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MAKE MORE THAN A STATEMENT: BIG DATA AND THE BANKS

BIG DATA AND THE BANKS

Paul Alexander, CEO & Co-Founder of Beyond Analysis

BIG DATA AND THE BANKS

BIG DATA AND THE BANKS

There have been big changes since I first opened a bank account. Internet banking on a smartphone was barely a sparkle in a software developer’s eye as we didn’t have access to the World Wide Web, and our smartest phones were BT payphones into which you could slot 10p pieces. Back then, cheques were in everyday use; we can now pay for small items by touching a bank card or mobile phone onto a till sensor.

One area of banking has, however, remained pretty much unchanged: the humble bank statement. Whether delivered through your post box or arriving in an email inbox, the layout and content of a bank statement has barely changed since the introduction of computer programmes back in the 1960s. Name, address, account number, sort code and the transactions carried out by your account in the last month or so. The bank’s logo usually sits somewhere in the corner.

Paul Alexander

Paul Alexander

It seems almost inconceivable that the bank statement has not received a makeover when so many other aspects of banking are almost unrecognisable from 30 years ago, especially given that it belongs to an industry that it fed by data, statistics and numbers. Where statements are concerned, banks have been guilty of failing to capitalise on the valuable insight that could be gained from their data and used to enhance customer experience for the greater good.

Germany-based Wüstenrot Bank recently announced that it is trialling a cashback loyalty programme for retail banks, which will see offers appearing alongside customers’ online bank statements. These can be redeemed by following the links and paying with a credit or debit card, opening up a new revenue stream for banks and providing small cashback incentives for account holders.

Red Zebra Analytics, the firm behind the project, plans to begin signing up retailers to the scheme as soon as a decent chunk of transactional data is generated by the trial. The organisation’s CEO boasts that closer relationships will be built between banks, customers and retailers, making it easier for retailers to quickly put together highly targeted marketing campaigns in the process.

Not far enough

The trial launch of this project represents a good first step in the right direction, but in my opinion banks should be going much further. Financial services organisations are currently going through a period of unprecedented change: banks need to start increasing their revenue streams by doing whatever they can to fight for customer retention in an increasingly flooded marketplace.

Competition has certainly heated up in recent months; however some of the best-known banks and building societies still resort to dangling the carrot of a cash incentive in front of competitors’ account holders, promising them payment for switching across and closing their existing account. Many banks have also been guilty of depending on customer apathy instead of formulating a genuine customer retention strategy; as it is now easier than ever to switch banks many are now desperately running to catch up. I would argue that, for many customers, loyalty does not come into the equation when talking about their bank; banks therefore need to be realistic and focus on customer engagement rather than equating the longevity of bank accounts, mainly due to apathy, to loyalty. Will a few targeted cashback offers make much of a difference to customer engagement in the battle for accounts? Probably not for everyone, no.

Banks have always had access to a whole raft of data but the majority have never chiselled through enough layers to realise what a goldmine they are sitting on. Retail banks could use their customer transaction data sets much more effectively by providing recommendations compared to the spending habits of similar account holders. For example, take comparison and review websites such as TripAdvisor. It can take an age to sift through page after page of posts and even when you’ve done that, it can be hard to work out which glowing references you can trust. This is where, in my opinion, the banks are missing a trick. With the data it already possesses, a retail bank would be able to tell an account holder where people matching a similar profile to them have been, thereby providing them with a recommendation based on data-led analysis – surely a far more trustworthy solution.

Assume the role of the attentive shopkeeper

Historically when a customer purchased some paint from their local hardware store and needed some more, they would simply return to the same place – and ten to one the local shopkeeper would remember their purchase. The shift from yesterday’s retail model to today’s hypermarkets and out-of-town retail parks has resulted in that relationship being lost along the way, but this represents an incredible opportunity for banks to step behind the counter and assume the role of the man in the big green apron.

By making online bank statements easier to navigate, search and manipulate, banks could empower account holders to use their statement as an enabler for smarter, quicker purchases – rather than simply a reminder of what they’ve spent. That’s the kind of service that would be a serious competitive differentiator and a true customer engagement tool.

Big Data is a relatively new term in the banking world, but it is something financial institutions have always had at their disposal. The sector is in a great position to reap the rewards a focus on Big Data can bring, it just needs to get its house in order first.

