Community Chair

Top KPIs for Measuring Retail Channel Performance

Retail banking is changing very fast with more technology savvy members and more capabilities being offered by digital banking platform. Retail banking still remains an important channel for most credit unions given their community roots. At the same time, it is a channel that is very expensive to operate. Research shows that the cost of each transaction via the digital channel is about 25 cents whereas the cost in the branch is about $10.

Therefore it is all the more very important for credit unions to keep a close watch on the Key Performance Indicators (KPIs) for the retail branches.

 Here are the Top 10 Key Performance Indicators (KPIs) that are recommended to keep a watch on the retail banking and ensure that it continues to create amazing experiences for the members.

 These KPIs can be divided into following main areas.

  • Attracting new members
  • Cross-selling and upselling to existing members
  • Driving member loyalty
  • Ensuring members services needs are met

1. Members per FTE

In operating a branch, one of the big expenses along with rent and utilities is the people cost. Therefore, there is a need to staff the branches appropriately. This is an indicator that measures the number of members attended by a full-time employee of a retail branch.

There may be some nuances in interpreting this data. Some credit unions train their staff to chat with members, with the aim of identifying their financial goals and opportunities to recommend useful products and services—which may increase assist time. That raises several questions: Are employees conducting routine interactions as efficiently and accurately as possible? Do longer assist times translate into higher sales? Are longer assist times increasing wait time and, if so, are scheduling and staffing changes needed to hold the line on wait time while giving employees adequate time to serve and sell?

2. Sales and Service requests per FTE

Sales and services generated by a retail channel increase its value. Hence, we need to evaluate that which channel is handling more sales and/or service request per full-time employee. This metric shows that how many sales are made by an employee in a particular time period.

Also, important here is the ratio of sales and services requests. According to recent studies, The ratio of sales/services requests of about 50:50 is considered healthy. If the branch reps are spending too much time on service interactions then the organization should do a deeper analysis to understand what are the services that the members are coming to the branches for and if they can be transitioned to more self-service channels such as ATM, digital, etc.

3. New members/accounts per FTE

This metric measures the number of new memberships that have been opened up in a branch and the number of new accounts that have been opened up in the branch. It shows how many new members each employee is able to attract. It can be calculated by dividing the total number of new members and/or accounts opened within a month with the number of full-time employees in that month. The increasing rate of new members in a branch is a sign of increased goodwill of the branch and the credit union.

4. Branch Performance Comparison

Every retail branch needs to timely compare its performance with the other branches of the credit union and also with the industry standards to ensure that the branch is performing optimally. The particular branch manager should know that in which area is his branch doing well and where does it need improvement. If a branch manager is going off track towards his branch performance and is unable to identify the reasons behind it, it may lead to the shutdown of that branch.

5. Member Churn

Member retention rate has a strong impact on the performance of a credit union retail channel. If the member of a particular retail channel is not satisfied with its services, he may switch their choices. It is normal to lose some members, but the reason for that should be properly analyzed.

It is important to know that whether this churn is voluntary or involuntary. Voluntary churn means that your members go to another service provider because they think it’s a better deal. Involuntary churn happens when a client’s decision is influenced by relocation, bankruptcy, etc. and they’re unable to continue using your service.

Generally, the member churn risk is high with the new members who are unable to adjust to the new credit union policies.

A credit union manager should work towards helping its members settle within the credit union by providing excellent customer care and user experience and by always being ahead of their competitors.

6. Revenue per FTE

Revenue per full-time employee is a very important metrics.  It is used to determine that whether a retail branch is being run efficiently. It is calculated as a branch’s net revenue earned divided by the number of its full-time employees. It shows how much revenue each regular employee generates. The higher the revenue per  FTE, the more efficient is the branch. The annual increase in revenue per FTE reveals the extent of productivity growth. If the revenue per FTE is going down over time, it is an indication that the business is becoming less efficient.

7. NPS Score

NPS or Net Promoters Score is a very popular metric that is used to measure member’s loyalty. It is based on a simple survey that is targeted towards members’ interests.The members are categorized as Promoters, people who are loyal and satisfied with the credit union services and Detractors, members those are displeased with the credit union services. NPS is calculated by subtracting the percentage difference between the Promoters and Detractors.

When it comes to the performance of a credit union retail branch, the NPS score should never be overlooked. Since the NPS score measures customer loyalty, this metric can be directly correlated to the sales and profitability of the bank. The higher the score, the better the sales and higher the level of profitability.

