FT Business Scenarios V2

Creating Business value with
Customer Flow of Funds Analytics

• Customer Insight & Marketing
– Optimizing return on marketing
investment
– Prioritizing customer experience
initiatives
– Improving accuracy of customer
behavior prediction
– Efficient detection of customer
behavior changes
• Product Management
– Optimizing “teaser rate” campaign
effectiveness
– Optimizing revenue across the
product portfolio
• Sales
– Aligning sales performance targets
to growth drivers
– Managing sales force
compensation
• Finance / Risk / M&A
– Funding the transition to digital
– Forecasting and monitoring
liquidity risk
– Reducing AML compliance cost
– Valuing and monitoring liability
portfolio acquisition
Jul-16 © FlowTracker Analytics Inc. Proprietary & Confidential 2
Business scenarios
FlowTracker creates value in many functional domains of the bank. The common
thread is better business decisions are based on understanding what customers
are actually doing over time.

CUSTOMER INSIGHT & MARKETING

Optimizing return on marketing investment
Anne, Vice President Marketing, at a $100bn Super-Regional Bank.
Anne knows that Return on Marketing Investment (ROMI) is the number one indicator
of success for her group. At the top of her agenda is growing the Retail Banking
business through targeted acquisition, cross sale and retention of customer balances.
Anne’s team has developed a host of KPIs for marketing but none of them seem to get to the essence of
the growth drivers she is responsible for. In fact the sales and retention stats she reads appear to be
inflated and don’t reconcile to portfolio growth which is her primary goal. Anne wants to measure what
she manages effectively and have confidence she is optimizing the investments she is responsible for.
Problem
Anne’s KPIs don’t enable her to
directly measure sales, cross
sales and retention.
She lacks confidence that the
ROMI her team reports on
campaigns is actually being
realized, let alone being
optimized.
Solution
FlowTracker was implemented
to enable Marketing to provide
account level customer sales,
cross sales and retention
statistics Ann’s team can use to
quantify and value new
business, retention of existing
business and the marginal gains
or losses from cross-sales across
the Retail bank.
Outcome
With the new insights gained
from FlowTracker information,
Anne’s group is now able to
allocate Marketing spend to
where it generates real growth.
In addition, her team’s ROMI
analyses have enabled cost
savings by highlighting where
product substitution reduces
profitability overall.

Prioritizing customer experience initiatives
James, Vice President CRM Strategy, at a $100bn Super-Regional Bank.
Designing customer experience journeys is a cornerstone of the bank’s competitive
strategy. James knows customer journeys differ across Customer Segments, and the
bank needs to be selective in prioritizing the investment in design and implementation.
James has to balance the needs of Product Management stakeholders while setting the strategic agenda
for Customer Experience development. He needs sales, cross sales and retention facts to justify which
opportunity areas are prioritized, and to enable continuous improvement of the CX program.
Problem
James needs to know which
customer experience journeys
drive growth and how much
they contribute to enable
prioritization and monitoring.
Product and Channel analyses
lack the insight into customer
behavior demanded of a
customer centric strategy.
Solution
FlowTracker was implemented
as an add-on to an existing CRM
Data Mart returning customer
behavior information to the DM
for analysis and reporting.
FlowTracker data was used to
quantify the relative impact of
customer journeys on sales,
cross-sales and retention.
Outcome
James was able to prioritize
Customer Experience Journeys
for development based on
quantified business impacts.
As the CX Journeys are
implemented, James is able to
measure results, test and
continuously improve designs
based on objective metrics.

Improving accuracy of customer behavior prediction
Phil, Director Customer Insights at a $15bn Regional Bank.
Phil heads a team of Data Scientists who have a great track record building predictive
models that score customers’ propensity to buy – or abandon – at both the product
and relationship levels. They know model accuracy directly impacts financial results,
and are seeking new ways to gain insights ahead of competitors.
Phil’s team recognizes their models are only as good as the target definition and the predictive variables
they have on file. IT wants to invest in unstructured social data, but Phil believes they can get more
value from the data they already have.
Problem
Customer Sales and Attrition
are not separable from product
substitution in Phil’s data,
clouding the target models
predict.
Acquiring new data sources is
costly with uncertain results.
Gaining more insight from
existing data is what Phil really
needs.
Solution
Phil implemented FlowTracker
Cloud SaaS, backfilling 36
months of time series analysis.
Existing models were updated
to redefine sales and attrition
targets as pure “new” and
“lost” business. Phil’s team also
added the new customer
behavior events into their
models as predictors.
Outcome
Within 120 days a full 36 month
history was available for
inclusion in predictive
modeling. Phil’s team
discovered their new models
gained 30% in accuracy due to
target redefinition and
FlowTracker customer behavior
events had significant predictive
power when added to existing
models.

