Retail banking has also faced challenges in measuring abstract and quantifiable indicators. Performance metrics in retail banking can be done using KPIs. The Retail Bank KPI can be used to measure the progress of a certain organization belonging to the industry. This measure is intended to help retail banks improve their progress towards achieving their organizational goals.
What are the key performance indicators of a retail bank?
The KPI in retail banking can include the factors that have links to the performance of a retail bank. There may be several KPIs to measure performance. However, it’s important to keep the number of KPIs to a minimum and choose KPIs that have direct attributes on your performance.
Total cash deposits held in a month and average annual deposits held can be used as KPIs to measure a retail bank’s performance in capturing customer deposits.
Other factors that can be considered as KPI’s in retail banking:
1) Average number of depositors per retail bank branch
2) Average withdrawals made by each depositor
3) Ratio of active depositor to inactive depositor
4) Average number of borrowers in arrears in a year
5) Average number of credit cards issued by the retail bank
6) Debt risk rate
7) Default risk rate
8) Average number of customers served in a day
9) Average number of bank accounts closed
Revenue, costs, investment returns, interest margin, and company assets are other KPIs for retail banks. They may have their own system to recognize KPIs. KPIs are measurable and quantifiable and must be identified to assess the performance of retail banks.
Certain attributes are also considered to recognize a measurable factor for performance evaluation as KPI. Identifying KPIs is crucial and must be carefully considered before they can be used as objects to measure performance. The SMART acronym can be used to identify KPIs. KPIs should be specific, measurable, achievable, relevant, and time bound.
In addition to the aforementioned KPIs that can be used to measure performance, one of the measurement frameworks used in financial institutions is risk-adjusted return on capital.
The risk-adjusted return on capital or RAROC can be used to perform analysis on risk-adjusted financial return. It is the return on capital ratio adjusted for certain risks involved in the process. As is known in the financial world, capital invested in high-risk forms of investment is likely to yield higher returns than risk-free investments.
RAROC can be used as a retail banking KPI along with other indicators.
The retail bank has an exact environment to identify the KPIs. Typically, banks are organized financial institutions that comply with the law in transacting with depositors, customers, and customers. And normally, the KPI is used to detect problems so that the entity can formulate solutions based on the given indicators used to measure its performance.
Top management at retail banks look at KPIs to accurately measure performance. Retail bank KPIs can be financial or non-financial metrics. Customer and depositor demographics, turnover rates, background of bank staff, and technology used may be involved.