A collection of observations, ruminations, predictions and random thoughts from Cornerstone Advisors.

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August 25, 2016 by Sam Kilmer Sam Kilmer

Life After Branches: What’s Your Value?

“Everyone is entitled to their own opinions, but not their own facts.” —Daniel Patrick Moynihan

Branches are essential. Branches are useless. Which is it?

Not a week goes by that we don’t hear another message about how branches are all closing tomorrow or they are indispensable forever. First, it’s the irreplaceable warm and fuzzy in-person branch experience. Then, it’s how banks are dinosaurs that need to rid themselves of branches so fintech omni-nirvana can be reached.

It’s like the (nerd alert) History Channel show Life After People, where viewers are taken on a journey of what Earth would be like if people went away, but instead it’s Life After Branches.

The Future Value of Branches

One way to gauge what’s coming for branches is to check out industry valuations. Where are investors making bets? First up, let’s look at some of the platforms used to engage digitally largely outside the branch. Private equity firm Vista Equity Partners recently acquired digital marketing platform Marketo for 6X revenue and outreach events platform Cvent for 9X revenue. Microsoft (valued at 5X revenue) recently acquired LinkedIn for 8X revenue. And industry darling Salesforce is valued at 6X revenue.

Compare that to branch mainstays NCR and Diebold, which are both currently valued under 1X revenue. While the big core providers driving many of the branch systems are valued in the 2-5X revenue range, a look behind the scenes finds payments growth and overall earnings — not branch related systems — driving that value. To be fair to Diebold and NCR, if the core providers spun off branch-only groups, those might carry valuations under 1X revenue, too.

So, there is clearly value in branches, but we need to be realistic about how much.

Why Branches?

Taking a step back, let’s remember that branches were originally created to be conveniently accessible so customers could originate new accounts. Financial models were designed under the assumption that revenue generated from those new accounts justifies branch expenses. Since most transactions were in-person, the branch did have a servicing aspect. The model worked. But then delivery shifted and branches became the alternative secondary servicing channel. It’s not uncommon now for a branch closure to result in the retention of 80% or more of the related customers. Which begs the question: why would a branch get credit for revenue generated today from accounts opened there 15 years ago? Or, why would a branch get credit for a customer’s revenue because the customer cashed one check there last month? If origination is the main goal, why isn’t that the main measure? Do we need to rethink value credits?

Half Gone Soon

Three facts about branches:

  1. Declining Interactions: Many bankers are already hearing crickets chirp in some of their branches. It shows up in the data too. According to the Cornerstone Performance Report for Mid-Size Banks, median branch transactions are already dropping at such a rate that, in only five years, half of today’s incidental branch cross-selling opportunities could be gone. That’s a dramatic pipeline impact, right? Some bankers may not be seeing major traffic declines because of high customer growth (not a bad problem) or because they’ve forced the branch into fulfillment interactions not really required. Wet signatures vs. e-signatures is the common example. Prediction: remaining barriers to e-signature adoption get solved once customers start rejecting the 30-minute loss of life to “just drop by.” If that doesn’t fix it, cost scrutiny will – when smart CFOs see the pinch of risk-elimination-compliance overspending sucking away precious resources from competitive survival initiatives.
  2. Footprint Reductions: Every quarter, another handful of mid-size banks announces 8%-10% reductions in branch networks. This is just the beginning. Yes, some growing banks and especially credit unions are modestly expanding their branch networks, and many are rightly reshaping existing branches. But the net is clearly headed downward and tough resource tradeoffs will pick up the pace.
  3. Digital Engagement: Online has risen to be a decent chunk of originations. Most are still done in branches but probably not for long. Bankers have to avoid autopilot spending, which will typically under-resource digital and over-resource branches.

New Models Needed

Many branches clearly have sales and branding value, but more will have to be done to drive value than web appointment-setting apps, kiosk justifications, or employees trained as Pokemon Go trollers. Banks will want proactive branch closure justification models and return on channel models using some new measures around revenue, efficiency, retention and experience. Revenue credits will need to be rethought around value creation. As much as branch build or transform models, return on channel and branch closure models will help bankers facilitate the tough conversations needed to survive.

What do you think?


Much appreciation to Ron Shevlin, Scott Hodgins and Jim Burson for their input to this article.


Introducing GonzoCast:
Under 15 minutes. Straight to the point.

This week we’re talking about trends in channel utilization.
Do we need branch closure models?



