Small business owners often face the challenge of tracking their financial performance. The challenge is especially tough because traditional and current financial metrics do not keep up with the complexity of modern banking. Therefore, we are going to uncover the top seven savings bank KPI metrics that would help small businesses track and calculate their financial performance.
Track your savings accounts growth rate with precision to know if your strategy is working. With the global savings account market's projected growth rate of 17.8% CAGR by 2025, monitoring your own bank's progress is crucial. Your savings account growth rate is the difference between the deposit amount and the withdrawal amount over a period of time, considering new and old accounts. By tracking the growth rate, you can identify potential areas for growth and boost profitability.
- The top three KPIs
- Savings accounts growth rate
- Loan portfolio quality
- Satisfaction rate of customers
Are you aware of the quality of your bank's loan portfolio? Measure the quality of your loan portfolio by analyzing the percentage of non-performing and performing loans to identify risks and opportunities. Positive indicators would be a low percentage of non-performing loans and high performing loans. Securing a good loan portfolio will help clients to manage their financial risks better and increase customer satisfaction.
Your savings bank's average deposit amount per customer is the best way to monitor the deposit behavior of your consumers. The more customers deposit, the more interest they earn, and the higher the profit for your bank. Tracking deposit trends is essential to identify customer preferences and get ahead of the competition.
Savings accounts growth rate
As a serial entrepreneur, I understand the importance of tracking and calculating KPIs to assess the financial performance of a business. Savings accounts growth rate is an essential metric for any savings bank that wants to measure its progress in attracting and retaining customers. In this chapter, I will define, explain the use case, show you how to calculate the KPI, share an example of the calculation, and discuss the advantages, disadvantages, and industry benchmarks for this KPI.
The savings accounts growth rate is a KPI that measures the percentage change in the number of savings accounts held by a bank over a specific period. This metric helps banks evaluate their ability to attract and retain customers. A positive growth rate indicates that a bank is successfully attracting new customers and retaining existing ones, while a negative growth rate suggests that the bank is losing customers.
Savings accounts growth rate is an important metric for savings banks to track as it helps them evaluate their business performance and make data-driven decisions. This KPI is particularly useful when setting growth targets and developing marketing strategies to acquire new customers. It also enables banks to track the effectiveness of their marketing campaigns and identify opportunities for growth.
How to Calculate KPI
The formula for calculating the savings accounts growth rate is:
Let's say a savings bank had 10,000 savings accounts at the start of the quarter and 12,000 at the end of the quarter. Using the formula above, we can calculate the savings accounts growth rate for the quarter as follows:
Therefore, the savings accounts growth rate for the quarter is 20%.
- Provides insight into customer acquisition and retention
- Enables savings banks to evaluate the effectiveness of marketing campaigns
- Enables savings banks to set growth targets
- Does not provide information on the value of the savings accounts
- Does not provide information on the profitability of the bank
- Does not consider external factors that may influence the growth rate, such as macroeconomic trends or changes in interest rates
The savings accounts growth rate varies by region, market, and bank size. However, a savings accounts growth rate of 5% to 10% per year is generally considered healthy for a savings bank.
Tips & Tricks
- Focus on improving customer experience to retain existing customers
- Offer competitive interest rates to attract new customers
- Develop targeted marketing campaigns to attract new customers
Savings Bank Financial Model
Loan Portfolio Quality
Definition: Loan portfolio quality KPI measures the credit quality of the loans issued, the overall risk of the loan portfolio, and the risk appetite of the bank. This KPI is an important indicator of the potential credit risk and the quality of the loans that the bank is offering.
Use Case: Loan portfolio quality provides insights on the creditworthiness of the bank's clients, the ability to maintain profits with a minimal repayment default, and the potential risk associated with the bank's loan portfolio. This KPI helps banks identify and assess the financial and operational risks associated with credit portfolios and manage loan portfolios' credit risks.
How To Calculate KPI: Loan portfolio quality KPI is calculated by dividing the total number of non-performing loans (NPL) by the total number of loans issued by the bank, multiplied by 100. The formula is:
Calculation Example: If a bank issued 500 loans, out of which 50 are non-performing loans, the loan portfolio quality KPI would be:
- The loan portfolio quality KPI helps banks identify the decline or deterioration in credit quality and mitigate potential credit risks.
