In the intensive search for new sources of profitable revenue, many financial institutions are missing one untapped source: cross-selling and upselling to existing retail consumer customers who also are small business owners. Equifax data analysis shows that up to 21% of consumer accounts may be held by small business owners or principals.
These individuals often tap traditional consumer credit resources, such as home equity lines of credit (HELOCs) and personal credit cards, to fund the roughly $80,000 in annual capital typically required for startups, even though they would be better served by small business and commercial products. By identifying the links between the consumer customer and possible small businesses, banks could more effectively target these individuals with tailored commercial offers.
The benefits that can be derived from combining consumer and business data are certainly many, expanding the customer base, increasing share of wallet, boosting campaign response rates through better segmentation, improved customer service and deeper customer relationships. Yet, banks have found it challenging to overcome incomplete or inaccurate core customer profile information that can be a barrier to identifying key linkages.
Achieving basic customer data integrity does require significant resources and process oversight. Even the best systems, processes and analytics cannot compensate for weak data, which is why it is essential for banks to augment their own data with more comprehensive, reliable data from third-party information providers to create a complete and accurate view of their customers.
Providers such as credit bureaus can use data-linking technology to integrate business data with banks’ consumer files to securely connect relevant information and use reference-based matching to accommodate poor, missing and out-of-date information. The connected data can then be consolidated into a “big picture” view revealing those consumers who also are business owners or principals – as well as the businesses that may be associated with them – creating opportunities for growth with commercial products and services.
For example, a bank may only see that a consumer customer has a HELOC and be blind to the fact that this person also is a multi-business owner who is using the line of credit and other personal assets to fund their efforts. Identifying relevant data linkages may reveal that the number and nature of businesses that this customer owns make them an ideal target for commercial loans, commercial cards, and possibly fleet and equipment leasing.
In addition to uncovering new sources of revenue, advanced linking technology also can provide risk management benefits to banks by recognizing whether a customer is a default risk because he or she is funding a business with personal loans. Either way, hidden opportunities exist for financial institutions if they can tap the right information sources.
Mr. Behrman is assistant vice president of product innovation, Equifax Commercial Solutions, at Atlanta-based Equifax Inc. He can be reached at [email protected].