Filed under: Branch Sales & Service, Marketing, Retail Banking, Strategy, Vendor Buzz

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August 17, 2016 by Butch Leonardson Butch Leonardson

Business Intelligence: No Vision = No Results

“Intelligence without ambition is a bird without wings.” –Salvador Dali

Business intelligence has been listed as a top priority for CIOs and executive teams for the past several years across many industries, including banking. For banking, top business drivers have included customer engagement and innovation, but also just plain old know-your-customer regulatory and compliance expectations.

With an increasing industry focus on finding opportunities for revenue growth, BI comes up all the time in conversations of both strategy and technology. But, let’s face it. Getting past the nebulous is tough stuff with BI. What is the best approach for implementing BI in reality?

Since BI initiatives are among the worst at scope creep and, well, going off a cliff, let’s start with a definition we can (hopefully) all agree on:

Business intelligence helps turn internal transaction and external market data into an asset.

OK, got that out of the way. Now, the top challenge organizations face in turning data into an asset is leadership. Anyone running a BI team knows that managing technology is easier than setting specific priorities across the enterprise. So, from my experience, here’s the four-point plan for business intelligence leadership.

1. BI = Leadership Tool.

Business Intelligence should become an extension of the bank’s strategic direction and communicating top priorities. A few examples from the trenches:

  • Identify customer pain points across physical and virtual channels
  • Evaluate portfolio concentration and exposure
  • Build a common single view of a customer’s relationship so communications across the bank are made in one voice
  • Reduce the cost of compliance by presenting regulatory information in an enterprise-wide dashboard
  • Present effective, real time cross-sell opportunities to customers and staff
  • Better understand specific product cost and profitability components

BI then becomes the bank’s continuous communication tool. The entire organization sees on a daily basis a reminder of the priorities and progress to date. The tempo on projects that are driving the priorities can stay high. Transparency can improve accountability.

2. C-level managers see themselves as enterprise digital leaders rather than functional silo leaders.

As a leadership tool, BI can be used to give banks insight into their operations that can point to low-cost innovation opportunities. These opportunities often won’t surface if banks stay in functional area thinking. For example, staff can build a BI environment that collects data, measures and teaches the bank where customer pain points are. Voice analytics in contact centers can surface pain points. This gets Lending, Retail, HR, Marketing, Finance and Risk Management all involved. Everyone brings their functional lens to the table, but with the same idea of making it easier for the customer.

3. Bottom-up sounds better, but top-down driven BI is actually better.

Been there, done that, bought the t-shirt, wasn’t comfortable. Bottom-up leadership appeals to our sense of democracy and the underdog. I was the CIO of a large financial institution and introduced a BI environment driven by IT. It was technically a success, but strategically? Not so much. We believed that as we increased the number of trained power users, value would rise to the top of the barrel. Not the case. And, this was at a strong financial institution with solid proven leadership. Lesson learned. BI is tough stuff.

The bank’s chances of success with BI increase exponentially if it starts with a compelling direction from the top and asks the leadership team to imagine a BI tool set that will help get you there and help communicate the progress across the enterprise on a daily basis. Dashboards, balanced scorecards and the like are awesome communication tools when tied to a compelling direction.

4. BI is a program, not an implementation project.

As the bank becomes more digital enterprise- and less silo-focused, management sees more programs develop instead of standalone projects. The beauty of a program approach is that you expect continual improvement in a domain. With projects, you have a conversion party and then move on to the next project. You find years later there has been little or no improvement since go live.

Imagine a new customer onboarding software selection and implementation project compared to a customer onboarding program. With the project approach, the organization becomes wrapped around software selection and hitting the go live target and budget. With a program approach, the organization expects annual budget items focused on improving the customer experience, maximizing existing software assets, and continual tailoring of the onboarding process around elimination of pain points, product focus, engagement measurements, and other virtuous priorities.

This is especially important with BI because so many of the potential initiatives can be executed using different systems. The same project being touted by a data warehouse vendor might also be done by a profitability, credit, fraud or marketing CIF system. If we keep our eye on what we are trying to accomplish and the new information needed to continue the conversation, it allows us to value what different approaches and systems can (and cannot) bring without stalling the entire program.

A BI program is expected to evolve continually, be responsive to new opportunities, and be a driving source of energy in moving toward the bank’s direction for the future.

Got Big Data Under the Hood? How About an ETL Engine?

GonzoBankers out there may have noticed the absence of big data, OLAP, ETL, meta data, and other components of the typical BI tech stack in this article. The technology solutions available are ever changing. They are the shiny chrome wheels on the muscle car. We get it.