Here’s a six point plan to help retail banks make the most of their own Big Data:

  1. Be clear on your business objectives, and those of your customers
  2. Understand what data you have right now (and what you don’t)
  3. Align points one & two and then create your own Big Data plan
  4. This should NOT be a three year, all-singing all-dancing plan; plan in detail for the first 12 months, then in high level for years two and three
  5. Only include actions that can be tested and measured – so you can learn and develop proof points
  6. Be committed to your data; if you’re in it for the long haul so will be your customers

Banking

UBX appoints new Chief Investment Officer

In line with its strategy to explore and invest in companies and platforms of the future, UBX—the Fintech and Corporate Venture Capital arm of Union Bank of the Philippines (UnionBank) — is announcing the appointment of Matthew Kolling as the company’s Chief Investment Officer (CIO).

Matt Kolling

Matt Kolling

As CIO, Kolling will be managing UBX’s Corporate Venture Capital (CVC) fund. He will also play a key role in raising capital for UBX while assisting the company in key corporate transactions, including the structuring of joint ventures and acquisitions.

Prior to his appointment at UBX, Kolling has been Head of Venture Investments at Aboitiz & Company since 2019, wherein he had been working with UBX on investment portfolio decisions. Before that, he held senior positions in Private Equity, Venture Capital, and Investment Banking at firms such as Providence Equity Partners and Morgan Stanley in New York.

Kolling has more than 20 years of experience in managing investments and deals in the Technology and Telecommunications industries and is active in Venture Capital and startup communities in the Philippines and the Southeast Asian region. He currently chairs the Manila Angel Investors Network, among others.

“We at UBX are excited to welcome Matt as our new CIO. We firmly believe that Matt will be instrumental in driving value creation opportunities, both within the CVC fund and our corporate ventures. We look forward to working with him as we fulfill UBX’s vision of a future where banking services are embedded into everyday experiences that matter,” said UBX president and CEO John Januszczak.

Meanwhile, UnionBank president and CEO Edwin Bautista said, “The addition of world-class talents in our pool reinforces our strategy to future-proof the organization and our business as we prepare for many new opportunities that come with the changing times.”

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Banking

It’s all relative: Older generations feel helping out the family financially is more important since the Covid-19 outbreak

It’s all relative: Older generations feel helping out the family financially is more important since the Covid-19 outbreak 1

Before Covid, 23% of people prioritised helping younger generations out financially, that increased to a third as a result of the pandemic

A recent survey* conducted by Hodge has revealed that the Covid pandemic has led to more people wanting to help younger family members financially.

A third (31%)** of those questioned said that since the Covid outbreak giving a financial gift to children or grandchildren is more important to them, compared to 23% who said it was a priority before the pandemic.

The traditional “Bank of Mum and Dad” is still very much open for financial help, with parents being responsible for 72% of the gifts, but the study also revealed that financial gifts can come from all corners of the family – including children (14%) and siblings (14%).

The survey also found that a third of people have received a financial gift from family, with those aged between 25-34 as the most likely to receive

The most popular reason for gifting money to family is for special occasions such as a quarter of gifts were given for weddings and birthdays but 11% of people have received money to help with big purchases such as cars and houses. In addition, 19% of people have received help with day to day finances, with around 14% of those receiving a gift have done so to pay off debt.

Emma Graham, Business Development Director at Hodge, said of the research: “Our study showed that, as a nation, we all want to help our family out when it comes to money. And whilst we all think of the Bank of Mum and Dad or Gran and Grandad as a traditional source, we were surprised to see that 14% of brothers and sisters are also helping out.”

The findings come from a recent intergenerational study conducted by Hodge, who interviewed over 3000 people about their attitudes towards finances and their aspirations for the future. The full research findings can be found at https://hodgebank.co.uk/2020/05/19/money-its-all-relative/.

As part of the study, people were also asked about paying back the gift, with 40% of beneficiaries expecting to pay their parents back, but this dropped to 28% if the gift came from grandparents.

From the gift donor’s perspective, 26% expect the gift to be paid back, however just 15% of grandparents expected the money back.

Hodge has produced a set of guides on how families can navigate the tricky subject of giving financial gifts within a family, as well as the considerations and steps that be families should think about taking before a gift is given, such as is it a loan or a gift and thinking about contingencies if the family member’s circumstances change. The guides can be found here: https://hodgebank.co.uk/news/

Emma continued: “It’s clear that families feel strongly about offering financial support to each other if they are able and this has increased since the Covid pandemic. Before Covid, 23% of people prioritised helping their families out financially in the next five years. Since the Covid-19 outbreak that has increased to a third of people saying helping a family member financially had become more important.

