optirate for banks & creditunions

CONFIDENTIAL & PROPRIETARY

Profitable Customer Acquisition


Ø  Grow the number of customers who have more than just 2-3 products?

Ø  Improve asset growth?

Ø  Improve profitability?

Ø  Grow your footprint without spending millions on adding new branches and staff?

Ø  Reduce marketing costs or make your marketing spend much more efficient?

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Does your Bank need to do any of the following?

CONFIDENTIAL & PROPRIETARY 3

All of these imperatives are highly correlated to the size and quality of your Bank’s customer base

Profit

NII

Net Fee Income

Operating Expenses

Asset Yield

Assets

Service Fee

Service Cost

COF

Deposits

# Services

Staff

Distribution Channels

Regulatory

Customers


But traditional customer acquisition strategies are prohibitively expensive and fail to generate the needed volumes

$200+ CPA 5 Purchases 10,000 emails

$500 - $750 CPA 2 Customers 5,000 ad impressions

$1,000+ CPA

$300 - $600 CPA 25 – 50 responses 10,000 DM pieces


The high cost of Marketing initiatives is shocking – especially given the opaqueness of the quality of the acquired customer

5.56%

0.88%

0.44%

0.25%

Bottom Quadrant

3rd Quardrant

2d Quardrant

1st Quardrant

Advertising Costs – Savings, CDs Advertising costs as percent of new funds 32 of the 50 largest Retail Banks

286.00%

33.00%

5.00%

1.92%

Advertising Costs – DDAs Advertising costs as percent of new funds 32 of the 50 largest Retail Banks

By comparison, the average 12mo CD rate is 0.40%

Source: Banks’ New ROA – Return on Advertising, Aite Group, March 2009


The QUALITY of customer acquisition programs is far from assured, despite the high cost and risk

80%+ of Customer

Base

10% - 20% of Customer

Base

Destroy 130% Profit

Earn 230% Profit

Source: Jack Henry December 2012, Customer Profitability Distribution


0%

20%

40%

60%

80%

100%

120%

140%

160%

Pro

fita

bili

ty

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It doesn’t take much to have a large impact – Just a 5% change in customer base can move profitability by nearly 40%

37% loss

40% Gain

5% decrease in profitable

customer base

5% increase in profitable

customer base

Baseline

80% of customer base

20% of customer base


Q: What are the best tactics to grow the 20% of customer base that is capable of driving growth & profitability?

•  All Consumers are SHOPPERS, and All Retail Banking Products are Marketed based on Price

•  Price is the KEY factor for customer acquisition


Loans are an attractive first product sale, but competition is fierce and growth is non-scalable

•  Intense competition •  Pricing / terms dictate

wins •  Too much $ chasing to

few deals •  Larger competitors

“buying” deals

•  Difficult to reach target customer

•  Time consuming •  One-at-a-time effort •  Prospecting “in the

dark”

•  Very high acquisition cost

•  Lack of required quality and quantity of leads

•  Requires experienced loan officers

•  (mostly) Strong ROI

•  Likely cross-sell opportunities

Competition

Customer Segmentation

ROI

Cross-Sell Opportunities

Loans


Checking Accounts offer limited opportunity to engage with the right customer on the right terms




“buying” deals



dark”

•  Very high acquisition cost •  Lack of required quality

and quantity of leads •  Requires experienced

loan officers •  (mostly) Strong ROI


•  Highly competitive •  Commoditized Product •  Pricing (fees,

incentives) wins •  ‘Me too’ offerings

•  Segmentation difficult •  Offering unattractive to

most profitable customer demographic segments

•  High Acquisition Cost •  Mostly unprofitable

customer segment •  Negative ROI

•  Customers likely to be open to cross-sell message

•  But most will not want / need additional services

Competition


ROI


Loans Checking Accounts


0%

10%

20%

30%

40%

50%

60%

$0

$200

$400

$600

$800

NSF Transactors

< $500 $500 - $1,000

$1,000 - $3,000

>$3,000

% C

ust

omer

s

Ave

rag

e R

even

ue

p

er A

ccou

nt

Average Account Balance

Revenue % Customers

Average Checking Account Costs

Most Checking Accounts generate non-recoverable operating losses

Source: Revenue: Top Trends in Retail Banking by Celent % Customers: Action Marketing Webinar “The future of Checking – Fee or Free?”

