Deposit Attrition, Retention 

How important is deposit and loan attrition ?

 

According to First Manhattan Consulting Group:

"Deposit balance erosion results in $20 million to $25 million in pretax income leakage per $10 billion in deposits annually, with as much as 25% of customers’ balances permanently removed from existing accounts. Consistently, the highest-value (top 10%) households account for over 70% of the deposit balance attrition and income loss."

Loan business attrition costs are additional....

 

The challenge of accurate retention measurement

 

Attrition / Churn in Retail Bank

Understanding true retention in Retail Banking is challenging because customers move money around among products. Most banks have come to these realizations:

  • It is relatively easy to measure new and lost customers (households)
  • It is even easier to measure new and lost accounts
  • Neither of these measurements accounts for portfolio change properly... we need to understand the balances that have left the bank.


One problem is that most new and lost business is related to ongoing customers. In fact, as the chart (top) shows, only 24% of lost business is accounted for by looking at lost customers.

Another problem is that looking at accounts does not work either. If we define lost business to mean lost accounts, we will pick up another 25% of the true lost business, leaving fully 40% of lost business undetected.

 

FlowTracker measures attrition precisely and completely...

 

Attrition / Churn in Retail Bank

FlowTracker completely solves the attrition measurement dilemma. Because the flows among accounts are tracked at the account level, we can see when money has shifted among accounts of the same product, between products, from assets to liabilities and vice versa, and when it has left the bank entirely.

FlowTracker accounts for 100% of the change of your portfolio without relying on observed changes in customer or account status (though these useful codes are created for reporting).

FlowTracker enables you to identify product switch events that are driven by changes in your customers preferences and needs. Because FlowTracker identifies every one of these events in every time period, it lays the foundation for a new breed of predictive analytics based on the subtle shifts in customer behavior and precise definitions of attrition, product substitution and transfer that FlowTracker creates.

 

 

... in multiple levels and dimensions of detail.

 

Precise deposit attrition / churn metrics

Not only can you get the top-line measurement of customer defection activity right, FlowTracker provides the detail to support in-depth analysis and understanding of the attrition behavior:

  • Individual customer
  • Product
  • Account
  • Branch
  • Account relationship manager

and FlowTracker provides this information in time-series (every month etc.) automatically, so you can mine this new data and predict who is at risk, where, and when.

 

Questions? Please contact us