How Banks Can Capitalize on Their Data to Stay Competitive

Mining insights from transaction data is no longer optional for banks and credit unions. Consumers' willingness to do business with fintech providers has made such insights critical. Transforming unstructured data into actionable intelligence is challenging, but five steps provide a tactical guide.

Accessing actionable insights from core data has long been a problem for banks and credit unions of all sizes. Cumbersome core systems make it time-consuming for many internal teams to extract meaningful data. Even when leaders manage to mine real insights, the data is often static or the information gets siloed within individual teams, limiting its value.

New competition from fintech and other industry challenges are threatening wallet share and account holder retention. It’s critical that financial institutions use their account holder transaction data to create actionable insights. These insights will help anchor relationships and enable banks and credit unions to stay top-of-mind and top-of-wallet.

The Competitive Challenges Facing Banks

Financial institutions are faced with a new urgency in today’s climate, not only to know and understand their account holders’ financial needs, but also understand how they want to engage.

The boom in online banking adoption accelerated by the pandemic means fewer account holders visiting brick-and-mortar branches. This eliminated one of the primary account holder engagement channels for many financial institutions. At the same time, the banking industry as a whole has become fragmented because consumers have more choices than ever. Globally, 64% of consumers have used one or more fintech platforms, according to Ernst & Young.

With the trial and experimentation of other institutions by consumers, attrition rates in banks and credit unions need to be watched closely. Overall attrition rates in the banking industry are around 15%, according to FI Works, and attrition can be up to 200% higher in an account holder’s first three to six months with an institution.

Some retail stores such as Walgreens now offer banking services, and fintech apps like Acorns have launched competing products that are drawing consumers away from traditional financial institutions.

Consumer Magnets:

Non-traditional institutions and online lenders have become a popular option for consumer loans, providing convenience and time-savings.

By better understanding account holder behavior, banks and credit unions can differentiate themselves in the market and identify these challenges to get out ahead, with targeted offers and helpful resources that strengthen account holder loyalty. Achieving actionable data doesn’t have to be cumbersome — getting on board with organization, security and automation can give a bank or credit union the edge it needs over the competition.

The following five tactical milestones are a good guide for developing a strategy featuring activated data:

  1. Cleanse transaction data
  2. Process data securely
  3. Share data securely
  4. Execute multichannel campaigns
  5. Adopt agility

1. Cleanse Transaction Data

Analyzing an account holder’s data can help reveal their priorities and offer insights on future actions. Financial institutions sit on a mountain of merchant payment data, all full of insights and behavior spend patterns. The problem is that unstructured, uncategorized transaction data often looks like a jumble of random numbers and letters because the data gets truncated and changed as it moves throughout the financial ecosystem. Actionability starts with making sense of that data.

A merchant payment cleansing service takes unintelligible data from complex to clean, adding value to a financial institution in a number of ways. For starters, easy-to-read transaction descriptions help free up call center resources and deliver an enhanced account holder experience within online and mobile banking portals. Artificial intelligence and chatbot functions, with more accurately tagged and categorized data, can significantly improve performance to respond faster and more consistently. Business segments throughout a financial institution can deliver more relevant account holder interactions that drive product utilization and engagement.

Taking it one step further, financial institutions can use transaction data to build predictive models for nearly any account holder behavior. Attrition modeling, for example, can identify which individuals have a high likelihood to leave a bank or credit union. Custom models can be leveraged, with the help of the right vendor, to identify the behavior financial institutions want to predict, or the outcome stakeholders want to achieve. The opportunities are nearly endless for financial institutions when catapulting their account holder transaction data to be intelligible.

2. Process Data Securely

Financial institutions of all sizes collect information on millions, if not hundreds of millions, of transactions every month. But transferring large volumes of data outside the organization adds time, labor costs and security concerns. Using a cloud-share application, specifically for a merchant payment cleansing solution, can help remedy many of these challenges, making transaction enrichment simple, fast, granular and accurate, while maintaining a seamless collaboration with the processor.

The cloud-share environment allows data to be processed without being moved between the vendor’s platform and then back to the financial institution. The data remains in the bank or credit union’s ecosystem, mitigating security concerns around account holder data and personally identifiable information (PII). With this type of system setup, banking leaders can gain seamless access to transaction enrichment solutions, yield significant time and cost savings and take action on the data by making informed strategic business decisions for the institution.

3. Share Data Securely with Tokens

Once the data is usable, a best practice is to automate marketing and operational campaigns, such as account-holder onboarding. In order to protect PII, tokenization can be one of the most useful data security tools.

Tokenization is a process that assigns a data value, or token, as a placeholder for sensitive data. Once created, these tokens can be passed across platforms to any authorized party for operations. This helps ensure individual data privacy and protection while allowing financial institutions to make full use of internal data.

Using tokenization provides a financial institution the flexibility to pick and choose vendors — even multiple vendors — extending the value of account holder data. When used as part of a comprehensive data governance and security strategy, tokenization can help expand business opportunities while minimizing risk to the organization.

4. Execute Multichannel Campaigns

Once account holder data is secure, financial institutions can be confident when integrating with various platforms to streamline key operations. For example, having a turnkey email delivery channel that is powered by insights from account holder transaction data enables a bank or credit union to deliver the highest level of targeting efficiency and relevant messaging. Most importantly, the digital use cases can accelerate revenue generation for both current account holders and acquisition campaigns.

By 2023, email users are expected to reach 4.3 billion, over half the world’s population. Even with a multitude of platforms like social media being consumed every day, email still remains the workhorse of digital marketing. Automating delivery to this channel increases the capability for on-demand quick campaign building, closing the time gap for most marketers while delivering a conversion-rich form of digital marketing.

For example, after mining transaction data, account holder spend analysis could reveal a particular individual is showing intentions to purchase a vehicle. That account holder would be entered into a “likely to buy a car” marketing campaign. Technology integrations push a bank’s data into action by seamlessly funneling insights through to the email platform, building an audience that will receive a relevant, timely and compelling message.

5. Adopt an Agile Business Playbook

Financial institutions need to recognize that the old playbook for engaging and retaining account holders isn’t going to cut it anymore. Leaders need to find new ways to build meaningful relationships through highly relevant experiences. Mining the rich transaction data already in-house, banks and credit unions can better understand their account holders holistically as they live out their unique financial journey.

Adopting agility moving forward means developing new strategies for increasing revenue, growing wallet share and outwitting the competition — all based on ongoing data insights. In the end, a financial institution’s commitment to setting data into action and being able to pivot with on-demand intelligence will ultimately determine their fate in an aggressive and disruptive marketplace.

Segmint is a provider of an industry-leading data insights platform and marketing automation platform, best known for the speed, scale and accuracy of our Merchant Payment Cleansing solution.

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