$120

$16

$25

$7 $30

$138

OD Fee

Debit Interchange

Interest Spread

Other Income

Less: Near-Term Reg

Avg Checking Account

Average DDA Revenue

Source: Affinion

After $30 reduction related to Reg E Opt-In

After $20 reduction related to Durbin

DDA Revenue and Costs by Account Balance 2 Profiles of

Profitable Customers

75%+ Customers Generate Operating Loses


Few consumers switch Banks; switchers are more selective and exhibit limited loyalty

1.9 Number of Banks considered during a switching process in 2010

8.7% Consumers who switched their primary Bank in 2010

8 - 12 Number of Banking providers used by a typical consumer

63% Banks that experienced greater price sensitivity from their customer base

59% Banks reporting decreased customer loyalty / more “shopping around”

Customer Acquisition

43% Customers who purchased additional banking products from their primary Bank

Retention / Wallet-Share


CDs provide for easy differentiation to attract the most profitable customer segment




“buying” deals



dark”

•  Very high acquisition cost •  Lack of required quality

and quantity of leads •  Requires experienced

loan officers •  (mostly) Strong ROI


•  Highly competitive •  Commoditized Product •  Pricing (fees,

incentives) wins •  ‘Me too’ offerings

•  Segmentation difficult •  Offering unattractive to

most profitable customer demographic segments

•  High Acquisition Cost •  Mostly unprofitable

customer segment •  Negative ROI

•  Customers likely to be open to cross-sell message

•  But most will not want / need additional services

•  Limited competition •  Commoditized Product,

but can be highly customized

•  Pricing wins

•  Ease of targeting most profitable customers

•  Ability to target consumers in selected geographies

•  Low acquisition cost •  Strong ROI assuming

aggressive cross-sell effort

•  Customers likely to be capable of supporting additional products & services

•  Requires a structured & aggressive cross-sell effort

Competition


ROI


Loans Checking Accounts CDs


What if there was a risk-free, performance-based solution that delivers the RIGHT consumer segment to bankers?

Consumers Want FI Needs

ü  Grow Affluent Customers

ü  Increase profitability

ü  Build customer base in new territories

ü  Decrease marketing costs

ü  Attractive Rates

ü  Real-time account open

ü  Safe & Sound FIs

ü  Unbiased advice

ü  Screens HNW customers via large high(er)-yield CD deposit

ü  Pays for all marketing & transaction costs

ü  Provides a turn-key solution

ü  Real-time campaign management


FIs are positioned to focus on valued-added cross-sell activities with consumers most likely to respond to the offers

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OptiRate is your “virtual” branch that does not stop delivering results

Your Bank’s WOW! Relationship Management

ACQUIRE Affluent Customers IMPROVE Profitability Through NII And Cross-Sale

SLASH Marketing Expenses

ENGAGE Prospective Customers

COMPETE Effectively Against Other Financial Institutions

EXPAND Into New Markets Before Developing Branches

Enabling your Bank to refocus its efforts on cross-sell of customer base that is highly likely to be receptive.


Consumers have unbiased ability to identify Banks & Credit Unions that value their business

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High-yielding CDs

Safe & Sound Financial Institutions

Simple & intuitive UI

Content to attract and inform consumers


OptiRate-referred customer base is more cross-sell friendly and thus more profitable with 50%-80% lower customer acquisition cost

Source: Online and branch acquisition costs: Brintech, Cass Bettinger & Associates and Amalfi Consulting, WIB Newsletter, November 2009

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Online Customer Acquisition

Branch Customer Acquisition

$143

$328

FI Benchmark Customer Acquisition Cost

$70

$70

OptiRate Customer Acquisition Cost

$73

$258

FI Savings


Return on investment is achieved one the transaction

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

Incr

emen

tal N

et R

even

ue

Number of Customers

6% Asset Yield

4% Asset Yield

5% Asset Yield

Just 1,000 new Customer

relationships can yield $400k - $800k

annually


Next Steps

Getting started is simple & fast…

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We offer

1,000+ New Affluent Customers

$500,000+ Incremental net revenue

$20 Million+ Improved liquidity

Simple agreement

No long-term commitments

4 week go-live with limited IT resources

Campaign management @ ~1hr / mo

$$$ Millions Convert wholesale funding into PROFITABLE customer relationships


Affluent Customer Acquisition

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Serge Milman [email protected]

415.260.3403 (c) 800.319.6784 x600 (o) www.OptiRate.com/Banks | http://BankBlog.OptiRate.com


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Partners

About Optirate

Associations

Robbie Vann-Adibé, Chairman

Leadership Team

Kay Nichols, Advisor EVP, FIS Global

Bryce Miller, Advisor SVP, Community Bank

Serge Milman, Founder / CEO

optirate for banks & creditunions

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