Mining for Opportunities

The niche of the community bank is the depth and breadth of its customer service; yet, the days of handshake loan approvals and simple spreadsheet reasoning are over. Well, sort of.

The personal experience developed at the branch level still exists, but today, every inch of the bank and customer relationship is touched by technology. And with the industry’s increasing ability to store and analyze a deluge of data in search of the Holy Grail – the single customer view – banks who resist progressing along the spectrum of analytics aren’t just falling behind, they’re at risk of being left behind.

The coupling of big data and predictive analytics to tailor the customer experience and trigger “Next-Best-Offers” doesn’t represent a new frontier so much as it does a natural evolution. Banks have historically collected data into isolated silos but have not fully realized the information to improve individual-level marketing, gain new business insights, and leverage themselves in the battle over customer acquisition and retention.

“Analytics has been used in financial services for decades under various name – statistics, quantitative techniques, [and] business intelligence,”

explains Arnav Sheth, Ph.D., Professor of Finance at St. Mary’s College of California and Director of the school’s Financial Analysis and Investment Management program. “It allows us to use sophisticated tools to mine valuable insights from data,” he continues, “whether it be to find new customer bases and create better, more bespoke products, or to find more effective ways to serve already existing customers.”

Terminology aside, the business drivers remain the same: increase revenue, control costs, and mitigate risk. Customer centricity, also a familiar term, takes on new meaning in the world of mobile users and increasingly complex data. More than a core value descriptor attached to mission statements, customer centricity includes the ability of a bank to appreciate, predict, and satisfy the needs of the individual. The holistic experience now requires banks to embrace analytic tools to understand the behavioral economics of the customer and to act upon them; this is where smaller banks may, in fact, be able to gain ground. By combining their rich tradition of service with a robust system of analytics, community banks can compete in a marketplace that is continuously fighting for consumer loyalty.

While the debate over whether or not technology is the great equalizer continues in boardrooms both big and small, its strategic viability is without question. Beyond customer profiles or payment and behavior datasets, the intelligence collected can help detect and predict internal and external fraud, gather and compile regulatory reports, measure business and employee performance, improve internal audit functions, and target departmental training and education needs. Still, for many community banks, digital transformation feels out of reach.

One way to begin the journey is by evaluating simple datasets. For community banks branding their apps through the WIB App Store, the analytics are already built into the backend of the credit scoring app. As customers and non-customers access their credit history and learn how to improve their score, the bank gathers product and competitor intelligence and can determine how much – or how little – wallet share is in play. On its own, the information is integral to marketplace dynamics; however, when coupled with payment datasets and customer profiles, what begins to emerge is a more fully realized vision of the individual. Recommending the right product to the right customer at the right time is the heartbeat of analytics. By way of technology, it allows community bankers to reaffirm their roles as trusted advisors and invigorate customer loyalty.

More than just a set of processes built from volume, variety, and velocity, a strong analytics program is essential to unlocking actionable insights and engagement strategies. And whether a bank leans on inter-departmental synergy to mine data for opportunities or hires a Chief Data Officer to extract meaningful messages from captured information, to rely solely on antiquated methodologies might satisfy at the moment, but it will not survive the data-driven standards of tomorrow.

Dr. Sheth explains it best with a brevity that captures the digital distinction: “As we move into the 21st century, it only makes more sense to adopt these tools to keep a competitive edge, and to maximize efficiency. To analogize – who uses a hand-powered drill anymore?”

In all of its expressions, technology is a unique business driver because it encourages a disruption of critical thinking strategies and is capable of changing the landscape of community banking.

In an ongoing effort to provide the most relevant educational experiences within the industry, Western Independent Bankers will host their annual Education Summit & Expo, September 17 – 20. This year’s exciting curriculum includes a Technology Track supported by sessions pertaining to FFIEC cyber security risk updates, ransom-ware threats, regulatory panels, and much more. For the first time in its history, the event will host a FinTech Showcase where up-and-coming companies will pitch their innovations and offer insight into the impressive technological advancements and opportunities available to financial service providers. To register or learn more about the event, visit Western Independent Bankers.