SPECIAL EDITION • THE NEXT NORMAL
What is an Engaged Digital User Worth to my Bank? By Charlie Kelly and Brian Hink, Remedy Consulting
B
ankers provide digital tools to their customers, but many community bank CEOs and even most “Digital Experts” from large financial technology organizations struggle to answer two questions related to their digital users:
“What incremental revenue does an engaged digital user bring me?” and
“What does an engaged digital user cost me?” If you want to determine an ROI for each active digital user you recruit, it may help to have a better understanding of the two sides of the equation – how to quantify the revenue and the cost of each digital user. Throughout this piece, we will try to get bankers thinking about the questions to ask when deciding what a digital user is worth to your bottom line.
A recent McKinsey study suggests that the number of “channels” a customer uses from your financial institution to access their money has a direct correlation to both the number of products they purchase, and the revenue per customer. The number of products purchased increased from five on average for the less engaged customer up to nine products for the most engaged customer. The revenue per customer the study used was $100 per customer for a single channel (less engaged) customer, and $210 per customer for a client that used three or more channels. So, $110 in incremental value for an engaged customer vs. non-engaged customer. We have seen other studies that suggest the incremental value of the digital customer is somewhere between $75$200 per customer. Oddly, we have yet to find an expert to show us how they calculate the value of the engaged digital customer. The reason that they may not want to commit to the secret sauce behind their estimates is because there are so many variables in this equation. The two most obvious might be: Using the concept that more channels equal more products purchased, which additional products can you anticipate that the engaged digital client will purchase? Can the average community bank CEO estimate the value of the additional products? Let’s look at some revenue drivers a bank could use to calculate the value of a digital user. For the purposes of this argument, let’s ignore loans and use just the value of a deposit account for an active digital user. When we build a model for a client, we start with three revenue and one expense reduction driver: Interest Revenue on primary account: When building ROI models for our clients, we start with $9,000 as an average balance, with 25 bps as a conservative estimate of the spread between investments/loans and what a client might pay on account balances. This comes out to $1.88/month.
• 20 •
• July-August 2021
