With continued talk of a recession and ongoing economic uncertainty, financial institutions are searching for creative ways to increase profitability. The PRI team’s expertise goes deep in this area, and in this week’s blog, Jen Megee, Director of Process Improvement at PRI, shares five proactive actions financial institutions can take to make a meaningful impact to the bottom line.
- Deposit and Loan Product Review
Megee recommends that FIs review their product lines to ensure that appropriate and competitive fee and rate structures are in place. It’s also an important exercise to ensure that the institution’s products meet customer expectations, which have changed over time.
“Often, products are set up and years go by without an honest evaluation of their profitability,” Megee said. “Refresh and revisit your product offering, always with a lens of improving the customer experience. Now is a good time to tweak the product set to reduce expenses or increase income.”
- Develop a Robust Debit Card Program
The debit card program is the FI’s primary source of non-interest income from a deposit perspective. Analyzing the debit card program and ensuring it is as robust as possible is a strong investment in profitability. Megee recommends:
- Measuring P/A/U (Penetration/Activation/Utilization) to determine whether the trends are up and to the right.
- Marketing the value propositions of the debit card program to ensure the FI’s debit card is “top of wallet.”
- Educating staff on the value proposition of the debit card so they can communicate it to customers.
- Reviewing the Brand, EFT and PIN agreements for maximum profitability.
Learn more about improving the profitability of the debit card program: The Retail Initiative for 2021: Improving Debit Card Portfolio Performance and Improving Debit Card Activation Boosts Profitability.
- Capitalize on Your Biggest Asset …Your Employees
Billionaire entrepreneur Sir Richard Branson has famously said, “Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.”
Leveraging employees to help the FI deepen relationships with its clients is essential to growing the business and increasing profitability, according to Megee. She recommends external business development programs for frontline staff and training them to evolve from thinking of themselves as order takers to relationship builders to expand existing client relationships and to develop “centers of influence” who can refer new clients. This approach has the added benefit of increasing employee engagement, which PRI partner Mikelle Brady highlighted in the last blog, Preparing for a Focus on Process and Efficiency, as crucial to long-term success.
- Review Your Operational Effectiveness
Megee said operations departments have been overlooked over the years for automation opportunities, and now is the time to review processes and system utilization.
“Technology has come a long way in recent years, and one of the areas PRI specializes in is going into an FI’s operational areas to evaluate where manual processes can be streamlined or eliminated through system enhancements,” Megee said. “We need to look at what we do daily and ask if there’s a better way. There are usually several opportunities to save time in operations, which is finding hidden treasure in terms of profitability.”
In Megee’s blog, Wasting Time: 8 Opportunities for Improving Operational Efficiency, she examines the eight top areas where excess time is spent in FI operations and why it’s important to focus on these inefficiencies now.
- Have a Sound Vendor Contract Management Program
To improve profitability, Megee recommends monitoring vendor contracts regularly. Often, FIs have contracts with multiple vendors to provide products and services, and they fail to effectively track renewal dates. Implementing a tracking mechanism ensures that renewals don’t occur automatically with unfavorable pricing. This allows the FI to negotiate and potentially bring new, more progressive vendors into the mix for better servicing, automation and pricing.
Taking these five relatively simple actions proactively will optimize the FI’s profitability at a time when they may be experiencing a squeeze on profits.
Profit Resources specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to propel growth and improve profitability.