Discover how White Clay’s platform enable bankers to drive value for both shareholders and clients in the exclusive interview covered by FinTec Buzz
Mac, can you share your journey and experience in the banking industry, and what led you to found White Clay?
Leaving college, I didn’t plan a career in Banking and had an internship lined up with my local congressman for the summer. It turned out he was on the Banking Oversight Committee, and he inspired me to explore the world of financial services. After the internship I got my first job at Bank One, Lexington in Accounting. While I learned many important accounting insights that would help me later in my career, the daily experience was not aligned with me. I quickly switched gears to focus on automating the bank’s internal operations and found ways to eliminate millions of pages of annual printing. This led to a seven-year career at Bank One in the Finance track creating systems to automate, enhance, and improve how information was applied to boost client and shareholder value.
I was then recruited by a broadband media company in Luxembourg to help build their business model and raise capital. I spent a year learning how a startup technology company worked and identifying the skills I would need to start my own company. I then went to Bank of America to build their Executive Performance Measurement environment. After successfully creating the solution, I switched to the Consumer Analytics department and focused on understanding consumer and business behavior by aggregating and managing large datasets and adding intelligence to drive client and shareholder value. In my years working at Bank of America, I also created a payments strategy for the bank and turned around the bank’s Merchant Services line of business by applying intelligence to drive revenue improvement.
In 2006, I left Bank of America and co-founded White Clay. During my career, I saw firsthand how the information intelligence capabilities of the largest banks gave them a great competitive advantage over regional and community institutions. We started White Clay to provide regional and community institutions with the same capabilities and help them compete with the largest banks.
How does White Clay utilize data aggregation and advanced intelligence to provide complete customer visibility profiles for community and regional financial institutions?
We often hear that financial institutions struggle to transform their data into meaningful insights. They’re faced with a mountain of raw, disparate transaction data, which is highly variable but not actionable. This situation is becoming more complicated as banks add more fintech solutions to their product line. At White Clay, we’re helping financial institutions maximize their data to improve relationships and increase revenue.
We use machine learning tools and trend analysis algorithms to ‘smarten up’ the raw data and consolidate it into one view of the customer and the banking products and services they use. Then, we display this information in a cohesive, easy-to-use dashboard made accessible to bankers, executives, and board members. Having a single, accurate view of their data across the organization helps banks determine which clients impact profitability and liquidity, as well as how to optimize their relationships and boost shareholder value.
How does data play a role in determining customer segmentation, and how can banks leverage this information to personalize their services?
Once we provide banks with visibility into their customers’ banking relationships, they can apply segmentation. Banks can choose to segment relationships in many different ways, including by households (e.g., a married couple), personal attributes like demographics (i.e., age, gender, ethnicity, occupation, income etc.), defined geographical boundaries (i.e., region, state, zip code etc.), lifestyles (i.e., personality, interests etc.) and profitability characteristics (i.e., deposit balances, loan balances, estimated revenue, profitability, and cost). Institutions can also group clients together who behave similarly, using behavioral segmentation (i.e., transaction, product, and service use data).
Segmentation allows financial institutions to find out who their customers really are, and how they derive value from their banking relationship. They will also be able to calculate the Customer Lifetime Value, which provides insight into how each client contributes to the bottom line while helping to identify potential revenue drivers. Knowing this information helps institutions personalize their offerings for each segment, leading to an increase in revenue and profitability.
What are the key benefits and advantages of having complete customer visibility profiles for bankers in optimizing client relationships and driving revenue?
Customers’ behaviors – for example high debit or credit card use, increasing ATM use, low branch deposits, etc. – indicate how they derive value from their banking relationship. Having complete customer visibility profiles helps banks better understand who their customers are and identify their individual needs. Banks will then be able to use these insights to design, execute and manage a playbook to optimize each client segment.
For example, banks might see that a product or service is underused and offer temporary discounts to increase engagement. Or they might start educating customers on products and services they might not be aware of based on their product usage and transactions. Or, they can assist small businesses with loans, governmental assistance, or taxes, and deter them from using non-bank products. These scenarios are examples of how banks equipped with relevant insights can improve shareholder and client value, ultimately leading to an increase in revenue and profitability.
Can you elaborate on the process of building and executing a deposit strategy for banks? What are the essential factors to consider?
For almost 15 years, financial institutions have kept their deposit rates low or nonexistent, instead focusing on loans and fees. The environment has now changed with most economists predicting that the U.S. will head into a recession in next 12 months. Financial institutions should prepare themselves to face the downturn ahead. During my conversations with both regional and community banks, I noticed that regional banks are further along in their preparation, while many community banks still haven’t acknowledged the possibility of an economic downturn.
Part of preparing for a recession is to build and execute a deposit pricing strategy, which should consist of four action points: building a deposit strategy in line with the institution’s asset and liability strategy, identifying where the majority of deposits sit and taking proactive action to keep those balances within the institution, educating and developing bankers to understand, execute and communicate deposit pricing tactics, and implementing a deposit pricing process which should include measurement, inspection, and coaching, allowing executives and managers to track performance at the organization, representative, and branch level.
Why do you believe it is crucial for banks to focus on their current banking relationships? How does White Clay assist banks in enhancing these relationships?
Historically, 70% of deposit growth comes from existing customers. As banks are looking for ways to grow deposits, build a stronger balance sheet and prepare for a recession, existing customers could bring greater gains than acquiring new ones. We often find that most institutions are not able to identify primary relationships and properly leverage them.
