How can banking analytics help community banks?

Banking analytics tools like Banker’s Dashboard are designed to automatically bring all of a bank’s data into a central location, which allows any user—from loan officers to the CEO—to make decisions based on up-to-date, reliable numbers.

Robust analytics can dramatically improve the way your bank operates. From increasing efficiency to improving customer service, analytics provide the information bank managers need to enable growth and improve the bottom line.

We asked some experts in the field for their perspective on how banking analytics tools can help community bankers.

What is banking analytics?

Banking analytics is the use of digital tools to automate the collection and reporting of banking data.

Automating the data visualization process can eliminate time-consuming, inefficient manual entry tasks. In addition to time savings, this automated process means bankers are always working with up-to-date data.

This is especially important in the era of high inflation. Scott E. Hein, Emeritus Professor of Finance, Rawls College of Business at Texas Tech University, says, “For the last 40 or so years, with very low rates of inflation, measuring things in dollar gains or losses was just fine. It reasonably resembled gains and losses in purchasing power over time. This is no longer the case.”

An automated banking analytics system helps account for a bank’s rapidly changing purchasing power. Bankers can also run more forecasting scenarios—and run them faster—than they could with old spreadsheet-based manual entry processes.

Reliable data for more informed decisions

However, just having access to data isn’t enough. In fact, having bad data may be worse than having no data at all: “The most serious obstacle to successful business decision making is not ignorance,” Scott says. “Rather, it is the illusion of knowledge and wise decision making arising from misleading data.”

Because the reports generated by a banking analytics system are based on data imported directly from the source, not only are mistakes from human error avoided, but unintentional bias can be sidestepped as well. Clean and accurate data is the foundation of accurate budgeting and month-end reporting.

But there is more value to be gained from the reports generated by a banking analytics system than completing routine processes faster. The centralized nature of these systems means bankers can perform deeper analysis about their assets and their customers and glean insights they would otherwise not have access to.

“Some of the best insights are often about customer behaviors,” says J.P. Nicols, Cofounder of Alloy Labs, “because what we say when asked often contradicts what we actually do. It’s not that we’re lying. It’s that we often don’t even know ourselves. We tend to decide on emotions, then just justify with facts.”

“Find out what your customers and members are actually doing,” J.P. says, “not what they tell you they want from you.”

Robust data analytics can help community bank leaders see larger trends that may be indicative of changes in customer behavior, without relying on direct input from customers. Bank leaders can also access a suite of tactics that were previously difficult to access or unavailable entirely, such as rolling forecasts, automated loan pricing analysis and lender performance.

Start at the beginning

Community bankers are not known for their abundance of free time. This can make the idea of implementing any sort of banking analytics system seem very daunting. However, there are small steps bankers can take to move towards a deeper understanding of their numbers and their customers.

One good way to get a new process started is by implementing it with new customers first. “Identify the data you need on your customers today and into the future,” says Jeff Marsico, President of The Kafafian Group, Inc., “and capture it at onboarding.” Once this process becomes routine, the information can be backfilled for existing clients. Having this data in place, says Jeff, “can help the bank know their customers and operate with greater discipline.”

There are also SaaS-based data collection and reporting tools that are able to be used out of the box. These tools are built with a deep understanding of how community banks operate and are designed to make the fundamentals of banking analysis faster and more accurate.

Add value with automation

When multiple people on a community bank’s staff are spending hours entering numbers into spreadsheets, the data is fragmented and quickly becomes obsolete. Automating these processes with a banking analytics system like Banker’s Dashboard frees up time for more valuable activities like making decisions about net interest margins, cost of funds, and loan yields. When the talents of the organization are focused on these value-add tasks, profitability increases and employees can do more meaningful work.