Case facts • • • • • • • • • • • • • • • Green wanted to figure out: Whether online customers are better for the bank.

Implications for online banking product. Data available: year end 1999 Customer profitability = (balance in deposit accounts)*(net interest spread)+(fees)+ (interest from loans)-(cost to serve) To improve customer profitability: Banks should charge for each transaction Encourage transaction migration to lower cost channels(online banking) Charging each transaction failed many times in the past. Analysis is to figure out the effects of online baking on customer profitability. Took a sample of 30,000 out of 5,000,000 customers. Average customer profitability = $111.50 Avg. customer profitability (online banking) = $116.67 Avg. customer profitability (offline banking) = $110.79 After running the regression analysis it is found that, the coefficient for online banking in the linear equation for profit is 22.45, which makes it a significant positive contributor to the profitability. It is also found that the effect of income bucket 8 and district 1100 can be neglected from calculation.

We analyse the profitability data for online and offline customers for each district mentioned: Considering the given sample it is apparent that except for the online customers in District 1200. .0088021111 which is less than the critical T value of 1. Then we conduct a Hypothesis Testing between the two set of data to find if there is any significance difference in their means. therefore the model developed is significant and the data and statistics achieved by this model can be accepted.058 which is very low and means that there is very less correlation between the variables. R-Square value: The R-Square value for the model is . Hence the Null Hypothesis cannot be rejected and based on the above analysis we can say that currently Online customers are not significantly more profitable then Offline Customers.PILGRIM BANK CASE ANALYSIS We begin the analysis by deleting the data from sample which has missing Age or Income values. The calculated T value is 1.644890595. This implies that the data does not fit the model very well and there are large variations in the data. Initially we divide the data into online users and offline users. We are left with around 22000 customer records and we consider this sample for further analysis. offline customers are more profitable in rest of the two districts. Next we conduct a regression test on the data to know about the variables which can help the Bank increase its profitability • • F-value: As the significance F-Value is very small.

45 shows that for each customer moving from offline to online banking.05 for a variable we can conclude that the beta is significant. the profit of bank increases by $ 22. It is restricted to only $4.45. As per the above table: • A co-efficient of 22. age has a negative 0. • • We found that there isn’t a significance difference currently between the online and offline customer’s profitability but considering this regression model. online usage shall be promoted.2% for the bank and thus if the bank targets younger people it could increase its profitability by having many online users. • • • . In the case of online vs. Also. As per the above regression data analysis table. Therefore. This means that we have significant evidence to accept the model.1% draws doubt about the credibility of the results. the p value is very low. Also Income has almost 1% effect on online usage. offline. customers with high income would use online facilities more and therefore help in increasing profitability. we should definitely try to have more users online because it would help in increasing the Bank’s profitability. the data shows that People in District1200 prefer online banking more than the remaining districts. This was also shown in a table drawn earlier where averages for the three districts for online and offline usage was shown. • • The R square value is very small therefore this regression model is not very significant. Tenure does not have a significant effect on the profitability.• P-Value for a confidence level of 95%: If the p value is below . But the fact that R square value is a mere 5. Therefore. Customers in District 1100 are not profitable as per the regression analysis and therefore the Bank shall look for ways to increase its profit in those cities by increasing their customer base and encouraging people to use online facilities.0317 effect on Online usage which means that with increase in Age the online usage falls by 3.

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