“So, it is clear that the Covid-19 lockdown and subsequent predicted economic downturn, has led to more families looking to share wealth to help younger children or grandchildren during this difficult time. Many people may look to Later Life mortgages, where many products have reduced their rates and have flexible lending criteria, to help out a loved during these difficult times.”

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Banking

New report identifies the factors which will determine SMEs’ chances of a successful COVID recovery

New report identifies the factors which will determine SMEs’ chances of a successful COVID recovery 2

·         Analysis of the performance of over 1,000 UK small and medium-sized businesses by Allica Bank provides roadmap for SMEs 

·         Regular training, an openness to innovation, and a clear vision all contribute heavily to an SMEs’ chances of success  

·         Allica Bank has launched a programme of free workshops to expand on the findings and support business owners 

Business bank, Allica Bank has combined data and insight from over 1,000 UK SMEs with a multiple regression analysis to determine what factors most closely aligned with an SMEs’ chances of success and separated the highest-performing businesses from their peers. These ‘rules for success’ have been compiled from the research data to support British businesses as they look to chart a course to post-Covid recovery.  

The full report identifies six behaviours for small and medium businesses to follow, to maximise their chances of a successful COVID recovery. The six top-line rules emphasised by the data were: 

Rule 1: SMEs should regularly train staff 

Of the top-performing businesses analysed, 47% provided training for employees at least on a quarterly basis, compared to just 32% of other businesses. Regular employee training was linked closely to success by the model.  

Despite this, many small businesses have neglected training and nearly half (46%) of the small businesses analysed only provide training for employees about once a year or less often. This included 15% that never provide employer-funded training. This discrepancy could represent a significant opportunity for small businesses to unlock the potential of their employees and thrive in the post-Covid economy. 

Rule 2: SMEs need to focus on innovation and technology 

Looking again to the best performing businesses, 76% were found to either continually (39%) or often (37%) be considering new opportunities for technology in their business. This is compared to only 51% for businesses considered to be outside of the top ranks, out of which only 27% admitted to continually looking for new technology opportunities. 

Rule 3: Small business must have a formal, long-term vision  

Nearly two thirds (66%) of the most successful businesses in the survey had a formal, long-term vision, compared to just 50% of businesses outside the top 100. Looking to the businesses that scored the lowest on the SME Performance index, only 37% claimed to have a formal, long-term vision. 

Rule 4: SMEs should broaden their customer reach and find new markets 

Of the top-performing businesses, 65% of these have overseas customers compared to just 40% of the worst performing businesses. Among the best performing SMEs, over a third (34%) identified international expansion as one of the top three drivers for their success. 

Rule 5: SMEs need to develop reinvestment plans 

22% of the best performing SMEs reinvested some of their profits into the business in the past three years with an average 9% of profits being redeployed. Tellingly, this is nearly double what other businesses admit to reinvesting in their business (5%). 

Rule 6: SMEs should engage with local business organisations and networks  

Of the top 100 SMEs, 30% had obtained external credit to expand over the past three years (compared to 24% of other businesses). Meanwhile, only 16% of all other SMEs had engaged with local enterprise partnerships or growth hubs in the past three years (compared to 23% of the top 100 SMEs). 

Chris Weller, Chief Commercial Officer, Allica Bank, said: 

“All small businesses are different, as are all small business owners, but one trait they share is an innovative resilience. Whilst the coming months and years will undoubtedly continue to present extreme challenges, there is no doubt that small and medium sized businesses across the UK will rise to meet them head on.  

“To give them the best chance to succeed, though, they need to be equipped with the right tools. There is certainly no silver bullet or panacea for every small business, but as this study has found, there are a number of common factors found in the most successful businesses that allow small enterprises to thrive and that they can consider individually for their business.  

“This research has identified common ‘rules for success’ that speak to every aspect of running a business, not just the financials. Once we saw these results, we wanted to use them to help small businesses begin to re-build and prosper, by outlining common factors and then examining how best they can be practically applied to businesses in all sectors of the economy.  

“Small business owners and their employees have been hit hard by the crisis, but they have the drive and resourcefulness to breathe new life into the economy and bring energy to post-Covid Britain. Our commitment at Allica Bank is to give them the support they need to do so, every step of the way.”

The full report contains a wealth of additional data and insight into each of these topics. As part of its mission to empower small businesses, Allica Bank is making the findings freely available and running a series of free online workshops with relevant partner organisations for businesses to attend.

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