White Clay helps banks build a clean data environment, aggregating a comprehensive view of each client’s relationship and behavior, including their accounts, transactions, and product usage. This helps banks determine which relationships are primary and which of the primary relationships have a history of contributing to the bank’s bottom line and the potential to drive additional deposits. For consumer clients, about 15% of all relationships drive 75% of deposits and 50% of revenue. Banks can then prioritize primary and profitable relationships and work on deepening them. Investing in primary relationships is the essence of relationship banking and can help banks remain resilient and continue to serve their customers, despite the economic circumstances.
Can you discuss the importance of identifying at-risk deposits for banks? What steps can banks take to mitigate the risk and retain those deposits?
Deposits are a primary funding source for most banks and have a significant impact on a bank’s liquidity and profitability. Retaining deposits is paramount in today’s liquidity crisis, even at the cost of paying higher interest rates.
We help financial institutions use their customers’ data to determine which deposits are at risk. Data that financial institutions currently have on their accountholders can be analyzed to determine each customer’s monthly spend, reserve and at-risk balance. Once financial institutions identify the accounts with at-risk balance, they can issue offers specifically targeting those accounts (e.g., rewards, raised interest rates etc.), making sure those customers don’t leave the institution for better options elsewhere.
In what ways does White Clay’s platform enable bankers to drive value for both shareholders and clients? Can you provide some examples?
When bankers can view the entirety of their banking relationships, they can understand which customers and accounts are profitable. Understanding profitability, including revenue, risk, capital, and expense will help narrow down those who make a big impact to the bottom line. Bankers can then start paying closer attention to those relationships and find ways to strengthen them. This includes determining proper pricing for each relationship and knowing how to introduce changes based on how each customer has previously responded to changing fees, offers, and services. Improved pricing has a direct impact on revenue and shareholder value.
In turn, data analytics can help bankers translate the personalized, human experiences they are known for in-branch, on digital channels. Bankers will have more meaningful conversations with their accountholders and will be empowered to educate, encourage, and promote products and services that are beneficial to each customer and household. Evidence-based decisions will lead to delivering the best service and support possible, resulting in higher levels of customer satisfaction and increased retention.
What challenges do banks commonly face when implementing data-driven strategies, and how does White Clay support them in overcoming those challenges?
The challenge with data is that financial institutions house it in core and ancillary systems, which creates a silo that prevents bankers from truly understanding their customers. Disparate data systems barely worked in the 80’s and 90’s, but in 2023, using these types of systems could mean the difference between a bank surviving versus thriving.
Once a bank upgrades its system, it must centralize its data to give bankers unprecedented insights into client profitability, sales management, banker incentives and more. This is where we step in – aggregating, cleaning, and analyzing banks’ data to help bankers know and serve their customers better.
Another common mistake is thinking of getting your data in order as a one-time event. Cleaning, analyzing, and segmenting data is an ongoing process that will give banks a competitive edge and position them for long-term success.
How does White Clay assist banks in staying informed about where money is coming from and where capital is going within their customer base?
Client transaction data provides many valuable insights into a client’s financial behavior. For example, transaction data will identify the other financial institutions that clients have relationships with and the nature of those relationships (e.g., where they have their mortgages, home equity lines and loans, credit cards, merchant, other deposit accounts, investment, insurance, trust products etc.). Delivering those insights to bankers can provide powerful solutioning conversations to help clients achieve their goals with a holistic bank relationship.
How does White Clay help banks identify the bankers who are driving the most revenue within their institutions? How can this information be leveraged for performance improvement?
Having a holistic view of each customer’s banking relationship helps employees understand how each customer derives value, then tailor products, services, and communications accordingly. Employees can be more motivated to drive revenue if they have greater visibility into the relationships they own, see the impact they’re bringing to the day-to-day lives of customers and how they’re valued as advocates. This increased accessibility also makes it easier to have regular touchpoints, ensuring sales and business goals are better aligned. Profitable banker-customer relationships can be used as examples for performance improvement and training, as well as rewarding high performers which can help with employee retention amid talent shortages.
Can you discuss the role of advanced intelligence and predictive analytics in White Clay’s solutions? How does this technology benefit banks and their customers?
We have created an artificial intelligence (AI) service that helps financial institutions accurately measure and enhance customer primacy. This tool shows bankers which customers are the most profitable and provides guidance in steering other relationships towards primacy. We understand each bank defines primary relationships differently – be it the number of accounts, services, transactions, loans, or deposits they have with a relationship. That’s why we built our tool to be adaptable based on the specific factors relevant to each financial institution. Those leveraging the service can identify which relationships can be improved to increase profitability, lifetime value, and duration.
How does White Clay work with banks to develop actionable insights and strategies based on the data it aggregates and analyzes?
We are more than a technology provider; we are a strategic partner, advising on the best ways to leverage the intelligence from technology for each institution’s needs. To be realized, insights need to be aligned with each organization’s client management, sales process, and culture. Creating targeted opportunities and focused playbooks for each banker role is critical. Additionally, the bank’s ability to measure, inspect, and coach employees’ behaviors is paramount to success.
White Clay’s dashboards can be customized and organized by branch, department, and job title, ensuring each bank employee gets quick and streamlined access to the data they need. This allows bankers and executives to make more informed decisions.
In your opinion, what is the future of data-driven banking strategies, and how is White Clay positioned to contribute to that future?
In a world of increasing data complexity driven by open banking and fintech solutions, I believe the ability to aggregate disparate data, turn it into intelligence, and deliver actionable insights is the future of banking. Institutions that don’t leverage their customers’ data will simply fall behind and, with time, disappear. Data-driven strategies help financial institutions make informed decisions about the products and services they offer and the way they price them. Offering products and services that customers want boosts satisfaction and increases retention. Accurately pricing products and services increases the bank’s revenue and profitability, which also makes shareholders happy. All this helps institutions become more adaptable and resilient.
