In the field of human resources, “onboarding” is often applied to new employees. But in the financial services industry, the term also refers to the account-opening process or new-account set-up.
A recent report from research firm Bancography confirms the importance of successful onboarding to your long-term relationship with members.
Recent tracking studies measured existing and new customers who opened deposit accounts. The results should be of interest to credit unions, many of which are welcoming record numbers of new members who recently decided to leave their banks.
Bancography interviewed customers six weeks after they opened their new accounts, allowing ample time for the institution to deliver one statement, checks, and a debit card, as well as to conduct a follow-up phone call.
Remarkably, only 80% of the calling sample provided by the institutions included operable telephone numbers. This percentage has not changed since 2005, despite institutions now using systems that require employees to enter a telephone number for each account opened.
Only 74% of new and existing customers received a follow-up telephone call from the institution after opening an account. This percentage has improved since 2005, when only 52% of customers received a follow-up call.
But if an institution starts with only 80% of its telephone numbers correct, and 74% of customers say they had been contacted after the account-opening process, then only 59% of all new account holders received a follow-up call.
The take-away, according to Bancography, is that a follow-up telephone call strongly correlates to higher-than-average levels of loyalty to the institution and quality of the onboarding process.
In various ratings, the difference between those who received a call and those who did not is notable. Measures such as “very likely to recommend” and “very likely to use again,” reveal a ratings gap of more than 10% between those who received a follow-up phone call and those who did not.
The attribute most associated with poor onboarding performance was the knowledge of the employee who opened the account and whether or not he/she suggested other products and services—the cross-sell indicator.
Why the lack of follow-through? The employee might not have been comfortable with the product suite, which affected the opening of the account and inhibited cross-selling, or the employee simply provided poor customer service.
Bancography’s studies offer no indication of why employees did not make follow-up phone calls. Researchers infer, however, that the employee was concerned only about opening a new account rather than offering good service to build loyalty.
The employee’s lack of care will likely carry over to other job responsibilities. Bancography suggests measuring the onboarding process regularly and connecting the results to staff incentives. Improved onboarding practices will have a direct impact on branch-level service quality.
The contact and interaction in the first few months with the new account holder builds the foundation of the financial relationship. For credit unions, loyalty fostered early on will offset attrition and give your credit union a member who uses additional products and services.
As regulators continue to fine-tune their expectations of consumer financial products, they seem unified in their efforts to require transparency regarding fees and information about how financial programs work. And while the credit union industry has always been carefully regulated, there is little doubt that the renewed focus on compliance related to overdraft programs could lead to confusion for institutions without compliance expertise.
Ultimately, there are two kinds of overdraft solutions: undisclosed matrix programs or transparent, fully-communicated programs. Matrix overdraft programs, which were developed to replace the time-consuming, manual task of determining which insufficient-fund checks should be paid, are used by many of the largest financial institutions in the country. These programs use a complicated criteria-based matrix to decide on a daily basis whether or not to pay overdrafts on consumer accounts.
Additionally, matrix-based programs increase compliance concerns because they are non-disclosed products. Since the criteria used to determine which checks to pay are always changing, it is impossible to explain how the programs work. So, an account holder has no idea if an overdraft will be paid or what his or her overdraft limit might be. And in today’s regulatory environment, that spells trouble for the institution. It is important to note that all of the recent criticism by regulators, legislators and consumer advocates has been focused on matrix programs—because they are secretive and unexplainable.
Regulators demand clear, simple disclosure about how things work with checking accounts. To protect your credit union from criticism by consumer groups and give yourself an advantage with regulators, make sure your overdraft program is easy for members to understand. In today’s economy, consumers want to know that their purchases will be covered. And while the majority will never knowingly overdraw their account, they appreciate the security of knowing their financial institution “has their back” if for some reason they don’t have sufficient funds.
Plus, consumers are more inclined to use a program like overdraft privilege—and accept a reasonable fee—when they understand its value and know how it works. As a result, more members will sign up for a fully-disclosed program, which will increase your revenue possibilities.
John M. Floyd is CEO of John M. Floyd & Associates, a profitability and performance-improvement consulting firm. Reprinted with permission from Anthem, the publication of the Northwest Credit Union Association.
The Durbin Amendment has given financial institutions with under $10 billion in assets a remarkable opportunity to grow, according to a recent column in BAI Banking Strategies. Its’ all part of the scenario that, for credit unions, plays out around Bank Transfer Day.
As banks face reduced debit income, they’re looking to incorporate fees elsewhere to replace that lost revenue. This puts credit unions and community banks in a position to offer dissatisfied customers a more attractive alternative, according to Christopher Leonard, chief operating officer and general counsel for strategic consultancy Velocity Solutions.
Credit unions can capitalize on this turn of events by aggressively pursuing new checking relationships by offering free checking, which will reinforce a consumer-friendly market position.
Unfortunately, many smaller institutions aren’t making the best of the situation, according to Leonard. Many fail to proactively spread the word about their advantages.
As consumer awareness grows—and as big banks impose additional fees—credit unions can incorporate five methodologies to benefit from the good fortune brought about by the Durbin Amendment:
1. Take advantage of referrals. Simply ask your members to remember your institution in discussion with friends, family, and acquaintances. Remind them that the credit union provides free checking and stellar service. Consider handing each member a “tell-a-friend” coupon or informative brochure along with a transaction receipt.
2. Show your enthusiasm. Lack of “big bank status” can’t be your only claim to fame to achieve growth. Make sure your employees are enthusiastic and energetic about the credit union difference.
3. Simplify, simplify. Make it possible for new members to open accounts in less than 10 minutes. Account openings need to be painless and conducted with friendly ease.