Efficient detection of customer behavior changes
Phil, Director Customer Insights at a $15bn Regional Bank.
In addition to Predictive analytics, Phil’s team use Event Triggers to detect and respond
to changes in customer behavior. To date they have had significant success with a
solution that analyzes daily transactions to detect unusual deposits and withdrawals.
Distribution channel leaders in Branches and the Call Center claim that as many as half of the
intervention leads that are generated from the solution are “false positives”, meaning the transaction is
only one side of an internal product switch. Phil needs to differentiate between opportunities for action
and transactions that can safely be ignored to improve the usefulness of the leads he is generating.
Problem
False leads generated by
analyzing transactions flood
distribution channels with low
quality leads for interventions.
Transactions fragment customer
behavior into multiple
unrelated events. Analysis of
transactions to re-assemble the
parts into a coherent customer
behavior is extremely difficult.
Solution
Phil started using FlowTracker
customer behaviour events
generated as the source of
Event Triggers leads.
Daily balance “snapshots”
uploaded to FlowTracker SaaS
are processed overnight and fed
into the lead distribution
pipeline.
Outcome
Branches and the Call Center
both confirmed that the
reduction in leads – and the
increase in quality was a
welcome change for transaction
trigger events.
As a consequence the
percentage of leads being
actioned increased from 45% to
85%.

PRODUCT

Optimizing premium rate campaign effectiveness
Felix, Vice President Deposits, at an $38bn Regional Bank.
He is running “teaser rate” campaigns to acquire new Term Deposit business. Primarily
he wants to attract new money to the bank and maximize the return from his
marketing investment.
Felix asked his analytics team to determine how much growth is coming from outside the bank versus
internal product substitution, and how long it stays with the bank but they struggle with the complexity
of mapping transaction flows across products in the bank. After six months of detailed data analysis at a
cost of $500,000, Felix still doesn’t know if he’s creating real growth or even getting a positive return on
investment.
Problem
Product substitution effects
cloud analysis of marketing
campaign effectiveness.
Felix can’t maximize his
investment returns without
knowing what is working and
what isn’t at the individual
account cash flow level so he
can adjust the campaign
designs.
Solution
Felix uses FlowTracker to
analyze flows of funds during
and after campaigns.
FlowTracker identifies where
new money is getting
generated, how much is
retained, and where product
substitution has negative
effects.
Outcome
Felix is able to quantify his
ROMI from new money,
retention rates and the
incremental benefits of product
substitution precisely for the
first time.
His campaigns are refocused on
segments and geographies
producing the most value,
increasing ROMI by 20%.

Optimizing revenue across the product portfolio
Felix, Vice President Deposits, at an $38bn Regional Bank.
Felix needs to meet volume and revenue targets across all the Deposit and Investment
products offered by the bank. His team has modeled price elasticity of demand on a
product by product basis but he is concerned that optimizing product pricing may not
produce the best results for the portfolio overall due to product substitution effects.
Felix knows product substitution can be as much as 35% of account level growth, but his systems don’t
enable him to measure the cross-product flows accurately at the customer and account level, which is
the key data he needs to include cross-elasticity in his portfolio pricing optimization program.
Problem
Price Optimization algorithms
produce compromised results
unless cross-product flows of
funds are measured and
modeled separately from other
flows.
Felix needs this holistic portfolio
demand view to optimize across
the portfolio as a whole.
Solution
FlowTracker produces customer
behavior events that measure
the volume of funds flowing
between accounts (therefore
products) separately from
money flows to/from the bank.
FlowTracker events, coupled
with rate data enable cross-
elasticity of demand to be
included in PO models.
Outcome
By including cross-product flows
in his PO models, Felix can now
optimize across the entire
product line with confidence.
In addition, FlowTracker enables
Felix to include post-pricing
flow analysis to enable
continuous improvement of the
Price Optimization program.

