The three key forces of changing customer demographics, non-traditional players and extensive regulatory oversight are redefining the banking operating models. To break the barriers of commoditization and differentiate, banks will increasingly rely on data and analytics. According to a recent survey by EFMA, banks investing into marketing data and analytics for example, can generate 15 to 20 percent more revenue for the same cost base.
Based on my interactions with the banks, to remain profitable in the banking business, banks are leveraging data and harnessing insights to move from the “product centric” culture to a “customer centric” culture. Our customers are leveraging data to:
- Define new customer segments, leveraging behavior data available on internally and meshing with external data from third party.
- Optimize the distribution models and have a pointed focus on digital channels of interaction to meet the customer demands of availability and accessibility.
- Measure the business results in terms of increase in customer value, rather than the traditional products per customer approach. These insights are then leveraged to identify gaps in cross sell, attrition
- Move away from one sizeFITS all approach and mass segmentation to personalize and price the product and services in accordance to the customer value
Wells Fargo is great example in banks seeking to monetize data available in-house, the bank was looking identify their new brokerage customers from their existing consumer banking customer base, currently leveraging brokerage services elsewhere.
Data can be leveraged by banks to sell new services thus adding a net new revenue streams, merchant offerings have provided some phenomenal use cases in this regard. Banks in the issuing and acquiring business can actually leverage customer and merchant data to offer bank funded offers, which makes them capture a share of market currently owned by the likes of Group on. Banks believe that “payments” is the area to look for data monetization opportunities as it provides the right incentives for the different players in the entire value chain. A phenomenal example of leveraging data to provide value added services is, American Express(Amex), which holds the data of 90 million cards and 5 billion transactions per year, which gives Amex a view of their customer’s lifestyle with insights into which stores they visit, how much they spend and where they go for vacation.
Data Monetization does not necessarily need to be a complexEXERCISE.Given the amount of internal and external data banks have access to; it is finally about determining the right business objective. The objective could be protecting and expanding current business leveraging streamlined internal data or foraying into newer avenues in the pursuit of newer revenue streams. The objective has to be owned and delivered by a TIGER team, and we are seeing action on that front, with the evolution of the role of a “Chief Data Officer”. Barclays and Chase are one the first banks to embrace the role of a Chief Data Officer.