Why ACH Data is the Key to Unlocking Customer Trust

ACH data is something only banks and other depositories have access to, and it uniquely offers a detailed and nearly comprehensive record of money movements in and out of an institution's accounts.

One of the less-discussed challenges banks and credit unions face as they battle with fintechs and other online rivals concerns their relative weakness at leveraging customer behavioral data. Digital-native companies have better in-built customer lifecycle management capabilities, because they’ve typically embedded customer retention in every aspect of their customer journeys, from product design through to upsell.

But traditional banking companies do have at least one distinctive edge. The Automated Clearing House (ACH) — a technology platform of much older vintage — gives them a powerful first-party data advantage over nonbanks and new entrants. ACH, and by extension the data it generates, is something only banks have access to that uniquely offers a detailed and nearly comprehensive record of money movements into and out of an institution’s accounts.

This advantage won’t come as a surprise to many financial institutions. A 2019 banking industry report (by enterprise data platform company Ab Initio) warned institutions not to underestimate the power of their data — decades worth, accumulated over countless business cycles.”

But especially considering Google’s move to begin deprecating the use of third-party cookies on Chrome (bringing the browser in line with competitors Safari and Firefox), now is an especially good moment for bank marketers to take a fresh look, as competitors search for new sources of actionable customer data. The report’s message is truer today than before: “By learning how to use their data to competitive advantage, banks can defeat encroaching competition not just from fintechs, but from rival banks as well.”

ACH: Bigger and Better

Meanwhile, the advantage is only growing. The Federal Reserve Bank of San Francisco established the first ACH in 1972, but the current national network did not begin to take shape until the mid-1990s. Today, as the use of ACH payments steadily rises — some 31.5 billion payments worth $80.1 trillion were processed in 2023, up 4.8% from 2022 — the volume and value of the data the network throws off is growing too.

“As the systems behind ACH transaction payments become more robust, you can expect the analysis of consumer financial behavior to become increasingly prevalent,” wrote Rob Reale, an Associate Partner at Insight Financial Marketing. “Financial institutions that can predict changes in consumer behavior are primed to pull ahead of their competition.”

For banks and credit unions seeking a competitive edge, ACH data can show if customers are holding accounts elsewhere and, if so, what type of account. It can reveal which credit cards are most popular among customers and offer insights such as whether one particular fintech has gained traction or vice versa. It can reveal when a customer makes a final loan payment and so might need renewed access to credit. It can prompt a bank to match a competitor’s CD rate or to seize the advantage as the regulatory playing field in BNPL has tilted in banks’ favor.

Here are three data mining techniques that can take advantage of banks’ and credit unions’ ACH data:

Customer segmentation and personalization: Banks can segment customers based on transaction history, matching ACH data with demographics to tailor marketing strategies and offer personalized services and promotions, including opportunities for cross-selling or upselling. The key is to match revenue generation goals with improved customer satisfaction by offering products that align with individual needs.

Market basket analysis and predictive modeling: Market Basket Analysis (MBA) is used to analyze transaction data, including ACH transactions, to identify patterns and relationships among products frequently bought together. For banks, MBA can help optimize product bundling strategies and identify potential cross-sell opportunities. Predictive modeling is also employed to forecast customer needs and behaviors, allowing banks to make data-driven decisions about which products to promote to which customers.

Dig deeper:

Enhancing cross-selling: Using intent data, which includes ACH transaction signals, banks can better understand customer behaviors and needs. For instance, banks can detect when a customer might be interested in additional services such as loans or credit products by observing their ACH transaction patterns and then proactively offering relevant products. For example, a personal banking customer’s activity may signal that they have started a business and would be receptive to an offer of SMB services.

A case study published by Synergent, a company that helps credit unions tap their data, offers a cross-selling case in point. Northern Credit Union, based in Watertown, NY, leveraged ACH data to target customers for auto loans, bringing in a combined $2.2 million in additional loans directly as a result of two 3-month campaigns.

The auto loan campaign began with a simple data query: Find members who had a) recently paid off an auto loan with Northern or b) held loans at certain national and local lenders with minimum loan balances of $10,000. Mining ACH data yielded an initial prospect list of more than 3,000 members. The campaign also generated an additional $1.3 million in additional non-auto lending.

What’s In the Box

For marketers and other front-facing professionals who may not be aware of just how much untapped value they are sitting on, consider the following table a way to get your creative juices flowing.

Selected ACH data mining opportunities
Code What it means Potential use cases
PPD Prearranged Payment and Deposit: identifies regular deposits such as payroll or recurring bill payments – Target customers for products like savings accounts, investment opportunities or loans.
– Regular payroll deposits could indicate stability and potential for investment services.
CCD Cash Concentration or Disbursement: used for corporate payments – Identify business accounts that may benefit from additional commercial banking products or cash management services. Frequent CCD transactions might suggest a business that could use merchant services or corporate credit cards.
WEB Internet-Initiated Entry: includes payments initiated through the internet or mobile devices – Discover customers who may be interested in digital banking services, mobile banking apps, or enhanced security features. High WEB volume could suggest a customer who might appreciate advanced online banking or fraud protection services.
TEL Telephone-Initiated Entry: single-entry debit transactions authorized by telephone, often used for bill payments – Identify customers who might be interested in automated bill payment or financial planning tools.
ARC Accounts Receivable Entry: indicates conversion of checks received by mail into electronic payments – Target products related to payment processing or e-commerce solutions. Businesses frequently using ARC may benefit from integrated receivables solutions or automated payment reconciliation services.
BOC Back Office Conversion Entry: indicates conversion of checks received at the point of sale into electronic payments – Identify retail businesses that might benefit from POS financing or inventory management solutions that include enhanced payment processing. Retailers using BOC might also be interested in business loans for expansion.

Mark Egan has held leadership roles at Brookfield Asset Management, Allianz Global Investors, Guggenheim Partners and Bloomberg. Egan began his career at Reuters, where he worked as a journalist for nearly 20 years and won two Reuters Journalist of the Year awards. He has a Masters in economics from Trinity College Dublin and lives in Montclair, New Jersey.

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