SALES

Aligning sales performance targets to growth drivers
Angie, Sales Director Retail Banking, at a $12bn Community Bank.
Angie knows she could be more effective if she was able to overcome two key
limitations: a) sales targets are assigned on the basis of previous results, without
insight on the trends at the customer level in the specific branches; b) She cannot see
whether some sales officers achieve their targets by cannibalizing certain products in their portfolio. In
other words, she cannot truly say she pays for performance and worst the branches have retention
issues as sales officers find their scorecards are arbitrarily set.
Problem
Branch portfolios vary greatly
even within regions. But Branch
does not have sufficient
granularity into how customers
use the funds. As a result,
sales targets can be unrealistic
at times and sales officers
compensate by repositioning
their customers portfolios
rather than looking for new
business in their markets
Solution
Angie’s “experiment” shed light
into the dynamics of the
portfolios of the branches in her
region. She is using the
information to rebalance the
scorecards for the remaining
quarters. The reports also
isolated the customer’s portfolios
that only rebalanced and
whether they are concentrated
on specific sale officers
Outcome
Explainable sales targets have
increased sales officers
engagement, which Sarah
expects will increase retention.
The adjustment of the
scorecards will also result in up
to 35% savings in
compensations from false sales
results.

Managing sales force compensation
Sarah, Vice President Sales, at a $15bn Community Bank.
Sarah manages three different sales forces who earn commission as part of their
compensation – investment and mortgage sales forces get paid for new business, while
the Branch Relationship Managers get bonuses on both sales and retention.
Variable compensation has been a successful motivator for sales staff in the past, but the bank is
increasingly concerned that there appears to be a disconnect between sales volumes reported and
portfolio growth that shows on the books. Sarah needs to ensure the bank is getting what they are
paying for, and that the right behaviors are being encouraged by the compensation plans.
Problem
Sales compensation is being
paid on new accounts and
account growth which includes
“old money” that is being
moved amongst products and
reported as sales.
This dilutes the rewards that
can be paid for new money and
encourages product churn
which is ineffectve.
Solution
Sarah started using FlowTracker
SaaS in the cloud to analyze and
report on the dynamics of
customer behavior.
FlowTracker reports separate
new money, true attrition and
cross-product flows at the
individual account level,
balanced to changes reported in
the financials.
Outcome
Sarah initiated a re-engineering
of the sales force compensation
programs. She eliminated
compensation on “old money”
and redirected the savings into
richer rewards for new money
growth.
Sales comp costs are flat but
Sarah is now generating 50%
higher ROI to the bank.

FINANCE / RISK / M&A

Funding the transition to digital
Jeff, Chief Financial Officer, at a $35bn Regional Bank.
Jeff is a tech-savvy Financial leader who sees the potential of Big Data, Machine
Learning and In-session decision making to transform his bank’s customer experience
from “push” campaigns to “client pull” based on real time interactive dialogue.
Jeff needs to ensure the Bank’s Digital strategies are producing tangible results and manage shifting
investment physical channels to digital at the right time and in the right amounts to maximize the
growth of the bank. His IT and Business partners are divided between the old and new technologies and
he needs facts to support his decisions and help his colleagues embrace change.
Problem
Unit sales reports, conversion
rates and marketing metrics
don’t tie into the Financials and
don’t enable comparative
analysis that would inform
resource allocations.
Jeff’s bottom line need is he
needs the portfolio growth facts
to manage and direct funding to
Digital initiatives.
Solution
Jeff compared growth, attrition
and cross sales metrics across
comparable customer segments
to quantify the return on Digital
and Traditional capabilities.
FlowTracker analytics enabled
him to create a fact based
business case for investment
allocation decisions.
Outcome
Not only is Jeff confident the
allocation of resources to digital
is justified, he can now track
and report on the incremental
benefits ongoing.
The tough decision to reallocate
resources from the “old” to the
“new” is based on facts that all
Executives can accept.

