Don’t be afraid to ask.
That’s the advice from marketing experts weighing how banks and credit unions can respond to growing limits on the use of personal data collected indirectly from consumers, known as third-party data. The California Consumer Privacy Act, for example, makes it easier for consumers to limit sharing of their personal information and even delete what has been collected.
Financial institutions have plenty of data already on their customers simply by virtue of taking in savings and making loans. This information — first-party data — can help banks and credit unions figure out which customers might be interested in additional products or services.
But there is another kind of data that can help institutions deliver services and experiences that are even more personalized. Zero-party data — a relatively new term — is information that customers willingly share — provided they might get something in return. Banks, for example, can ask customers about their top financial concerns.
“If you deliver great value to the customer, and you can articulate very clearly how you are going to deliver that value to the customer, they will hand their data over to you quite willingly,” says Arun Kumar, executive vice president of data and analytics at Hero Digital, a digitally focused customer-experience firm in Austin, Texas.
What is Zero-Party Data Exactly?
Unlike data sourced through other means — first-party, second-party, third-party data — zero-party data is information that is delivered straight to the brand voluntarily from the consumer themselves.
Getting Closer to Zero-Party Data
Customers are willing to share. In fact, nearly two-thirds of consumers, or 62%, are okay offering up personal information if it leads to more relevant communications, according to a report, “Banking on the Customer Journey: 2022 Financial Services Insights,” by Braze, a New York-based company offering a digital customer-engagement platform.
And according to the Braze survey, 59% of financial services brands surveyed are already using zero-party. The problem is that many are not using it well.
More than four-fifths, or 82%, of financial services brands believe their customers are satisfied with their messaging. Customers judge more harshly: Only 39% believe communications from their financial services company are relevant.
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Why the gap? It’s likely that banks are sending messages based on their own business objectives rather than on what customers actually want or need, says Myles Kleeger, president and chief commercial officer for Braze.
The downsides of getting it wrong are higher than they used to be, Kleeger adds. Customers today are more likely to bristle when they get an irrelevant message, particularly one that leaves them guessing why they were on the receiving end.
But if customers can tie the message back to information they shared willingly, they are less likely to be surprised, he says. “It kind of diffuses any friction you might see when it comes to privacy.”
Getting Zero-Party Right
Banks can bridge the gap by looking closely at why they are collecting zero-party data in the first place and figuring out what they intend to do with it, marketers say.
Banks and credit unions may want to develop a new product, cross-sell existing products or venture into new markets.
“You have to define your use cases upfront,” Kumar says. “What’s your strategy? Where are you headed? What are the new products that you want to launch? What are the white spaces you want to tackle? What’s the need that you’re seeing in the market that’s not being served?”
Not only is the collected data more valuable, customers are less likely to question why it’s being collected in the first place, Kumar says.
Dig deeper: Personal Loans Are a Growth Area with Cross-Sell Opportunities
He also suggests banks gauge their risk appetite. Customers may want quicker, digital approvals for personal loans, and zero-party surveys may back up the demand. But if risk managers aren’t on board, financial institutions could be promising something they can’t produce.
“Banks have to really step into this very carefully because there is no easier way to damage your credibility than to offer up something, make the customer work and then not deliver it,” Kumar says.
‘Don’t Mind My Asking’
Banks and credit unions have plenty of opportunities to ask questions of their customers. They can post short surveys on their websites and follow up credit applications with additional questions, marketers say.
“You could ask the customer, ‘Hey, would you be willing to answer five more questions in order to help us serve you better?'” says Kumar.
Many banks already ask online customers a few questions about potential improvements to the online experience, Kumar says. “We can add one or two questions at the end just to understand what else you expect from your bank in a digital experience.”
Financial institutions can create additional opportunities to ask questions. For example, a bank could send out content on retirement planning, Kumar says. “In that content, they can offer up a survey where they say, ‘We would love to understand how better to service your retirement needs.'”
“If you do this in a planned way and you’re able to talk to about 50 customers, that’s a wealth of data that you can potentially feed up the chain, and then we can start making changes.”
— Arun Kumar, Hero Digital
The best place to question customers, though, is in a branch, he says. “You can ask the customer for the data, and then you can also explain why you’re asking for that data.”
Bankers don’t have to — and most likely can’t — engage with every customer who comes in. But customers who are open to it could be asked about their financial concerns and their long-term needs, such as saving for college or retirement. From there, bankers could ask what products they would like to use that are not currency available at the branch or that they are seeing at competing institutions.
“If you do this in a planned way and you’re able to talk to about 50 customers, that’s a wealth of data that you can potentially feed up the chain, and then we can start making changes,” he says.