- It provides insights into past performance and helps manage the allocation of future risk-taking activities.
- It is a straightforward calculation and easily understandable KPI.
- The loan portfolio quality KPI may not capture all risks associated with the portfolio, such as concentration and geographic risks.
- The KPI may only reflect historical data and may not be a good indicator of future risks.
- The calculation of non-performing loans may vary from one bank to another and may not standardize across the industry.
KPI Industry Benchmarks: According to the industry standards, a healthy loan portfolio quality KPI should be less than 5%.
Tips & Tricks:
- Periodically review and update credit policies to prevent potential risks.
- Consider diversification of loan types and clients to reduce credit concentration risk.
- Provide ongoing training and education to loan officers and relevant staff members.
Satisfaction rate of customers
One of the most crucial KPI metrics for a savings bank is the satisfaction rate of customers. This metric measures how content and happy the customers are with the bank's services, offerings, policies, and support.
The satisfaction rate of customers is the percentage of customers who are satisfied with the bank's services and offerings. It considers various factors such as the quality of customer support, ease of access to services, interest rates, transparency, and overall customer experience.
The satisfaction rate of customers is a key metric for a savings bank to ensure the retention of existing customers and attracting new ones. A satisfied customer is more likely to stay with the bank and recommend it to others, contributing to the bank's growth and success.
How To Calculate KPI
Satisfaction rate of customers = (Number of satisfied customers / Total number of customers) x 100
Satisfaction rate of customers = (400 / 500) x 100 = 80%
In this example, the bank has 500 customers, and out of them, 400 are satisfied. Therefore, the satisfaction rate of customers is 80%.
- Helps in measuring the customer's perception of the bank's services and offerings.
- Assists in identifying areas of improvement and enhancing customer satisfaction.
- Contributes to the retention of existing customers and attracting new ones.
- Subjective, as it depends on the individual perception of customers and can vary from person to person.
- Difficult to quantify, as it involves intangible aspects such as customer experience and satisfaction.
- Might not consider external factors such as market trends and competitive offerings.
KPI Industry Benchmarks for the KPI: 'Satisfaction rate of customers'
The industry benchmark for satisfaction rate of customers varies depending on the region, size, and offerings of the savings bank. However, a satisfaction rate of 80% or above is considered a good benchmark for savings banks.
Tips & Tricks
- Collect customer feedback regularly through surveys, feedback forms, and complaint management systems to measure the satisfaction rate of customers accurately.
- Focus on improving the quality of customer support, as it is one of the primary factors affecting customer satisfaction.
- Offer attractive interest rates, personalized services, and transparent policies to enhance customer satisfaction and retention.
Average deposit amount per customer
As a savings bank manager, you need to pay attention to a number of KPI metrics to efficiently track and manage your business. One of the most crucial KPI metrics is the average deposit amount per customer. In this chapter, we will cover everything you need to know about this KPI metric, including its definition, use case, calculation method, advantages, disadvantages, and industry benchmarks.
The average deposit amount per customer is a KPI metric calculated by dividing the total amount of deposits held by a bank by the number of its customers. This metric enables savings bank managers to determine how much individual customers are saving on average, and to track trends in customer savings over time.
The average deposit amount per customer KPI metric is used to gain insights into customer behavior. Banks can use this metric to determine how much customers are saving, and whether there are any trends in customer savings over time. This information can be used to inform marketing strategies, financial product development, and customer service improvement.
How to Calculate KPI
Calculating the average deposit amount per customer KPI metric is simple. You need to divide the total deposits held by the bank by the number of its customers:
Total deposits / Number of customers
For example, let's assume your bank holds deposits worth $100 million and has 10,000 customers. The average deposit amount per customer can be calculated as follows:
$100,000,000 / 10,000 = $10,000
- Provides valuable insights into customer behavior
- Helps to identify customer-centric opportunities
- Helps to track customer savings patterns over time
- Only provides a snapshot view of customer behavior
- Does not take into account customer demographics
- It may not reflect accurate customer behavior based on seasonality or other external factors
KPI Industry Benchmarks
The average deposit amount per customer KPI metric may vary between banks depending on several factors, such as the size of the bank, its customer base, and the types of financial products it offers. As a result, it is important to review industry benchmarks to gain insights into how your bank is performing in comparison to others. Industry benchmarks for average deposit amount per customer KPI metric may range between $5,000 to $30,000 on average depending on the bank size and customer demographics.
