enter into 2012.
The conversations I’ve had with bankers over the last several months share an overarching sense of relief because they have their houses in order. By now, all bankers should have a very clear view of their portfolios’ vulnerabilities and of the proper balances to keep it healthy. Because of this, lending can commence. Defaults are not nearly as ominous as they were going into 2011. Experts predict that commercial real estate investors will seek buying opportunities in 2012. Even credit cards are expected to increase new account openings due to a sharp drop in defaults.
Increased buying also evinces an air of confidence in the marketplace. Bankers are investing in their infrastructure, new tools and services. Such strategic purchases help financial institutions advance efficiency and service, major catalysts to growth. Three areas that I will watch eagerly in 2012 include:
1. Profitability solutions – they are more popular than ever since the financial health of all institutions has been tested by fire. Such solutions bring us back to the very basic principals of banking (scrutiny in lending, analyzing risk, knowing your customer, etc.), but they do so in a fast and convenient manner. They require less manpower while providing more detail and forecasting. Bankers are serious about banking smarter and, in response, we should see profitability solutions experience greater application and maturing in 2012.
2. Mobile – it will develop substantially in 2012: mobile banking, mobile websites, mobile payments – all of it! An over-abundance of applications are being developed and tested to meet the excitement, anticipation and demand of this fast-paced channel. Next year will sift out the long-lasting mobile verticals from the cool, but rather illogical ones. Technologies that were created with the consumer in mind should thrive.
3. The cloud – it has gained traction in 2011 and next year will be a time for answering questions about how applicable this platform truly is to banking. Of course, the concept of banking in the cloud is convenient and cost saving. But, should bankers trust their holy grail of consumer information to a database that is physically out of their control? An answer to this ongoing debate will hopefully be found in 2012, either making it a permanent fixture in banking or ending the buzzword’s moment of fame.
Yes – issues of uncertainty amid changing regulations, elections, and the European market still loom. Some of these issues may be forced to a close in 2012, while others are indefinite. Regardless of the constant change, take a day (at least) to celebrate and be thankful for how far we have come in such a short time. Looking into the New Year with expectations of growth, added efficiency and greater service is refreshing!
Also, please feel free to share any other trends that you will be watching in 2012 in the comments section.
Happy holidays!
Dave