What Causes Profitability?

In this three part series, Digital Insight staff discusses how financial institutions, can increase their profitability through offerings and customer usage.

In our first article, we examined research from Digital Insight during a two-year period that proves that digital bankers increase engagement and profitability with their financial institution. Looking at the specific banking applications, we can begin to see some interesting results.

Changing Consumer Behavior

It’s no secret that new technology promotes convenience and creates a more engaged banking consumer. Take Mobile Remote Deposit Capture (Mobile RDC). It is a game changer for financial institutions – think Bill Pay 15-20 years ago – as the convenience of being able to take a picture of a check, deposit it into an account, and have the funds available same day is driving customer engagement of this service.

However, while the increase in consumer engagement is somewhat obvious, technology like Mobile RDC is also changing customer behavior. Mobile RDC is driving away routine, yet costly “human” interactions at the branch and allowing the customer to bank the way they want to bank.

After measuring results across several financial institutions during an 18-24 month time period, Digital Insight found that Mobile RDC causes customers to utilize the branch less, and those customers actually grow their deposit balances more heavily than bankers who do not use Mobile RDC.

Therefore, it can be said that financial institutions have the ability to not only create a more profitable consumer through engaging technology but can also change their behavior, thus making them more profitable.

Reward Your Users

Rewards programs have been commonplace across many lines of business – credit cards, travel, Starbucks – and we can see why. By encouraging consumers to use a product or service, businesses –  and specifically financial institutions – help build loyalty and satisfaction.

Understanding the value rewards programs bring to financial institutions, we couldn’t help but raise the question of what other correlations do reward programs create? So we took a look at Purchase Rewards, a rewards program that is tied to debit card purchase usage and helps customers save real money with personalized cash-back offers within online and mobile banking.

Specifically studying digital banking causality between the Purchase Rewards product and debit card usage, Digital Insight saw that customers who began using the debit card rewards program experienced a 5% growth in their monthly debit card purchases following the initial month, compared to 2% growth for customers who were not engaged in Purchase Rewards.[1]

As these findings show that banking debit card rewards programs cause customers to increase their debit card activity with their financial institution, the value for a rewards program goes much deeper than building loyalty among your customers.

In our next article, we’ll take a look at adoption of digital banking, and how to keep these profitable customers coming back for more.

The data used for this article was analyzed by the following Digital Insight team members: Heather Youngo, business analyst, Jason Weinick, manager of analytics, Brenda Shimmons, manager of analytics and Russ Tarver, marketing manager.

[1] Internal study of 15 Digital Insight financial institution customers, July 2009 through March 2014; claim based on comparison to Digital Insight online non-Purchase Rewards customers.

Written by Heather Youngo Jason Weinick Russ Tarver and Brenda Shimmons