4. Resurrect direct mail marketing. Because there hasn’t been much incentive for consumers to switch financial institutions in the last several years, direct mail marketing techniques haven’t been particularly fruitful. Potential exists now for direct mail to be more successful. Target marketing will help locate your desired demographics.
5. Fully engage current accountholders. “At a typical community bank or credit union, up to 40% of checking account holders are not actively using the institution’s debit card,” notes Leonard. Target-market these individuals and make them loyal members with increased use of services.
With vigilance, action, and dedication, Leonard believes community-based institutions can take advantage of the growth opportunities provided by the Durbin Amendment.
Further, he suggests, it behooves those institutions to do so, as changes next year to the presidential administration or Congress could erase this favorable environment.
You say the word “role-play” and the staff cringes. Sounds familiar? Role-playing often falls into disfavor with employees because the trainer doesn’t ensure that “realism rules.” Extremely overbearing clients and belligerent employees are the rare minority—not good examples for role-playing scenarios.
When practicing skills, trainers need to encourage a realistic environment. Give employees an opportunity to sharpen their skills in credible settings where the personalities are more real-world. A lot of people don’t like to role-play because the other person plays Attila the Hun. They act over-bearing or obnoxious so as to embarrass or humiliate the other person.
When people do role-playing well, it’s a confidence builder. Because role-playing is interactive, it keeps employees engaged in the training. They get to “experience” handling various situations they face on the job.
“One of the things we did in a basic Mortgage Originator 101 class was to set up application scenarios—one person was the loan officer and the other was the applicant,” explains Debbie Webb, CMC, NMLS instructor at Schlicher-Krtaz Institute in Perkiomenville, Pennsylvania. “The applicant was given the details and the loan officer had to ask the right questions to uncover the information. You can do something similar for your front-line employees. Examples are cross-selling scenarios or how to diffuse a situation with an angry client.”
Tips for Success
For more effective role-playing, Webb offers these tips:
For trainers:Make everyone feel comfortable. “The first time I was in a role-playing situation, the trainer really made me feel incompetent if I didn’t have the answers or responses she wanted to see,” says Webb.
For students:Relax, use the knowledge, and handle the situation as you would for a client—it’s a more natural that way and sometimes makes it easier to get through the role-play.
This story appeared in Branch Manager’s Letter at www.branchmanagersletter.com and is reprinted with permission. Contact publisher Lana J. Chandler at 304-343-0206 or Lana@BranchManagersLetter.com.
One-fifth of workers compensation claims account for about four-fifths of total claim costs. If a company could only identify these problem claims in advance, it could greatly reduce its workers comp expenses. However, most of these high-cost claims are not obvious at first; they emerge slowly over time. One method used by insurers to aid detection is predictive modeling. But to maximize any model's utility, there are several vital factors to consider.
Philosophy
It is critical to understand the carrier's claims philosophies in two areas even before diving into the specifics of an insurer's predictive model. First, does the insurer understand that managing workers comp costs requires treating the whole person rather than just the injury? Focusing only on the injury fails to take into account the factors that often determine the success, length and ultimate cost of treating the injured worker.
For example, imagine an employee with a work-related knee injury. Because pain is subjective, a host of psychological issues come into play. Does the injured worker believe he or she can manage the pain? Does the claimant believe the injury is a minor obstacle that will quickly heal? Is the worker motivated to return to work?
Second, is the insurer committed to producing the best medical outcome for each injured worker? This is the best way to manage total claim costs over the long term. Any other philosophy will hamper the ability to cut workers comp costs regardless of whether or not modeling aids in early detection of the problem claims.
Data
Data is the fuel of predictive models; the larger the database, and the broader the range of information included, the more effective it will be. Ask about the size of the database used to develop the carrier's predictive model. Ask how many individual claims and medical billing transactions determined the variables the insurer uses to predict high-cost claims. How did the insurer validate the effectiveness of its model? And is the model based only on claims data or does it include other sources of information like psychosocial factors?
Analysis
How the insurer uses the data is arguably even more important than how thorough that data is. Can the insurer's predictive model look at that data holistically? Rather than the presence of one variable, it is far more often the interplay of a range of variables that helps identify potential high-cost claims. Find out if the insurer's model uses "multivariate analysis" to identify likely changes in the claim over time and their likely effect on costs.
Frequency
How often is the information on each claim updated? A model can only review the claim data that is available in the claim file. So it is vital that the process requires—in fact, prompts—claims professionals to gather specific information at certain points in each claim's life cycle.
This raises another key question: How often does the carrier's claim process run each claim through its model? Sure, it is important that the model reviews each claim at intake; the goal of the predictive model, after all, is to spot potential high-cost claims at the outset. But does the model look at each claim at other points in its life cycle? If so, how often and when? And why did the insurer select those points to run the claim through the model?
Operations
An insurer's predictive model must be integrated with its claims operations. It can be a useful tool to manage a claim—but only if the model is embedded into the insurer's day-to-day claims management process. Furthermore, beyond simply alerting claims professionals of potential high-cost claims, the predictive model should provide them with guidance on how to manage the claim given its specific risk factors. Knowing something is a problem is not much help if you do not know how the problem can be solved.
Tracking
Find out how the insurer measures the effectiveness of its model. Does the insurer actually use this information to enhance and improve the model? Or did it simply start using one and presume it was working well? Without ongoing assessment, the only way to tell if the model is effective is by taking the carrier's word for it.
George Neale is executive vice president and general claims manager at Liberty Mutual. Reprinted with permission from the December 2011 issue of Risk Management Magazine. Copyright 2011 Risk and Insurance Management Society. All rights reserved.
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