How Do You Rate?: Q&A with VERIBANC President

Mike Heller Veribanc

We recently spoke with VERIBANC, a company that provides bank ratings on all U.S. federally insured financial institutions. Michael Heller, president of the company, told Banking.com about what the VERIBANC does and who they work with.

 

Q: Can you tell us more about VERIBANC?

A: We’ve been in business since 1981 and our bank rating system has helped banks, consumers, business people and government offices manage banking risk and protect their deposits and investments against bank failure and fraud.

Q: How do you develop your bank ratings?

A: The ratings are developed using our existing ‘Beyond CAMELS’ quantitative only methodology. This methodology has been audited and approved by several insurance companies for use with insuring deposits in excess of the FDIC’s limit. No bank or holding company has ever paid us to rate them. We have always published our track record (ratings effectiveness) and not just a few of the good years.

Q: What does your track record look like?

A: We don’t claim to be perfect, just optimally tuned. Our current ratings effectiveness rate is over 99 percent, while our false alarm rate is about 20 percent. Our rating system is unique in that we do not “conservatively adjust” our criteria so that a large part (30 percent or higher) of the banking industry winds up in our lower rating categories – so as to improve or inflate our predictive results. Instead we balance predictability of bank failure with false alarms, so we can provide our customers with true value. We even publish our track record on our website at: http://www.veribanc.com/TrackRecord.php.

Q: What products do you offer to help Banks and Credit Unions meet regulatory standards?

A: Our most popular report for banks is our Regulation F Report. Comparable to this for Credit Unions is our Section 703 Due Diligence Report.

Q: You released your Q4 ratings at the end of 2013. Can you share an excerpt with us?

A: Our Director of Modeling at VERIBANC, Milton Joseph, wrote the following on “Size Equals Strength”

The FDIC’s recently released September 2013 (Quarterly Banking Profile) reveals an overall sound condition and continued financial improvement among the nation’s Insured commercial and savings banks. For the quarter, the sector achieved a nearly 1.0% return on average assets, and, as of September 30th, the industry’s Leverage (Core Capital) Ratio reached 9.4%. Nonperforming Assets-to-Assets fell to 1.8% at that date. At mid-year, comparable percentages were 9.3% and 1.9%, respectively.

Our asset size review indicates that small banks and thrifts, those with assets of less than $100 million, demonstrated particular strength. As of September 30th, that category of institution reported a Leverage Ratio of 11.7% and a Loss Reserve-to-Noncurrent Loan Ratio of 87.4%. Both percentage were the highest among any of the measured asset-size peer groups.

Interestingly, at September 30th, deposits held by FDIC-Insured institutions exceeded $11.0 trillion. Included in that total were deposits of close to $1.6 trillion that were higher than the FDIC’s $250 thousand Insurance limit. Nearly all of the $1.6 trillion of Un-Insured deposits (91.6%) were held at large institutions with total assets greater than $10 billion. One might conclude that size does continue to equate to strength 

 

To learn more you can go to www.veribanc.com.

Making Banking Fun: Gamification in Financial Services

Recently, the Banking.com team sat in on American Banker’s webinar, “Gamification in Financial Services: Five Proven Ways to Get an Edge,” which shared how leading brands in financial services have applied gamification to reach their target markets. Moderated by EMI Consulting’s Campbell Edlund, the panel of presenters included:

With content ranging from what gamification is, how companies are using it and walking attendees through a real-life, successful example, we wanted to get insight from one of the experts. We spoke with Nick Maynard, Director of Innovation, Doorways to Dreams Fund.

Image courtesy of Stuart Miles

Image courtesy of Stuart Miles

Q: Is Gamification for everyone? If so, why/why not?

Doorways to Dreams Fund (D2D) has successfully deployed a library of casual video games that engage consumers, build financial knowledge and confidence, and prompt real world action-taking. Our recently published report summarizes our findings on this work to-date. In addition, D2D and our partners have deployed prize-linked savings accounts through the Save to Win program which is now offered in four US states through credit unions and we have adapted this concept to encourage 100MM US tax filers to save part of their federal refunds. Building on this work, D2D is currently exploring the application of gamification to addressing consumer financial challenges like building emergency savings, financing higher education, and saving for retirement.

Given our experience, D2D believes innovative strategies to engage consumers are essential and impactful. Gamification, while new and unproven, is a natural extension of our approach and offers a new set of tools worthy of investigation and testing. Beyond what we’ve measured to-date, the data indicates that everyone plays games and video games, in particular all ages, demographics, and genders. It’s a language that consumers and employees speak. The open question is how best to deploy this tool and where gamification will prove most effective.

Q:  How do organizations develop gamification campaigns that easily tie back to their objectives?

The first step in D2D’s approach is to embrace the role of the game producer, envisioning and managing toward the end business objective; it is crucial to have the right mindset when exploring the application of this innovation. Next, we work to understand what consumer actions/behaviors the objectives aim to influence; if the objective is to increase the savings of consumers, for example, do we want to see more frequent deposits? Larger deposits? Both? Next, we work to validate that set of actions with the consumers we hope to impact; for example, how do consumers view these actions and what challenges do they face today?

Following that consumer research, we engage our network of game design experts to help explore which actions might most benefit from the application of a gamification strategy. In addition, we tap the creativity of this network to develop an approach that is fun and engaging for the largest possible audience of consumers. Finally, we engage the target audience during the game development process to ensure that the innovation is impacting consumers in ways that support the project objectives.

Q: What do you see as financial organizations biggest challenges when implementing gamification design?

We see a number of challenges. First and most important, financial organizations are not typically considered hubs of fun. The key ingredient in the gamification cocktail is the role that fun plays in driving intrinsic motivation in a consumer. Research indicates that games have positive impacts on the brain and this creates a distinct opportunity to help consumers act in ways that are consistent with their goals. Second, financial institutions have not yet fully digested the scope and influence of the video game industry and the amount of game play across age, gender, and income. In addition, an inherent generational bias exists regarding video games with the feeling that it’s for kids, despite what the data indicates. Finally, financial organizations do not know where to start in exploring the application of these tools, as there are very few examples in the financial industry, especially consumer-facing examples.

Q: Are there any organizations that financial institutions should try to emulate? Who is doing it right?

Financial institutions can look two places to learn about how to pursue gamification: the energy and health care industries. Companies like OPower have leveraged tools that include gamification to impact customer behavior related to energy usage. In the health care arena, games and gamification are being put to use in a variety of settings including improving health habits, increasing wellness, treating illness, and, most interestingly, exercise. Just in the realm of walking and running, examples like FitBit, Nike Plus and Zombie Run all reveal different strategies to encourage and reinforce exercise.

 

What do you think? How are you using gamification in your financial institution? Let us know in the comments section below or by Tweeting at @bankingdotcom.