Tips and Tricks
- Use this KPI metric in combination with other KPIs to gain a better understanding of customer behavior
- Consider calculating this metric on a monthly or quarterly basis to track trends
- Use customer demographics to segment customers and calculate this metric to gain deeper insights into customer behavior
Percentage of Customer Retention
As a business owner, one metric that you need to keep a close eye on is the percentage of customer retention. This KPI metric measures the number of customers that continue to do business with your bank over time.
Customer retention is the ability of a bank to retain its customers over a particular period. The percentage of customer retention is the percentage of customers that continue to do business with a bank over time. This is measured by subtracting the number of customers lost during a specific period from the total number of customers at the beginning of that period and dividing by the total number of customers at the beginning of the period.
The percentage of customer retention is an important KPI metric that helps banks to understand how well they are retaining their customers. It provides banks with valuable insights into the rate at which customers are leaving the bank and helps them to identify areas where improvements can be made to improve customer retention rates.
How to Calculate KPI
To calculate the percentage of customer retention, you will need the following data:
- Number of customers at the beginning of the period
- Number of customers lost during the period
Suppose your bank starts the quarter with 1,000 customers and loses 50 customers during the quarter. The calculation for the percentage of customer retention would be:
- Provides valuable insights into the rate at which customers are leaving the bank
- Helps banks identify areas where improvements can be made to improve customer retention rates
- Provides a simple and easy-to-understand metric for measuring customer retention
- Does not take into account the quality or profitability of the customers
- Does not differentiate between customers that leave and customers that are lost due to factors outside the bank's control
KPI Industry Benchmarks
The industry benchmark for the percentage of customer retention varies depending on the bank's location, size, and target market. However, most banks aim to have a customer retention rate of at least 90%.
Tips and Tricks
- Offer excellent customer service to improve customer satisfaction and retention rates.
- Create personalized marketing campaigns to target specific customer segments and improve retention rates.
- Regularly survey customers to understand their needs and identify areas where improvements can be made.
Number of new customer acquisitions
As a savings bank, it is imperative to track the number of new customer acquisitions as it is one of the key performance indicators (KPIs) that can help gauge the growth of the business.
New customer acquisition is the number of new customers who have opened an account with the savings bank over a specified time period.
The number of new customer acquisitions is a useful KPI as it helps the savings bank identify if its marketing efforts are effective in attracting and acquiring new customers.
How To Calculate KPI
To calculate the number of new customer acquisitions, you need to divide the total number of new customers acquired during a specific period by the total number of customers at the start of the period, and then multiply it by 100 to get the percentage. The formula for calculating the KPI is:
Suppose a savings bank had 100,000 customers at the start of the year, and over the course of the year acquired 5,000 new customers. The calculation for the number of new customer acquisitions would be:
Therefore, the savings bank had a 5% new customer acquisition rate for the year.
- Helps determine the effectiveness of marketing strategies to attract new customers.
- Enables savings banks to track their growth over a specific period.
- Helps identify areas for improvement to attract more customers.
- Does not account for the quality of new customers.
- May not provide a complete picture of the savings bank's overall health.
- May not take into account the churn rate of existing customers.
KPI Industry Benchmarks
The KPI industry benchmark for the number of new customer acquisitions varies by region and type of savings bank. However, on average, a savings bank can aim for a new customer acquisition rate of around 5% to 10% annually.
Three Tips to Improve New Customer Acquisitions
- Use targeted marketing campaigns to attract potential customers in your target demographic.
- Offer incentives for new customers, such as waived account fees or bonus interest rates.
- Provide a seamless and convenient account opening process, such as through an online platform or mobile app.
Cost per Customer Acquisition
As a serial entrepreneur, I know that one of the most critical metrics for any savings bank is the cost per customer acquisition. This KPI is a measure of the amount of money spent to acquire a new customer. In this chapter, I will explain in detail what this metric is, how it is used, and how it can be calculated.