Forecasting and monitoring liquidity risk
Paul, Vice President Risk Management Office, at a $10bn Regional Bank.
The regulatory environment has kept Paul and his colleagues busy as of late. The risk
management office hast implemented processes to ensure that the financial and risk
reporting do not contradict each other, but the reporting is at a macro level which does
not shed light into the trends within the retail accounts. While the bank has managed
Problem
Risk committee cannot
demonstrate to FDIC or the
board they have a 360°
understanding of the Retail
portfolio dynamics, i.e.: Flight
to Liquidity trend, trajectory of
the financial positions, changes
in product risk profile.
This is impacting the bank’s
valuation which makes it a
target and limit is options
Solution
Paul will trial FlowTracker to
monitor the behavior of the retail
accounts. Using data sets over
different periods of time, he will
identify patterns to improve his
predictive model.
He is liaising with the Branch
Banking team to sponsor the
trial. This standardizes the tools
used across the bank.
Outcome
Insight into the flow of funds
and the stability of its deposit
base has enriched the reporting
to the analyst which is reflected
in the buy recommendations
and the banks improved
valuation.
Both, shareholder sentiment
and the regulator evaluations is
improving
to significantly clean it’s portfolio, lessons learned indicate they need to do a better job of identifying
early signs of shifting risk profile of their customers. Both regulators and the board are reporting that
management can only be reactive to the changes in the retail accounts liquidity position.

Reducing AML compliance cost
Paul, Vice President Risk Management Office, at a $10bn Regional Bank.
Paul’s AML team has been growing rapidly and he’s getting pressure from his business
partners to reduce the cost of compliance, while still ensuring the bank stays ahead of
the risk of Money Laundering actions.
He knows the transaction analytics and case management tools they’ve implemented detect and
monitor suspect cases sufficiently, but experience has shown there are far too many “false positive”
signals coming from their detection algorithms. Paul needs to focus on real risks to contain costs.
Problem
Following up on false positive
AML cases is costing Paul a lot
of money. His peers are
frustrated with the spiraling
compliance cost which is
diverting investment away from
growth initiatives.
Paul needs to reduce the
incidence of false positives to
contain costs.
Solution
Paul’s team uses FlowTracker to
screen down the volume of
customers whose transactions
require investigation.
Now the team focuses on large
transactions only when there is
a corresponding external flow
detected by FlowTracker.
Outcome
By layering FlowTracker’s
customer behavior perspective
on top of his existing AML
detection regime, Paul was able
to reduce case volume by 35%.
The cost savings have been
redeployed into revenue
generating initiatives.

Valuing and monitoring liability portfolio acquisition
Zach, Vice President M&A, at a $100bn Super-Regional Bank.
Zach sees a huge opportunity to grow through acquisitions as the industry goes
through a wave of consolidation over the next 5 years. He is strategically seeking out
and acquiring banks with solid core deposits that will mitigate rising interest rates.
Zach has a critical need to ensure that the deposit bases he’s buying are of high quality and have
minimal attrition as the acquired client base is merged into his bank. Financials and Treasury liquidity
and duration reporting give him the macro story but he wants to understand the portfolio dynamics
before and after the deal and include quantified targets for retention and growth in deal terms.
Problem
Zach needs to monitor, analyze
and report on deposit quality in
prospective acquisitions before
and after the deal is struck.
In a perfect world, Zach would
like to get raw data from the
banks to do his own analyses
using a tool that can be set up
fast and easily.
Solution
Prospective banks send masked
client account data from their
CIF’s to FlowTracker “as a
Service” in the cloud.
Within 4 weeks the FlowTracker
team runs the analytics process
and provides standard reporting
plus complete datasets to both
banks securely to support
negotiation and tracking.
Outcome
Zach can now evaluate the
customer behavior dimension
of prospective target banks
consistently, securely and
quickly.
This information enables Zach
to asses the quality and price
the portfolio more precisely and
ensure retention terms are
complied with until close.

Want to know more? Please contact Dave McNab:
Dave.McNab@FlowTrackerAnalytics.com
+1 (416) 708-2069
http://www.flowtrackeranalytics.com

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