Banking Ignores Potential of Data

The use of consumer data drives virtually all of the key trends in financial services today. From the partnership between fintech and banking to the searching for qualified employees, data is the foundation for growth and long-term success.

By Jim Marous, Co-Publisher of The Financial Brand and Publisher of the Digital Banking Report

The banking industry has always had more consumer data available than most other businesses. The management of transactions and the building of relationships over time has provided insights into behavior that gave a competitive advantage and hurdles to market entry against firms outside the industry.

As consumers embraced digital channels for commerce and communication, banks were among the first companies to take advantage of the new streams of data. Some firms were early movers, employing advanced data analytics, appointing chief data officers, and investing substantial time, effort, and resources in building out infrastructure that enabled data analysis.

Unfortunately, despite the vast amount of data available, the early start and the industry’s formidable resources, most banks are far from realizing big data’s full potential according to research from the Boston Consulting Group. Some of the reasons for falling short of potential include:

• Competing priorities. Such as addressing regulatory changes in the wake of the financial crisis.
• IT complexity. Because of multilayered systems and siloed data, banks rarely use the full breadth and depth of data at their disposal.
• Lack of coordinated vision. Resulting in suboptimal allocation of human and technical resources and limited interaction and exchange of ideas.

The risk of falling behind in leveraging consumer insights has never been greater since consumer expectations are rising. The majority of these expectations are being set by non-financial competitors.

More importantly, advanced data analytics are central to virtually every banking trend identified by industry leaders in the 2016 Retail Banking Trends and Predictions report sponsored by Kony, Inc. Here is how consumer data plays a central role in five of the future banking trends.

1. The Partnership Between Banking and Fintech

The vast majority of fintech firms have been established to provide consumers an improved digital experience based on contextual insight and simplified delivery of financial services. By leveraging advanced analytics of consumer data and digital technology, smaller start-ups have been able to build solutions that are superior to those from legacy financial institutions.

The reason why the partnership between legacy banking firms and start-ups makes sense is that, while the fintech firms may have a better engine in many cases, the legacy financial firms have the fuel to make the fintech solutions more successful in the long term. Legacy banks and credit unions have the larger customer bases that fintech firms lack. By combining the data and technology skills of many of the fintechs with the data from the larger legacy firms a win-win is created.

2. Removing Friction from the Customer Journey

Because the consumer does the vast majority of their shopping for a new financial institution using digital channels, it is no longer adequate to wait until the customer or member walks into a branch or decides to purchase a new product online or via a smartphone. Instead, banks and credit unions must engage customers at every stage of their purchase journey, not just because of the immediate opportunities to convert interest to sales, but because two-thirds of the decisions customers make are informed by the quality of their experiences all along their journey ...

To read the rest of the article on leveraging data to keep up with banking trends,  go to the complete article here ...

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