Mining for Gold in Bank Data

Community banks are drowning in customer data.

Every debit card swipe, every ACH and every online bill pay produces data that provides insight into their customers’ relationship with the institution, as well as their lifestyle and potential needs. Banks should prioritize using their proliferation of customer data to open up new service and revenue opportunities. The potential to identify untapped opportunities is enormous.

The amount of data generated by the digitization of services and customer interactions has grown exponentially in recent years. By 2020, about 1.7 megabytes of new information will be created every second for every person on the planet, according to a 2017 McKinsey & Co. report. This figure is only expected to increase: By 2021, half of adults worldwide will use a smartphone, tablet, PC or smartwatch to access financial services. The mindboggling amount of data comes at a time when companies must “fundamentally rethink how the analysis of data can create value for themselves and their customers,” according to a Harvard Business Review article by Thomas Davenport, a professor at Babson College and a fellow at the MIT Initiative on the Digital Economy.

Amazon is often cited as the model for capitalizing on data to increase sales and improve consumers’ experience. The company tracks each customer interaction—from site searches and purchases, from Alexa commands to song or movie downloads—to develop a holistic view of that consumer’s preferences and buying habits. For instance, if a consumer purchases prenatal vitamins from Amazon, she will soon see pop-up ads for other pregnancy and baby-related items. Amazon will also send her offers and reminders to repurchase the vitamins at the exact time they run out.

Banks should try to emulate Amazon’s ability to highly personalize a consumer’s experience. Organizations that leverage customer behavioral insights outperform peers by 85 percent in sales growth and more than 25 percent in gross margin, according to Gallup. And personalization based on customer data can deliver 5 to 8 times the return on investment on marketing expenses and increase sales by 10 percent or more, according to McKinsey.

But in order for banks to use the data produced by their internal systems, they need to create a structure and plan around it. Institutions need to direct information to one location, figure out how to analyze it and—most importantly—develop an actionable plan. This is a challenge because many banks partner with a myriad of vendors to provide the different consumer services such as debit and credit card processing, online banking and bill pay vendors. To consumers, these disparate systems may appear to work together reasonably well; behind the scenes, they may not communicate with each other.

This is an overwhelming imperative for many community banks. Fifty-seven percent of financial institutions say their biggest impediment to capitalizing on their data is that it is siloed and not pooled for the benefit of the entire organization, according to a July 2016 report from The Financial Brand. Other impediments include the time it takes to analyze large data sets and a lack of skilled data analysts.

But banks can remove these impediments with an “intelligent” data management technology platform that aggregates information from unlimited sources and makes it available enterprise-wide, from frontline staff to marketing to management. Platforms analyze data from sources like the core processor, online banking and lending systems, as well as peer and demographic data, and develop automated revenue- and service-enhancing strategies that capitalize on the findings.

The results are better, automated and even instantaneous decisions that generate greater sales opportunities and improve customer experience.

Banks can use the data to generate personalized, targeted marketing and communications campaigns that are triggered by an increase or decrease in customer transactional activity. Reduced activity can indicate an account might leave the institution; proactive communication can reengage the customer and retain the account.

This data can improve cross-selling objectives, generate sales opportunities and track onboarding activities to facilitate the customer’s experience. The data could identify customers who use payday or other non-bank lenders, and generate omni-channel offers for in-house products. It could also flag follow-up communications on products or services that consumers expressed interest in, but did not open.

Centralizing institutional data into one platform also creates efficiencies by automating manual processes like new account onboarding, loan origination and underwriting—even customer complaint resolution. It can also introduce additional customer services provided by third-party vendors by requiring them to integrate with only one data source, instead of many.

Banks need to leverage their customer data in order to create highly personalized and meaningful offers that improve engagement and overall performance. With the assistance of a comprehensive data management platform, community banks can overcome the hurdles of unlocking the value of their data and achieve Amazon-like success.