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CUSTOMER CONFIDENCE IN BANKING – TIPS ON USING BIG DATA ANALYTICS TO REBUILD IT

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CUSTOMER CONFIDENCE IN BANKING – TIPS ON USING BIG DATA ANALYTICS TO REBUILD IT

By Dominic Vincent Ligot

The world’s financial infrastructure is collapsing. So they say.

It’s a theme that is oft-repeated. You only have to log on or open your newspaper and stories about problems in the banking world come thick and fast. Fraud, the spats about Brexit, looming financial disasters and misdeeds – it all comes rolling out, spiced up with rumour and gossip, colouring the public idea of the role of banks.

Hardly a surprise then, that despite the industry’s admirable growth and the central roll it has played in society for hundreds of years, the public regards the banking community with suspicion. Issues like security breaches, poor customer service and lack of service evolution all figure heavily in the public mind, while those who work within banking look to the stars and do their best to allay such concerns.

Rebuilding confidence

To win back customer confidence and forge a successful path in the face of unparalleled digital disruption, individual banks (and the whole industry) need to look hard at their long-established business models and operational practices. A few banks have already started out on the digital transformation journey – embracing new technologies and tapping into existing data resources to create improved products and services. Big Data and analytics are the key to all this, but their full potential still remains largely unrealised. Banks now need to take practical steps towards creating data-driven business opportunities from the areas where the public has the wrong impression.

Payments data

Start with the most under-appreciated dataset. Payments reveal a great deal about each user – how much they’ve paid, what they paid for, who was paid, the banks involved, transaction time and location, and so on. In fact, a customer’s payment profile says much more about her, or him, than any social media metric or record. Payments data is highly accessible and can pinpoint lifestyles, detect which companies make up a supply chain, and plot spending trends by time or place. At the same time, although customer data is not as dynamic as payments data, in banking systems it can be attached to other profiles such as payments and credit history to enhance analytics and create successful “Next-Best-Offers”.

Fintech sensibilities

Should banks be worried about the Fintech boom? Not necessarily. Banks have both the resources and the ability to retain their position in a way that start-ups really don’t. They just need to adopt a bit of Fintech thinking. Banks can try some of these simple and practical things in the short term that could make a significant difference:

  1. Play with some data around a recommendation engine – It can be done as an experiment with a few people. Group customers by preference, products by customer, and transactions by pattern similarity. Everyone’s always looking for the elusive ‘Single Customer View’, but guess what? A ‘Partial Customer View’ linking two to three product portfolios is already enough to get started.
  2. Look closer at payment and behaviour data – Payments can help banks understand the sequence of events that leads to somebody leaving the bank. Payments can reveal hidden social networks within a bank’s portfolio. Customer-to-customer, customer-to-merchant, company-to-company, product-to-product – what could you do if you knew these relationships?
  3. Fraud and compliance – As mentioned before, banks are incredibly adept at regulatory compliance and fraud mitigation. But the industry needs to start getting better at text analytics and using web behaviour to detect high-risk patterns. Insights such as ‘who clicked on what before fraud happened’ can be very enlightening. These days, companies can match weblog data with branch data and check the difference between web and in-branch behaviour.
  4. Service experience – In the brick-and-mortar era it was ‘Location, Location, Location’. Now, in the digital era it’s ‘Customer, Customer, Customer’. Use event data to spot processes that are causing problems for your customers and fix them. Contact Centre logs are a hidden source of insight. It doesn’t take much to parse them for sentiment and recurring patterns. There could be new products hiding behind these complaint logs, if only banks were inclined to look.
  5. Improve the mobile experience – Many banks have mobile apps but they usually concentrate on facilitating payments, fund transfers, and account management. What if a local bank’s app could act like Mint and provide the user with cool ways to manage budgets, see financial profiles at a glance, and even offer helpful advice? You can parse those mobile servers for hidden patterns in data (location profiles, IP addresses, mobile browsing, etc) – the ‘fingerprints’ of customer satisfaction.

Okay, these five things won’t turnaround troubled relationships on their own but they could be the first, tentative, steps towards reconciliation.

And once the ‘relevance’ and ‘confidence’ fences have been mended and an enterprise-wide digital transformation strategy embedded, banks can get back to developing meaningful, long-term, data-driven customer relationships instead of settling for a diminishing series of ad hoc, one-night stands.

Banking

Commerzbank to lose 1.7 million clients by 2024 – Welt am Sonntag

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Commerzbank to lose 1.7 million clients by 2024 - Welt am Sonntag 1

FRANKFURT (Reuters) – Commerzbank expects to lose 1.7 million customers by 2024 as part of its current restructuring, resulting in a 300 million euro ($364 million) hit to revenue, weekly Welt am Sonntag reported, citing sources close to the bank.