8. Cost per New Member

Everything that a credit union retail channel does in order to attract new members, costs money. Be it advertising costs or other promotional costs, it takes a considerable amount of your bank’s budget. It is this KPI that measures that how much it costs to attract new members.

Cost per member is calculated by dividing the total monthly promotional costs by the number of new members in that month.

A decreasing rate of cost per member can be a sign of increased customer satisfaction in a particular retail channel. An increasing rate, on the other side, is an indication that your branch needs to put in extra efforts to attract customers. 

9. FTE Time Utilization

This should measure the following

  • Service transactions that can do via Self-Service Channel - As noted earlier, retail channel is very expensive to operate. Research shows that the cost of each transaction via the digital channel is about 25 cents whereas the cost in the branch is about $10. Therefore one the key metrics is to know how many of the service transactions that are being done in branches can be done via a low-cost channel leading to cost savings for the credit union that can be passed over to the members.
  • Percentage time on back-office tasks - Back office tasks are important at the same time there should be measure in place to understand what percent of total FTE time is taken by these back-office tasks. If these back-office tasks are taking more than 20% of the overall time, then there is a need to review the processes and explore possibilities to drive process improvement initiatives. Technological enhancements such as teller capture and the use of cash dispensers/recyclers simplify teller tasks and reduce time spent balancing. Process improvements in the back office of the branch should focus on eliminating paper and manual tasks replaced by automation. However, night deposits will continue to need servicing, cash shipments will not be eliminated, and ATMs will need cash replenishment and servicing by a real person.
  • Percentage time on Time offs, training and management should be tracked to ensure that appropriate time is spent on these crucial activities to ensure best branch performance. 

10. Employee Churn

This metric is calculated as the number of employees who left the organization for any reason divided by the average employee headcount. It indicates the percentage of employees who left the organization, either voluntarily or involuntarily, during a specified period.

Generally banking industry experiences a high rate of employee turnover when compared with other industries. Factors like compensation level and education requirement in banks cause this churn. The work-related stress of meeting individual goals also drive employee churn rate. The retail channels should try to minimize this rate as high employee churn can create a negative impact on customer service and company revenue.

CONCLUSION

Retail branches have an important role to play for Credit Unions to continue to be a visible community partner. The branches should be augmented with digital and other self-service channels so that more and more retail presence is used to increase the credit union’s footprint in the community. Having a visible presence in the community is still an important factor for many members when they are choosing a financial institution that they can trust and therefore credit unions should not totally give up on retail branches. These KPIs can help a retail channel to organize its performance and retain its members and continue to grow.

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Comments

  • Vendor

    Excellent comments, Dale. A useful extension of what was already a helpful blog post!

    Dale, we haven't developed anything to measure penetration, but we have done some interesting things to address the challenges of branch potential, product mix and seasonality when developing plans, targets and performance measurements. The "trick" we us is measuring money flows instead of balances as a basis for understand....

    When you look at the money flows - new money in and lost money out, that is - you're looking at the real new sales and lost money attrition the branch experienced recently. As you pointed out looking at balances is a cumulative historical view that may be sub-optimal for planning purposes, since both branch and geographic demographics (and therefore potentials) shift over time. Looking at recent (last year, month by month, product by product) cash flows provides a much more realistic basis for planning and targets.

    The hard part is separating out product substitution - money moving between products, accounts, branches - within continuing relationships from new and lost money flows. Many fall back on account opens and closes as a proxy but experience has shown us this approach fails to recognize huge amounts of new an lost money and also includes lots of substitution flows at the same time - not good! 

    Money flows reflect seasonality, product mix and realistic potentials that branches can reasonably expect to achieve. We think it is a big step forward to move to this kind of analysis, especially for deposit side of the balance sheet where substitution accounts for about 30% of all account level growth.

    Looking to branch metrics we've developed 4 KPIs that are actionable, easy to measure and comparable to decode the Revenue / Staff dollar metric. It works like this:

    PRICE: Revenue/Balances x POSITIION: Balances/Members x SERVICE LEVEL: Members/Staff Count x STAFF MIX: (1/Compensation/Staff Count)

    = Productivity = Revenue/Staff Dollar

    We publish these stats for US CUs in our Credit Union KPI Peer Comparison and Benchmarking app. We invite you to use it - we publish it at no cost.

    Finally we strongly agree with the need for both potential and "soft side" measures, but they're outside the scope of our services.

    Hope this is helpful.

    Strategic deposit growth analytics for Banks and Credit Unions
    Accelerate deposit growth with patented behavior analytics
This reply was deleted.

 

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