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Pandemic changes make the case for benchmarking

To navigate the financial industry’s new normal, it is critical to base strategic decisions on in-depth data analysis.

Sep 1, 2021 / Consumer Banking
Businessman using tablet analyzing sales data

You can’t know where you’re going next when you aren’t sure where you stand right now. That’s where the beauty of benchmarks come in – they offer invaluable insights through comparative analysis. But not all benchmarks are created equal, and those that provide the most value are based on rich, reliable and well-defined data.

The challenge for financial services leaders is finding the right, industry-specific data that can be used to set goals, benchmark performance and inform other strategic decisions.

Complicating that task is the deluge of data churned out by government agencies, consulting firms and the banks themselves, which in recent years have grown their analytics teams.

Over the last two decades, BAI has become a custodian of data for the nation’s banking consortium. Most of the top 50 banks entrust BAI with account-level data, which is anonymized and compiled into a unique benchmarking platform used by senior banking leaders.

This highly granular data produces remarkable insights that can drive well-informed decisions by board members, C-suite executives and frontline managers. Benchmarking can uncover market opportunities and provide an objective understanding of a financial services organization’s status in the marketplace. The information can be segmented according to an organization’s unique structure and definitions.

Financial services leaders participating in BAI’s variety of benchmarking programs can, for example, determine how they compare to their peers in terms of opening new accounts within certain generational segments, ascertain the percentage of new accounts being opened online versus in-branch, or learn how well their bank is performing in specific markets against local competitors.

Banking leaders must go beyond the raw numbers to determine how they stack up against their peers. An organization may be doing well against its own internal benchmark, but may pale in comparison to the industry norm, suggesting a strategic reset may be in order. On the other hand, a bank may presume it is performing poorly in a particular market, but benchmarking analysis indicates the bank is on par or even outperforming the peer average.

Consumer Benchmarking is BAI’s biggest program, measuring more than 137 million consumer households and $5.8 trillion in combined account balances each year—about 60 percent of all U.S. deposits. Key metrics include cross-sell and product penetration rates, adoption of mobile banking and remote deposit services, and household tenure status.

BAI’s Business Benchmarking program is based on the comparative analytics of 17 million business banking customers and nearly $900 billion in combined product balances each year. Key metrics include new business acquisition rates, portfolio performance, and account growth and retention.

Digital Benchmarking’s key features include online account profiles and a comparison of online account opening to households that are not originating accounts online. Amid the COVID-19 pandemic, when online banking has transformed from convenience to necessity, it is increasingly important for banks to understand and measure their digital performance.

BAI’s Talent Management Benchmarking provides chief human resources officers with actionable insights based on data that allows them to gauge how well their diversity, equity and inclusion initiatives compare with the rest of the financial services industry. Other key metrics include retention, percent of internal hires versus external hires, and voluntary versus involuntary turnover.

There are any number of talent acquisition surveys and studies on topics such as time-to-hire or turnover ratios available today. But they are of limited value to bank and credit union leaders when they focus on the talent market at large or on unrelated industries. Instead, benchmarks in BAI’s talent acquisition program are keyed exclusively to the retail banking industry.

BAI benchmarking programs come in a variety of formats and cadences. For example, the Consumer Benchmarking report is delivered semi-annually, providing in-depth insights that help leaders make fact-based decisions. The Consumer Executive Dashboard is delivered monthly, and the Consumer Pulse is available weekly and monthly for participating organizations.

The pandemic has accelerated the pace of change in financial services. When conditions change rapidly, decisions get tougher. You simply can’t run your organization the way you did in the past or on gut instinct. To navigate the industry’s new normal, it is critical to base strategic choices on in-depth data analysis.

The closer the data is to your own industry and to your own organization, the more power it has to inform smart, strategic decisions, which then translate to results that meet or exceed benchmarks established by your peers.

Karl Dahlgren is managing director of BAI.

Get insights on how to leverage and analyze the treasure troves of data your financial institution collects in the BAI Executive Report “Harnessing big data to personalize banking.”