We’ve seen BI data architecture charts that were super cool but also clearly designed to scare off small children, senior executives, and anyone else with a short attention span. They are not the place to start a BI conversation, much less a BI initiative. Once the bank has a compelling direction for BI, the makeup of its technology stack will be easier to define and implement.

Let’s Do This.

If a bank’s team is not committed to leading, BI initiatives might actually be the single largest waste of spending out there. That said, better customer engagement, risk management and innovation can all be enabled with BI. Yes, with a return on investment, too. Staff can be fully informed on the bank’s desired direction and progress, technology assets can be better utilized, and the leadership team less siloed. Not really a bad deal, if you think about it.

CUES School of IT Leadership™

GonzoBankers Butch Leonardson and Steve Williams will be presenting at the CUES School of IT LeadershipTM Sept. 27-29 in Charleston, S.C.

Current and future credit union CIOs and executive teams won’t want to miss this opportunity to explore ways to guide their IT organizations’ direction and spending. Attendees will leave with a Strategic IT Action Plan designed to take their CU’s ITO further.

Learn more and register.


Filed under: Best Practices, Branch Sales & Service, Information Technology, Marketing, Retail Banking, Web & Mobile Banking

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August 8, 2016 by Alison Van Pelt Alison Van Pelt

Four Conversion Must-Do’s in a Bottle

I recently attended a bank’s first conversion data validation event and was so impressed by it that I kept asking myself, “What if I could bottle this somehow?” So like any project manager worth her salt, I’m doing just that. So, here’s my four conversion must-do’s bottled for your sipping pleasure.

1. Go Team: The conversion team should be structured properly and early. One of the many fun things I learned as a bank CIO leading a core conversion was that adding cross-functional resources that are key stakeholders enhances buy-in. Including team members from departments that cross all bank areas like accounting and IT will go a long way toward the success of the project.

2. Room (except for Chatty Cathy): The validation room is a key factor in the success of the full conversion. Workstations with dual monitors are preferable. Connectivity to both the donor platform(s) and the new platform makes for easier data validation. The people in the seats should have an aptitude for detail and fact-finding. They must be fully trained and comfortable on the new system. They also need to understand the majority of the business decisions that have been made during the set-up of the new system. Word of warning: a Chatty Cathy is likely to disrupt the project.

3. Focus: Clearly defined roles and responsibilities will help people stay focused on the tasks at hand. Resources must be dedicated not only to the event but to their role in the event. As an example:

  • IT handles technical tasks and provides end-user support.
  • Accounting focuses on balancing activities.
  • Validators focus on data review and report issues to team leaders.
  • Team leaders review issues and report to the vendor.

4. Watch it! Manage the data effectively. Data validation is a tedious task for anyone, and management often starts asking questions like, “% Complete?” and “How many issues reported?” There are several data points to be considered for management:

  • The source or donor data. Some banks build tools to populate vendor-provided workbooks to eliminate some of the entry by validators. This is great, but it also needs to be validated that the workbooks are populated correctly.
  • Issue reporting is important but not all issues are issues. Say what?? Data validators will report items that need to be vetted by a team leader. Decisions along that way have been made to change how business is conducted or how the data is converted. Multiple issues may be logged that will have the same root cause. Team leaders need to vet the issues and only report the true issues. An internal reporting tool will help information flow quickly to team leaders.
  • Team leaders need to log and pass true issues quickly to the vendor for resolution. As a banker, a vendor, and now a consultant leading these projects, I’ve learned that vendors will often provide dedicated resources, but only for the duration of the conversion. It’s a race against time. The quicker issues are escalated, the quicker the vendor can respond.

Whether it’s for core, online banking, lending or payments system conversions, GonzoBankers out there are finding successful conversions are as much about project LEADERSHIP as they are about project MANAGEMENT. We hope these four bottled-up must-do’s help you in leading your next conversion. And, hey–it’s good to have that bottle for toasting the team when the successful conversion is through. Sounds like fun, huh? Well happy un-bottling, decanting and tasting.

To your health!

We take the Dread out of Conversions

A bad system conversion can literally “break the bank” and pose serious operational, management and perception risks to the organization.

That’s why you want the conversion experts from Cornerstone Advisors on your team.

We act as mentor, advisor, and best practice provider, and you can feel assured that at the end of the project, we’ll all be celebrating with a toast to a successful conversion.

Contact us today to learn how we do it.



Filed under: Core Processing, Risk Management

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