Leveraging Data to Transform Digital Banking into a Profit Center

Banks and credit unions often view digital transformation as an endless journey of new integrations, apps and functionality. These advances improve the account holder experience and overall efficiency, both of which help financial institutions remain competitive. But by using the technology that has already been implemented in new ways, it's possible to realize even greater value for the bottom line. With the use of data, institutions can effectively and relevantly upsell and cross-sell products and services in a more timely and effective way than ever before and deepen account holder relationships in the process.

Financial institutions have been racing to meet consumer demand for new capabilities and convenience, prompting them to continually upgrade digital banking features and tools and improve the user experience.

Despite their progress, most are leaving significant revenue on the table. While the improved efficiency and customer service are evident, digital banking solutions have the potential to offer another benefit: the capability to use a treasure trove of data to drive highly effective marketing campaigns.

By viewing digital banking as an investment rather than a cost center, banks and credit unions may discover a valuable opportunity to increase share of wallet and drive more revenue.

Digital Transformation as an Ongoing Effort

Financial institutions have made notable progress in digital transformation in recent years, but many are still pursuing results. The Digital Banking Report found that 38% of surveyed banks deployed digital banking transformation solutions at scale but didn’t achieve the expected results.

“Services such as digital account opening, remote deposit, bill payment, and P2P payment integration are now table stakes.”

So far, banks and credit unions generally have focused their digital transformation efforts on enhancing service-based functions, such as account information and money movement. New platforms and application programming interfaces, or APIs, enable them to incrementally add modern applications to their legacy core and other processing systems and expand their digital capabilities without major overhauls.

However, while digital transformation often improves efficiency and the account holder experience, banking leaders typically think of such initiatives as the cost of doing business. Many financial institutions, contending with limited resources, both in personnel and budget, take the approach of making a list of necessities and piecing them together with “good enough” solutions to deploy digital features and capabilities sitting on top of their legacy platform.

This strategy may check the box, but it can hinder the ability to pivot in the future as the industry and consumers shift unexpectedly. Services such as digital account opening, remote deposit, bill payment, and P2P payment integration are now table stakes. Today’s consumers want more than these baseline capabilities. With their experiences outside of banking setting the bar — from Amazon to Apple to Netflix — they have come to expect a high level of engagement and personalized recommendations to meet their needs, and they want convenience to go with it.

Read more: Digital Insights Will Determine Your Institution’s Fate

Transaction and User Behavior Data Reveals Insights

Diving deep into transaction data and insights derived from these behaviors enables financial institutions to better understand their account holders’ financial stages, and where they may need some support or additional products and services. For example, account holders who have just made the last payment on a car and have recently paid a hefty bill from an auto repair shop may soon be in the market for an auto loan. And a CD holder that has two months left on a 12-month CD could be in the market for another high-yield option. This type of account holder engagement is critical at a time of waning loyalty: 60% of consumers say they cannot rely on a single financial institution for all of their needs.

The Consumer Challenge:

The number of consumers who say they can't rely on one banking provider for all of their financial needs:

Transaction data also can indicate which account holders are engaging with the competition and how much money is leaving the bank or credit union to be kept elsewhere. Even when a financial institution doesn’t hold the account holder’s mortgage, auto loan, or credit card, the data can reveal where payments are going, creating an opportunity to serve up competitive offers to capture wallet share.

Banks and credit unions can also use these insights to support account holders in challenging times. Targeted communications can improve account holder financial wellness, which creates a virtuous cycle of improved satisfaction, retention and ultimately increased product revenue opportunities. Data analytics can empower financial institutions to provide the coaching and tips account holders need to improve their financial well-being. Plus, the data collected may provide an opportunity to go beyond individual account holder behavior and provide a 360-view of the financial health of all account holders as a group. These are valuable insights that surface trends the financial institution can use to build future business strategies.

Read more: What the Data-Driven Bank of the Future Looks Like

Making Digital Banking Both a Service and Sales Channel

If there’s an upside to digitization and rising consumer demands, it’s the opportunity this creates. Financial institutions have the means with technology and data to engage on a personal level with their account holders and deepen their relationships, leading to increased revenue.

Research shows such efforts do pay off. One study by Accenture found that building more personal relationships can boost revenue from those with primary accounts by up to 20%.

A Great Source of Growth:

The revenue boost a bank can get when the relationships it creates with consumers feel more personal :

However, to realize this opportunity, bank and credit union leaders need to rethink their strategy around digital transformation and the user experience. They must move beyond using digital banking solely for service and instead think of it as a sales channel where they can meet account holders’ needs with additional products.

Data, along with artificial intelligence and machine learning have given financial institutions the ability to make connections, create tailored messages and deploy these to the ideal audiences. By pairing insights and marketing automation with a digital banking platform, institutions can target their account holders with personalized cross-selling and deliver marketing offers directly in the digital banking platform and other channels.

Real-world, practical applications for using data to drive revenue through the digital banking channel include onboarding programs, self-service account opening, product cross-sell and up-sell, competitive takeaway campaigns, increased product utilization, engagements for the next best product and capturing business accounts being masked in retail.

For years, companies like Amazon and Netflix have used account information, clicks, page views, and trends to offer personalized recommendations. This strategy is so powerful that McKinsey & Company estimates 35% of Amazon purchases and 75% of views on Netflix are now driven by recommendations from algorithms.

Financial institutions can take this same approach to personalization and relevancy and leverage digital banking capabilities combined with data to turn this must-have investment into a profit center.

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