Data is taking a new role front and center at many financial institutions. No longer relegated to backroom functions, bank-collected and third-party data is being used to boost sales and profit and even create whole new lines of business. Indeed, some financial institutions see their future as providers of information above and beyond transactional activities.
“We’ve concluded that information and data are strategic assets,” says Peter Simon, head of analytics, marketing and information propositions at London-based Barclays Bank Plc. “Rather than keeping data in the backroom, we’re making it a core banking product.”
Barclays is one of the largest banking transaction processors in Europe and is involved in a third of all payments within the U.K. retail system. That gives the bank access to an enormous amount of information that, when properly aggregated and analyzed, can give customers unique insights into their finances and businesses.
For example, information can be broken down by zip code allowing Barclays to determine if people in a particular area are spending less than in others, if rents are higher in one zip code than another or if business start ups are lagging, according to Simon. For a pizza restaurant in downtown London, Barclays can tell the owners when their busiest times are, how often customers come to them in a month, and on average how much their patrons spend per-meal. This information can be presented on a chart or graphically. Barclays can also give the owners ways to improve their business by looking at the data of other comparable businesses, according to Simon.
“We might be able to tell them that they are less busy during certain times of the day than other similar businesses in their area and the reason for that is because they have fewer male customers in their 50s,” says Simon. “The recommendation would be to better target that demographic.”
Barclays has only been working with data in this way for about two years and some products have only been live for a year or even several months. “So, we don’t, as of yet, have a full understanding of how it’s affecting sales and customer satisfaction,” says Simon. “However, we do have a sense that customers are seeing an uptick in value from the personalized attention.”
360 Degree View
At BBVA Compass, based in Birmingham, Ala., Edgar Encisco, director of customer intelligence, says the bank is using customer data to better cross-sell products, predict behavior, and improve customer service.
The kind of data BBVA Compass is gathering includes transactions, balances, and information gathered by third-party suppliers, Encisco says. In this way, the bank can track customer internet searches and other activities such as stopping into a branch to ask a question. For example, if a customer is searching the internet to purchase a home, the bank may offer them mortgages products, he says.
“When we put it all in one place, it gives us a 360-degree view of the customer,” Encisco says. “And if we can predict if a customer is considering leaving the bank for example, we can do something to stop it.”
But to accomplish that, the data has to be made available at all customer touch points, whether in a bank branch or on the website – and in real time, he says. If someone is not a customer and they go to BBVA’s public site, for example, the bank would offer the products there. If a person is a customer, the data would help the bank determine the best way to contact them and orchestrate an individual campaign for that customer.
“Each customer has their own needs and, by tracking metrics, we can identify cross-selling opportunities,” Encisco says. “We want to be sure that bankers in the branch, for example, don’t offer the wrong products. Not all products should be offered to all people.”
BBVA also wants to give the information to their customers to help them with their finances. Based on their transactional history, for example, the bank could develop a spending analysis. Or the bank could aggregate the account data from all the institutions that customers have accounts with and provide that information in a single location. This will allow the customer to better understand their financial situation. By looking at all their outstanding loans and cash in one place, a consumer can make better decisions, Encisco says.
The data must not only be available in real time, but it must also be current, Encisco adds.
“Data has an expiration date. A person looking for a home may only be doing so for about three months so the offers have to be recent and fresh.” In some instances, data may be seasonal. For example, at graduation time the bank might want to offer a credit card or car loan.
Customer campaign models developed with data are two to six times more effective than when not using this information, Encisco says. And campaign models that relate to attrition are three times more likely to keep the customer at the bank than not using the model at all.
But all of this technology is only as good as the people who run it, Encisco says. On that point Sid Deloatch, chief information officer for Cincinnati-based Fifth Third Bancorp agrees. Fifth Third is now beefing up and recruiting technology workers to aid in its data development and other Information Technology (IT) programs. By the end of the year, the bank plans to have added 200 more IT, digitization and security employees, putting the total to more than 1,000 IT workers, a 27% increase since 2012, Deloatch says.
And Fifth Third is actively recruiting developers, business systems analysts and project managers, he says. “These are high-end technology roles that will help build products to ensure that our customers have the best experiences. That can range from improving our mobile app or back-end operations, to call centers and products and services.”
Deloatch adds that Fifth Third plans on continuing to invest in technology as consumer preferences change. And at Barclays, Simon says that developing data products is well worth the investment. “All banks are large information and data processing businesses. Executing and processing that information is the core of our business.”
Ms. Wolf is a contributing writer to BAI Banking Strategies based in Pittsboro, N.C.