The lender hopes to offset the drop by growing its loan business as well as by expanding its business with corporate and very wealthy clients, the report said, without giving any further detail of why customer numbers were expected to decline.

It also didn’t say if any specific category of client was most likely to be lost.

Commerzbank declined to comment.

According to the bank’s website it serves around 11.6 million private and small-business customers in Germany and more than 70,000 corporate and other institutional clients worldwide, so the reported loss of customers would suggest a drop of around 15%.

The bank earlier this month reported a $3.3 billion fourth-quarter loss, sinking further into the red as it continued a major restructuring and dealt with the fallout of the COVID-19 pandemic.

The bank’s restructuring plan involves cutting 10,000 jobs and closing hundreds of branches in the hope it can remain independent.

($1 = 0.8253 euros)

(Reporting by Christoph Steitz and Tom Sims; Editing by David Holmes)

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Banking

Citigroup considering divestiture of some foreign consumer units – Bloomberg Law

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Citigroup considering divestiture of some foreign consumer units - Bloomberg Law 2

(Reuters) – Citigroup Inc is considering divesting some international consumer units, Bloomberg Law reported on Friday, citing people familiar with the matter.

The discussions are around divesting units across retail banking in the Asia-Pacific region, the report https://bit.ly/3pD57WP said.

“As our incoming CEO Jane Fraser said in January, we are undertaking a dispassionate and thorough review of our strategy,” a Citigroup spokesperson told Reuters.

“Many different options are being considered and we will take the right amount of time before making any decisions.”

The move, part of Fraser’s attempt to simplify the bank, can see units in South Korea, Thailand, the Philippines and Australia being divested, the Bloomberg report said.

However, no decision has been made, according to the report.

Revenue from Citi’s consumer banking business in Asia declined 15% to $1.55 billion in the fourth quarter of 2020.

The divestitures could be spaced out over time or the bank could end up keeping all of its existing units, the Bloomberg report said.

The firm is also reviewing consumer operations in Mexico, though a sale there is less likely, the report said, citing one of the people.

Last month, New York-based Citigroup beat profit estimates but issued a gloomy forecast for expenses. Finance head Mark Mason said the lender’s expenses could rise in 2021 in the range of 2% to 3%, weighing on its operating margins. (https://reut.rs/2ZwXRB1)

(Reporting by Niket Nishant in Bengaluru; Editing by Maju Samuel)

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Banking

European shares end higher on strong earnings, positive data

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European shares end higher on strong earnings, positive data 3

By Sagarika Jaisinghani and Ambar Warrick

(Reuters) – Euro zone shares rose on Friday, marking a third week of gains, as data showed factory activity in February jumped to a three-year high, while upbeat quarterly earnings boosted confidence in a broader economic recovery.

The euro zone index was up 0.9%, with strong earnings from companies such as Acciona and Hermes brewing some optimism over an eventual economic recovery.

The pan-European STOXX 600 index rose 0.5%, as regional factory activity was seen reaching a three-year high on strong demand for manufactured goods at home and overseas.

Another reading showed the euro zone’s current account surplus widened in December on a rise in trade surplus and a narrower deficit in secondary income.

Still, the STOXX 600 marked small gains for the week, having dropped for the past three sessions as investor concern grew over rising inflation and a rocky COVID-19 vaccine rollout.

But basic resources stocks outpaced their peers this week with a 7% jump, as improving industrial activity across the globe drove up commodity prices.

“This week’s slightly adverse price action has all the hallmarks of a loss of momentum temporarily and not a structural turn,” said Jeffrey Halley, senior market analyst at OANDA.

“There is not a major central bank in the world thinking about taking their foot off the monetary spigot, except perhaps China. (Markets) will remain awash in zero percent central bank money through all of 2021 (and) a lot of that will head to the equity market.”

Minutes of the European Central Bank’s January meeting, released on Thursday, showed policymakers expressed fresh concerns over the euro’s strength but appeared relaxed over the recent rise in government bond yields.

The bank’s relaxed stance was justified by the euro zone economy requiring continued monetary and fiscal support, as evidenced by a contraction in the bloc’s dominant services industry in February.

The STOXX 600 has rebounded more than 50% since crashing to multi-year lows in March 2020, with hopes of a global economic rebound this year sparking demand for sectors such as energy, mining, banks and industrial goods.

London’s FTSE 100 lagged regional bourses on Friday due to a slump in January retail sales and as the pound jumped to its highest against the dollar in nearly three years. [.L] [GBP/]

French carmaker Renault tumbled more than 4% after posting a record annual loss of 8 billion euros ($9.68 billion), while food group Danone and German insurer Allianz rose following upbeat trading forecasts.

(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)

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