Grounded in Data

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How a Pennsylvania bank is infusing data analytics into its operations

By Karen Epper Hoffman

Community banks have long prided themselves on knowing customers better than their larger competitors do. But in this age of electronic access and rapidly changing demographics, more community banks are finding guidance from data analytics.

Headquartered in Chambersburg, Pa., Orrstown Bank has been adopting analytics software over the past three years to make better use of its data. In particular, the bank is using its data to track the use of its service channels, generate revenue beyond its core commercial lending, and grow its market footprint.

“The bank had worked through some issues and it was prepared for growth,” says Benjamin W. Wallace, Orrstown Bank’s executive vice president of operations and technology. “And Orrstown was not just looking at the credit side of the house. We wanted to build throughout Pennsylvania and Maryland, and we were putting down the foundations to grow the bank.”

In late 2012, the $1.3 billion-asset community bank was resolving credit issues from the earlier financial crisis. Wallace and Jeff Deppen, Orrstown Bank’s chief information officer, were recruited from JPMorgan Chase to help the community bank grow organically and through some acquisitions. In the past few years, the bank has acquired six other banks, which have expanded the bank’s Mid-Atlantic footprint, Wallace says.

As Deppen and Wallace and their team dug into the data analysis side of their work, they realized they first needed to develop systems to monitor and track what channels the bank’s customers used as well as their preferred products.

“If you can’t measure it, you can’t improve it,” Deppen points out. Looking to data confirmed a few beliefs but overturned others, including the “conventional wisdom that millennials are not banking in the branches,” he adds. “We found that our younger generation of customers had as much probability of using the drive-up teller as people over 65.”

The data also uncovered that Orrstown Bank did not have as much penetration into its customer households as it needs to become the primary financial provider in its market, Wallace says. With the help of Canadian database analytics and marketing vendor Race Data, based in Toronto and Montreal, the bank executives quickly realized “there was gold in this data … that we were not using,” says Deppen.

Orrstown Bank’s core software vendor lent its support, funneling the bank’s data to the analytics company and other service providers. After gathering disparate data from the bank’s various systems, Race Data reviewed the information and gave each customer a score based the number of his or her transactions and products with the bank. The higher his or her “engagement” score, the less likely the customer was considered vulnerable to leaving the bank.

Based on these scores, the bank has promoted greater debit card use and marketed wealth management products and services to specific customers.

“As community banks, we have to have as much wallet share as we can,” Wallace explains. “We can’t always build that in-house, but we can [tie it together] better than any other service provider.”

If all goes as planned through the bank’s use of data analytics, Orrstown Bank should be a much more information-savvy community bank in serving and marketing to its customers, Wallace offers. “I don’t want to be an incremental bank,” he says. “When you buy a car, you get 80 new things—you don’t get just one.”

Takeaway:

Data analytics can help banks know and serve their customers, including younger ones.


Karen Epper Hoffman is a financial writer in Washington state.

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