The Future of Bank Performance Analytics is Here

“The future is here already, it’s just not evenly distributed.” – William Gibson, sci-fi author of Johnny Mnemonic. The film was in theaters in 1995 but the setting of the movie was today – 2021!

Supporting customers in a fast-paced, highly competitive era of innovation and technology, maintaining safety and soundness, and optimizing shareholder value takes tremendous nurturing and investment to build a culture of continuous improvement of people, process, and technology. But a self-perpetuating culture is not a one-time event or slogan; to be successful, it is a 24X7, disciplined, never-ending process.

  • The evolution of financial intermediation driven by de-risking the balance sheet via hedging derivatives and the maturity of decentralized “shadow banking” has been remarkable, but the more than $1 trillion (USD) in largely unregulated fintech investment has driven the hockey-stick growth curve of technology innovation – placing immense pressure on regulated banks and credit unions to outperform market expectations.
  • The cost of compliance (or the “risk of being wrong”) with safety and soundness for regulated banks is staggering, continuing to eclipse all-time highs. Banks that initially responded to the increase in risk and related compliance demands through substantial staffing increases are now building their own modern technology or partnering with fintech’s to improve productivity and shareholder value.

To optimize shareholder value consistently, banks must consider all stakeholders in their total enterprise value (not just shareholders, but customers, regulators, employees, and the communities surrounding their operations) – optimizing responsible growth and risk-adjusted profitability while reinforcing a disciplined culture of continuous improvement. – Easier said than done. Until now…

Introducing Amberoon Statum KPI

To solve for responsible growth, profitability, and shareholder value, the business of banking has to adapt as rapidly as stakeholder expectations (all of them). Ensuring that our firm can continue to offer a comprehensive approach and skillset to address these changes most efficiently and effectively, our team at ZipTie Advisors has partnered with Amberoon, Inc. (a Silicon Valley-backed financial technology firm led by Shirish Netke) to introduce Statum KPI, Amberoon’s cloud-based, machine learning, advanced bank performance analytics platform.

Amberoon developed Statum KPI in collaboration with IBM, Google, and multiple financial services regulatory organizations within the construct of the IBM Financial Services Cloud and multiple advanced data insights platforms to support the resiliency, compliance, and security required by regulated financial institutions. Statum KPI delivers to banks the power to transform data for all regulated financial institutions in the U.S. into user-friendly, decision-useful information, so that bank leadership has greater certainty of the right path forward before the next crisis or socio-economic disruption event threatens the financial services industry, your consumer customers or your business customers:

  • “Look Around the Corners” using “early warning indicators” to assess your and your peer banks’ outlook and risk of failure, using forensic machine learning models based on 20 years of patterns among bank-specific data, geographic and geospatial data, demographics, and other non-traditional sources (e.g., travel, natural disasters, virus spread, financial crime, et. al.);
  • Facilitate custom identification of peer groups based on geography, asset/ employee size, and unlimited risk and performance metrics;
  • Analyze your bank’s key performance and regulatory compliance indicators versus your peer group, or any bank(s) in the U.S.;
  • “Dive Beneath the Surface” by deconstructing those KPIs to determine how your bank outperforms or underperforms your peer group and the industry as a whole. For example:

For Q1 2021, the mean efficiency ratio was 66% for all 5,024 banks that reported: 67% of these efficiency ratios fell within one standard deviation of that mean (from 51% to 81%); where 18% of bank efficiency ratios were lower than 51%, and 15% were greater than 81%.

By comparison, for the 1,672 banks with asset sizes between $500 million and $20 billion, 72% of efficiency ratios reported were within one standard deviation from the same mean (66%); 22% of banks reported ratios lower than 51%, and 6% were higher than 81%.

High-level conclusions:

  1. Larger banks are not necessarily more efficient, regardless of the historical cases made for the benefits of “economies of scale” to justify size;
  2. Evaluating the components of non-interest income, net interest income, and non-interest expense, the data supports a case that the costs of maintaining a large, publicly held, regulated financial institution more than offset the economies of scale gained through M&A or even organic growth (all else being equal);
  3. If banks aren’t higher performing because of their sheer size and scope of services, leadership needs a solution that identifies the root drivers and whether they align with your bank’s purpose and strategy.

 Where does your bank fall within these ranges? Why is it there? 

Is it where you want to be?

Amberoon has deep bench strength in forensic inquiry, artificial-intelligence-driven predictive modeling, and risk-based scenario analysis – integrated with continuous human interaction to monitor and update emerging data insights responsibly, which they use to continuously implement the safest modern technology available through their agile development approach. With ZipTie Advisors’ deep financial services industry experience and its existing partnership ecosystem, this partnership with Amberoon reaffirms our collective commitment to identify, nurture and provide the highest quality solutions and value creation toward our shared greater purpose for promoting the sustained success of regulated financial institutions across the country. Find out more about the functionality and adaptability of Statum KPI at https://www.amberoon.com.

ZipTie Advisors provides strategic CFO (including Complex Accounting & Reporting), CRO (including ERM & TRM), and business and operational process services and solutions to banks and credit unions throughout the U.S. focused on optimizing shared value through people, process, and technology. We will collaborate with your bank to tailor a plan, bring the right Team and Experience to assist you and work relentlessly to ensure your success.

In the words of legendary mountain climber Sir Edmund Hillary, “people do not decide to become extraordinary. They decide to accomplish extraordinary things.” You may not have a 29,000-foot mountain to climb, but your mountain is just as important to us.

Reach out to chad.fooshee@ziptieadvisors.com to schedule a demo or answer your questions.

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