Big tech continues to push further into consumers’ lives, looking to gain deeper insights into their behaviors and spending habits. Recently, Amazon announced it would incentivize people to provide information on their non-Amazon purchases. Through the Amazon Shopper Panel, select consumers can now upload receipts from outside retailers in exchange for monetary rewards.
By capturing data related to outside spending (data historically exclusive to financial institutions), tech giants like Amazon are now marching further into the financial services arena. And it’s only a matter of time before others follow suit.
But financial institutions have an advantage. They already collect an abundance of data that far outweighs that of any other industry. They know how much people spend on groceries each month, where they ate for dinner last night, what recent life events they’ve experienced and where they like to shop.
They just need to know how to use those insights.
As financial institutions work to reevaluate and refine their digital strategies, data must be a top priority. And in a world where data influences everyday interactions and decisions, an institution’s data strategy needs to be part of the broader shift to a digital-first approach to banking.
How can financial institutions maximize their existing data to make it more meaningful and actionable? Three essential steps will bring measurable results.
1. Centralize Data Across the Organization
Data helps drive insights that determine what’s most important to a consumer, their primary pain points and where they are in their financial journey. These insights can help banks and credit unions cross-sell more products, provide personalized service, build trust and empower people to make better financial decisions.
But for data to be actionable, it first needs to be understood.
A critical component of maximizing the power of data is to first create visibility across business lines and channels. This often requires breaking down silos to gain a centralized view of the data across an organization to understand every consumer interaction.
Consider, for example, someone who starts to open a new account application online but abandons it before finishing. Maybe that person also checked mortgage rates the last time he signed on to digital banking. Having data visibility across channels would allow a banker to proactively help them complete their application the next time they enter a branch, contact the call center or open a live chat. The banker could even take that opportunity to explore the individual’s interest in discussing mortgage rates based on his previous activity.
Creating visibility of data across channels helps bridge physical and digital interactions to provide a seamless and frictionless connection between people and their financial institutions. It also provides the level of personalized service consumers have come to expect from their banking relationships. And it plays a significant role in the shift to a digital-first approach to banking.
2. Align the Right Staff to Mine and Manage Data
Just as a hospital wouldn’t allow an operation to take place without a surgeon, a financial institution shouldn’t solely rely on a software developer or project manager to analyze and interpret complex and disparate data. They don’t have the training or expertise to do it alone.
Another critical component of driving meaningful and actionable data is hiring the right staff to mine and manage it. Far too often, financial institutions rely on existing staff who lack the skill sets needed to analyze complex customer data. And without a centralized data strategy, this becomes even more challenging.
What financial institutions need are data analysts and data scientists. These professionals are skilled in analyzing data for actionable insights. They know how to collect disparate sources of data, cleanse and validate it to ensure accuracy, and ultimately interpret it to extract meaning and discover new opportunities to use it.
Nearly half of U.S. banking consumers would be willing to switch to a different financial institution that could better anticipate their needs than their current institution, according to an NCR survey conducted by the Harris Poll.*
3. Use Data to Provide Real-Time Value
Once financial institutions gain a deeper understanding of their data, powerful things can happen. But they must bear in mind that it requires more than just cross-selling a product and getting someone to use it to deepen engagement and build loyalty. Financial institutions should be looking at their data to determine how they can create value and improve their peoples’s lives.
Take financial wellness, for example. When the COVID-19 pandemic hit, consumers and businesses were increasingly looking for financial guidance and assistance. Financial institutions rushed to offer access to PPP loans to help small businesses stay afloat. Skip-a-payment options were offered to ease financial hardship and income loss. And personal financial management (PFM) solutions saw a considerable spike as consumers more actively managed their budgets and spending.
Republic Bank, an NCR partner, experienced a 17% increase in adoption of its digital PFM solution at the start of the pandemic.
Financial institutions should be using their data not only to understand consumer needs but to anticipate them. And they should be applying those insights by targeting consumers with personalized products and services in real time.
With apps like Charlie, Acorn and ChangEd, just to name a few, consumers have access to an abundance of tools outside their traditional banks and credit unions that can help them reduce debt, save money and budget better. And people will find, and use, these tools to help them improve their financial well-being if their financial institutions don’t offer to do so.
55% of U.S. consumers would be likely to use a budgeting or goal setting/tracking tool if their financial institution offered it, according to an NCR survey.
Banks and credit unions have a huge opportunity to provide real-time value that builds trust and loyalty for a lifetime. They have the unique ability to use the data and insights they already have to anticipate people’s needs, help them proactively manage their money, and guide them to better ways to save, budget and reduce debt.
Putting Data Into Action
Here are some examples of how financial institutions can bring these efforts together to create relevant and meaningful interactions.
Pay down debt faster. A consumer carries a balance on his credit card and subsequently pays monthly interest. Their financial institution informs them that by contributing $25 more per month, they can pay down this debt six months faster. Here, the financial institution uses data to offer meaningful advice to improve the account holder’s financial situation and trust in the financial institution.
Live within their means. By looking at transactional data, a financial institution gleans that a younger couple spends $500 to $700 on groceries and $150 to 300 on dining out each month. Their overall monthly spending is often more than their combined income. Their bank or credit union offers to set an automated budget for groceries and dining out to help the couple stay on track with a budget and improve their financial health.
Avoid overdrafts. A person frequently overdrafts or gets down to a low minimum balance each month. Their financial institution offers overdraft protection and educational information related to budgeting tools and cashflow monitoring alerts. Here, the institution uses data to provide personalized recommendations for better money management with solutions that can help people avoid fees, keep their money and improve financial wellness.
Build on This:
69% of U.S. consumers say cashflow monitoring alerts from their financial institution would be helpful.
Consumers are loyal to brands that demonstrate they know them, show them ways to improve their lives and offer them meaningful rewards for their loyalty. Their banking relationships are no different. When a financial institution understands its data, the opportunities are endless. And by using that data to offer meaningful value that improves their customers’ lives, banks and credit unions can build the trust and loyalty that keeps them coming back for the long haul.
Accelerate: Insights from NCR
3 Steps to Embracing a Digital-First Approach to Banking
*The survey was conducted online by The Harris Poll on behalf of NCR from February 4-8, 2021, among 2,007 U.S. banking consumers age 18 and older.