How banks are understanding their customers as individuals again

Banking used to be personal; customers were treated as individuals, and their local bank teller would understand what was going on in their life and what time they would likely pop into the branch. Since then, consumers have been whittled down to a series of impersonal numbers based on inadequate data provided by the credit bureau and whatever information they provide the bank with (e.g. transaction history.) Banks know how much you earn and how you spend your money but they don’t know about that promotion you were recently offered, that you are expecting a pay raise, that you plan to travel a lot more and are trying for a baby- all of which are factors predictive of future financial status. Now, with the increase of available data, and new and innovative software products available, banks can get personal again.

The internet has changed the way people communicate. There are over 1.65 billion Facebook users (a number which increases daily) and every 60 seconds the platform sees 510 new comments written, 293 000 statuses published, and 136 000 photos posted1. With more and more data being created exponentially, it is only logical to utilise it in order to better understand consumer behaviour. While social data is increasing, traditional credit data is not. More Millennials use Facebook daily than own a credit card. Although this is partly due to a desire to avoid further debt, 6.5% of Millennials say that the reason that they do not have a credit card is because their application was denied. Millennials have the lowest average credit score3 of any generation, and the shortest credit history, making it difficult to be approved using traditional methods. Based on the previously mentioned statistic (that more Millennials use Facebook daily than have a credit card), exploiting social data as an alternative to (or as well as) traditional data could enable individuals with little-to-no credit history to establish risk and identity profiles. During our recent study with Visa, we derived that a higher propensity for unbanked individuals, including Millennials or those new to country, to engage with formal financial institutions could be achieved through replacing tiresome application processes with social data driven processes.

Social data analytics can verify identity, detect fraud, verify location and whether they travel a lot (e.g. that annual ski trip to the Alps), identify relevant life events such as getting engaged (an upcoming expensive ceremony?), a promotion, or moving house and more. This capability not only enables banks to determine risk and generate alternative credit scores, in turn opening up potentially life-changing opportunities for those traditionally deemed undesirable applicants, it can also be used to tailor offerings and communication techniques to better engage with consumers. Big Data and text analytics tools, such as PROFILE, can ensure that bank customers feel valued again by personalising automated processes. For example, an ‘unexpected’ transaction made abroad won’t be so unexpected when you have already been notified that that consumer has been planning a trip to Australia with their friends, eliminating the embarrassment and inconvenience of a blocked bank card. Likewise, a simple “congratulations” at the top of a marketing email when they have just received a promotion or got married could personalise the bank-to-consumer relationship in a way that promotes customer loyalty. Banks can use this data to not only for acquiring customers, but for customer retention also. A key challenge for banks in the digital age when it comes to retaining customers is personalisation; 15% of customers say that they would switch branch because the customer experience was not tailored to their individual needs5. The integration of data and analytics technology could enable this personalisation by presenting each customer with a bespoke customer experience, facilitated by determining a customer’s wants, needs, and lifestyle, and delivering information, products, and services that they are likely to consider relevant and interesting. A loyalty incentive, a tactic most banks use to attract and retain customers, could be much more effective if that incentive is something that that individual actually wants rather than a ‘one size fits all’ approach.

Personalising the user journey with analytics software like PROFILE can increase customer loyalty while simultaneously offering the capability to empower consumers to gain access to products and services they may not otherwise get approved for when relying on traditional data. Moving into the digital age doesn’t just mean creating an app and introducing internet banking, it also requires banks to utilise the digital footprints of their consumers. After all, social media is now a primary channel for people to communicate with each other, announce life events, congratulate and commiserate friends and acquaintances, engage with brands, RSVP to events, plan holidays, and so much more. If you don’t know what your consumer is interested in, or that they have a big trip with their friends planned next week, then you mustn’t be looking. The data is out there, and it’s time to start using it. Make banking personal again.

Author Ben Allott