Jon M. Deutsch, Managing Principal for Banking, Financial Services & Insurance at data and business intelligence specialist, Information Builders

Big data is still high on organisations’ agenda in 2014. In fact, according to Gartner’s 2014 predictions on big data, ‘Enterprises must adapt to this quickly changing landscape to establish an analytical competitive advantage’. But when you’re talking to financial services organisations about this, what they really want to know is: ‘how is big data going to help us?’ Financial services organisations want to know how data is going to help them earn more, spend less, identify fraudulent activity and design better, more efficient processes. While you can understand these goals, it definitely feels as though something is lacking. This is the role of the customer. Given the hype around data and privacy, customers are very much aware of the value of their personal information, putting them in an ideal bargaining position to trade their information for benefits.

There’s no denying that financial services organisations’ reputations have taken a hammering in recent years. Thanks to the financial crisis, the PPI debacle and more, trust in these organisations is extremely low. Taking this into account, along with an increased number of financial comparison services, new banking organisations and simpler account switching processes, customer loyalty is suffering.

Jon Deutsch

That being said, banking customers are still some of the most loyal around. In fact, it’s often commented that banking relationships on average last longer than most marriages. So why is it that banks need to be taking notice?

The younger generation or ‘tomorrow’s customers’ are being brought up at a time when criticism of financial services is at an all time high. They’re far more pessimistic and cynical about the motives of banks and their financial products than their parents were. This wariness, be it from millennials, the middle aged or pensioners, detracts from the value of banks’ communications and advice. It’s all well and good using big data to analyse and segment customers for marketing purposes but if your talk is ultimately met with doubt and uncertainty then it’s pointless. Banks need to take note because nothing defeats the upsell – or diminishes customer loyalty – faster than cynicism.

How are banks going to go about wiping away this doubt, rebuilding their tattered reputations and inspiring customer trust? Well, firstly they need to demonstrate to the customer that they’re on their side. HowUnderstanding the customer, offering a better service and ensuring greater visibility over processes will go a long way to rectifying the stereotype of the ‘selfish banker’. And it’s here where big data and analytics can play a major role.

According to a study from Corporate Executive Board (CEB), satisfied consumers tend to buy twice as many products from banks than those who are not (CEB Consumer Financial Monitor, Q3 2012). But what is it then that satisfies a consumer? We can start by first looking at the customer experience.

In the past, when you asked what a great banking experience consisted of, the response was a face-to-face meeting with a helpful banker. We’ve seen more and more local branches closing in recent years, now the customer experience is more likely to take place online or on a mobile app.

Using big data effectively will allow these digital experiences to become more than just a replacement for in-branch transactions. Banks and other financial services organisations can use freely available open data sources, along with existing customer data to make these tools invaluable to the customer. A key example of this is using geo-location to offer discounts for preferred products and services if a customer is in the immediate vicinity or combining transaction history with inflationary information to offer investment guidance.

Banks are in the unique position of being able to really get to know their customers. Many know more about their customers than their own families do. Banks have records of everything that customers have bought, earned and spent. They may even know their savings goals and what their retirement will look like. There aren’t many things that you can hide from the bank. But hand in hand with this unique position, comes a unique duty. Banks wanting to use this customer data need to be as transparent as possible about what they’re doing with this information and how it benefits the customer.

By creating a two-way relationship, banks are in a better position to understand their customers and can go a long way to building loyalty and trust. After a few years of essentially sabotaging their own reputations, banks need to position themselves on the side of consumers. Whilst they may be using customer data to improve marketing or decrease fraud, they can use that same wealth of data to advise on the best time and day to buy flights or spending strategies,as well as offering discounts.

Each generation is becoming more aware of the value of personal information and how they can trade this with companies for free services. They’re increasingly aware of their own worth. What’s more, as the bar for more accurate, personalised and informative services is rising, businesses need to give an explanation for the information that they are collecting.

When it comes to personal financial management, this needs to be more than just a pretty pie chart telling you what happened to last month’s salary. Data and analytics give banks the opportunity to become integral to day-to-day life. Not just because they are keepers of the funds, but because they can provide smart, trusted advice that customers need and use every day. Retailers are recognising this and are stepping forward with this customer-centric view. Some are even venturing into the world of finance, but their data view is limited. For now, banks have the data advantage, but if they want to stay competitive, they have to learn how to use it.