The cost per customer acquisition is a metric that measures the total cost incurred by a savings bank to acquire a new customer. This metric is essential because it provides insight into the effectiveness of a bank's marketing and sales efforts. A low cost per customer acquisition indicates that the bank is efficiently attracting new customers, while a high cost per customer acquisition indicates that the bank may need to revise its marketing and sales strategy.
The cost per customer acquisition is an essential KPI for savings banks because it helps them to identify the most efficient channels for acquiring new customers. By analyzing the cost per customer acquisition across different channels, a bank can determine which channels are most effective and allocate its marketing and sales budget accordingly.
How To Calculate KPI
The formula for calculating the cost per customer acquisition is:
Suppose a savings bank spent $10,000 on sales and marketing in a given period and acquired 100 new customers during that time. The cost per customer acquisition would be:
So the cost per customer acquisition for the savings bank would be $100.
- Provides insight into the effectiveness of marketing and sales efforts: The cost per customer acquisition helps savings banks to determine which marketing and sales channels are most effective at acquiring new customers.
- Enables optimization of marketing and sales budget: By analyzing the cost per customer acquisition across different channels, savings banks can allocate their marketing and sales budget more efficiently.
- Helps identify potential cost savings: A high cost per customer acquisition may indicate that a savings bank is overspending on marketing and sales efforts. By analyzing the cost per customer acquisition, banks may identify areas where cost savings can be made.
- May not account for all costs: The cost per customer acquisition may not account for all the costs associated with acquiring a new customer. For example, costs such as employee salaries and overhead expenses may not be included in the calculation.
- May not provide insight into customer value: A low cost per customer acquisition does not necessarily mean that the bank is acquiring high-value customers. Banks must also consider customer lifetime value (CLV) when evaluating the effectiveness of their marketing and sales efforts.
KPI Industry Benchmarks
According to industry benchmarks, the average cost per customer acquisition for savings banks is approximately $300 - $400. However, this varies by region and may be affected by other factors such as the bank's target market and its marketing and sales strategy.
Tips & Tricks
- Focus on acquiring high-value customers rather than simply minimizing the cost per customer acquisition.
- Regularly evaluate the effectiveness of different marketing and sales channels and adjust your strategy accordingly.
- Consider the lifetime value of a customer when determining the optimal cost per customer acquisition.
Tracking financial performance is crucial for small businesses, especially when it comes to banking. However, traditional metrics may not always keep up with the complexity of modern banking. This is where Key Performance Indicators (KPIs) come in handy. Here are the top seven savings bank KPI metrics that can help small businesses track and calculate their financial performance.
- The top seven KPIs
- Savings accounts growth rate: Monitoring the growth rate of savings accounts is essential to identify potential areas for growth and boost profitability.
- Loan portfolio quality: Measuring the quality of the loan portfolio can help mitigate financial risks and increase customer satisfaction.
- Satisfaction rate of customers: Tracking customer satisfaction can help identify areas for improvement and enhance loyalty.
- Average deposit amount per customer: Monitoring deposit trends can help identify customer preferences and stay ahead of the competition.
- Percentage of customer retention: Maintaining a high customer retention rate is essential for sustainable growth.
- Number of new customer acquisitions: Increasing the number of new customers can help boost revenue and expand the customer base.
- Cost per customer acquisition: Measuring the cost per customer acquisition can help optimize marketing strategies and reduce expenses.
Out of these seven KPIs, the top three include savings account growth rate, loan portfolio quality, and satisfaction rate of customers. Tracking the growth rate of savings accounts can help identify potential areas for growth and boost profitability. A good loan portfolio quality can help manage financial risks better and increase customer satisfaction. Customer satisfaction, in turn, can enhance loyalty and lead to long-term growth.
Moreover, monitoring the average deposit amount per customer can aid in identifying customer preferences and staying ahead of the competition. Retaining a high customer retention rate and acquiring new customers are also crucial for sustainable growth. It is important to measure the cost per customer acquisition to optimize marketing strategies and reduce expenses.
In conclusion, small businesses face challenges when it comes to tracking their financial performance in modern banking. However, by using these seven KPIs, they can calculate and monitor their financial performance with precision. Tracking these metrics can help identify potential areas for growth, manage financial risks, enhance customer satisfaction and loyalty, and ultimately, increase profitability.
- 5-Year Financial Projection
- 40+ Charts & Metrics
- DCF & Multiple Valuation
- Free Email Support