Competition is intensifying in the banking sector, with fintech start-ups, technology giants and social-media leaders targeting various parts of the financial-services profit pool. Open Banking initiatives and regulatory directives such as the European Union’s Payment Services Directive 2 (PSD2) have already started to open access to data across the financial-services industry. This will give rise to data-driven innovations in the coming years—and banks are well positioned to lead the way; but they also risk being pushed aside by third parties.
As alternatives in banking emerge, banks need to prove their value to customers and explain why they shouldn’t simply log in to Apple, Amazon or Facebook to complete their banking. The key to maintaining an edge over alternative-banking services is to build the banking experience on meaningful engagement that allows customers to develop positive financial habits.
However, to reap the benefits of meaningful engagement programmes, banks first need to get their houses in order.
Gather all your data in one place.
This is the starting point for everything. All transaction and financial-product data such as card and account transactions—along with other core banking customer data, such as that held in customer relationship management (CRM) systems—need to be readily accessible without overloading core banking systems. Currently, banks run different applications and have various systems in place. If all financial data were kept in just one system, it would be much faster to gather and analyse data. But it’s not so simple.
Trying to understand data across multiple systems can be a challenge. With online banking pushing data to grow exponentially and spread across systems, banks need to bring it together in one spot if they are to fully take advantage of more open banking.
Enrich your data.
Once customer data has been consolidated into a single repository, it’s time to enrich the information with third-party data sources such as merchant directories. To succeed in today’s highly competitive landscape, banks need to understand their customers and anticipate where future opportunities may arise. Data can help them zoom in on customers and better understand their needs.
Successful banks utilise a 360-degree view of each customer. After all, using the right data and right analytics can make the difference between customer growth and customer depletion. In a case cited by McKinsey, banks were able to use data to create targeted campaigns that reduced customer loss by 15 percent.
Transform your data into insights.
The next step is categorising the information to create insights. Consolidation, enrichment and categorisation should be dynamic, as the system learns from each user interaction and adapts marketing offers to suit. The best way to gain this insight is through effective data management and analysis. However, banks need to be certain that their banking data is as close to 100 percent accurate as possible, so they don’t make decisions based on outdated or incorrect information. Inaccurate targeting often leads to customer alienation.
Deploy card-linked offers.
One example of how banks can use data to create a better user experience with which to engage customers is through deploying card-linked offers (CLOs). CLOs increase engagement and loyalty, develop new revenue streams and most importantly position banks as advisors on financial management to customers.
In short, CLOs allow banks to provide merchant-funded offers to their online customers as part of every-day personalised digital banking. But before embarking on a targeted CLO program, there are several important strategic choices to be made:
Be clear about strategic goals—CLOs can either help increase engagement, drive new revenue streams or cut costs. Make sure you know what your aim is in order to plan efficiently.
Decide on the target audience—CLOs are not just for Millennials receiving fast-food discounts. They can be tailored towards all audiences, as long as they are personalised with offers that make sense based on previous spending.
Decide which digital channels will work best for offers—CLOs can be part of everyday banking, a special-offer app or both. Whichever channel you use, transparency is key. Let the customer know why they are receiving an offer tailored specifically to them. Trust is everything these days.
Decide on your strategy for sourcing offers—to deliver a high-quality CLO, developing a merchant offer-sourcing programme is a key component. The first thing to decide is if the bank is to be responsible for sourcing the offers or whether one or more offer-sourcing partners will be used. Partners mean less revenue but save on time. But to scale a programme, banks should consider working with vendors that can offer self-service merchant portals to host merchant campaigns—this ensures a higher retention of merchants and reduces the costs of recurring campaigns.
Implementing CLOs equips banks with a versatile tool that can strengthen engagement and ongoing loyalty to banks.
Create real-time insights.
Another clever way for banks to deliver better experiences to customers through using their data is to provide them with real-time market insights. Once banks have decided strategy and organised data, they can start utilising real-time market insights in several powerful ways. Adding enriched data to existing streams will allow business-analytics teams to provide more detailed research, predictions and advice for their customers.
Banks can allow corporate customers to access real-time market insights by integrating the functionality in online banking and/or mobile channels. They can also make real-time market insights available to non-banking clients as an online stand-alone service.
No one stays behind for long.
All banks are capable of building meaningful customer engagement and developing new revenue streams. But to achieve this, banks need to understand the data they have, what it means and what each individual customer values most.
To stand in the face of new competition, banks must now turn to their data. With the correct use of customer data, banks can expand their offerings to provide real value for them and their customers, drive up engagement and loyalty, and most importantly retain their customer bases.