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MONETISING BIG DATA IN RETAIL BANKS STARTS WITH A BETTER CUSTOMER EXPERIENCE

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Davy Nys, Vice President of EMEA & APAC, Pentaho

Retail banks are starting to view big data as a promising asset class that can provide new revenue streams. However as the government’s recent pause on the NHS Care.data scheme proves, even when organisations intend to use data to benefit society and it’s anonymised, consumers are still wary. Retail banks, which have been wracked by scandals relating to PPI fraud, LIBOR rigging, unpopular bonus schemes and IT failures, need to think beyond upselling and cross-selling and consider how big data analytics can repair trust and improve the whole customer experience.

Davy Nys, Vice President Of EMEA & APAC, Pentaho

Davy Nys, Vice President Of EMEA & APAC, Pentaho

Retail banks are indeed under more pressure than ever to use their valuable data to come up with more competitive customer offerings. With UK household disposable incomes at their lowest point since 1987 (ONS figures as of Q1 2013) more consumers are using resources like switching websites and tuning into programmes like Moneybox to take a more active role in managing their finances. Although consumers are still slow to change their current accounts, when it comes to other financial products and loans, this is changing thanks to initiatives like The Payment Council’s recently launched Current Account Switch Service. Some are evaluating new players like peer-to-peer lending services Zopa and RateSetter and using personal finance management software like Intuit’s Mint.

So with competition and awareness heating up, how can retail banks monetise their customer data to gain marketshare without jeopardising already fragile customer trust? The best way to start is to use data to give customers something they genuinely want! Fortunately there’s one glaring thing that falls into that category: integrating financial product and service portfolios into a ‘360 degree view’ so that they are easier for customers to manage. Every banking customer has a story about when they called their online bank manager to enquire about, say, their buildings and contents insurance, and was swiftly transferred to another department (or automated voicemail system). This, despite having been sold on the promise that they would get a seamless, integrated customer experience.

To varying degrees, banks have started to integrate their core retail products like current, savings and mortgage accounts into single views. However customers increasingly expect to be able to see, for example, insurance policy details and renewal dates so they have the visibility to compare products, negotiate fees and read the latest terms and conditions. Some banks already fearing for their reputations, have been afraid to carry out further integration for fear that data will leak out of legacy IT silos and threaten data privacy and security. Other banks feel threatened by greater transparency and the giving customers more information to help them ‘shop around’.

These are valid fears, however given all the high-profile security failures and breaches that have happened recently, these no longer support inaction. The reality is that many banks run on ancient IT infrastructures riddled with risks and costs, both of which get passed on to customers. Furthermore, as it dawns on customers that their financial products aren’t truly integrated but merely ‘white-labelled,’ they no longer see the point in paying any kind of premium to buy services from a single provider and are much more likely to shop around.

A bigger picture

I want to be very clear that monetising big data is not just about making it easier to upsell insurance to a mortgage customer. It’s about offering the kind of exceptional personal service and experience that ultimately leads to the ‘Valhalla’ of customer value pricing (CVP), or maximising the total value of a customer to a bank throughout all interactions and transactions.

CVP is a relatively simple idea and will be familiar to most readers: by working out what different customers need and integrating that knowledge throughout all its interactions, a bank should be able to improve customer service and loyalty as well as increase its own profitability by optimising pricing for customer value. Simple though it may sound, this has eluded retail banks for years because they have set pricing using assumptions that are too generic and crucially, focused more on growing revenue than adding customer value. Big data analytics offers an important technological solution to help resolve this dilemma.

How big data integration and analytics supports CVP

Unlike other industries that offer multiple services to customers such as broadband providers, retail banks uniquely possess very concrete data about exactly what their customers have purchased, when and how often. This means retail banks are have the best data available for building detailed customer profiles and tailoring product and service offerings accordingly. So how do modern big data integration and analytics tools support this? Here are just a few ways:

Supporting a two-way, 360-view

The most fundamental service that benefits the retail bank and its customers is the ability to offer that integrated 360-degree view of each customer’s entire portfolio I described earlier. This view also needs to run both ways! Yes, banks should have that holistic view of its customers, but similarly customers increasingly expect that same visibility of their products and services. This includes being able to use a single password to sign in and view everything through a clear and simple dashboard. Customers who prefer to deal in person or over the phone should get a similarly integrated experience and not have to be transferred to people in other departments using completely non-integrated IT systems. This 360-view is the prerequisite to being able to monetise data more profitably in the future.

As mentioned before, many banks still fear that data will leak out of their ‘secure’ silos if they attempt to integrate it into new applications that improve the experience for customers or their bank managers. However sophisticated new data integration tools make it possible for banks to blend data ‘at the source’ without having to first move it into a different ‘staging area’. These same tools also make it possible for banks to set up smart rules to ensure that data is handled according to local and European data governance rules, virtually eliminating the risk of compliance and security breaches.

Lower costs

Retail banks are harshly criticised for passing on high operating costs to customers by stealth, whether it be through hidden transaction fees or selling products customers don’t need. New players in the market can offer customers better value, in part because they use modern, cost-effective IT infrastructures. Data storage is one of the most expensive and escalating components of IT spend so consider this: according to a report (October 2013) by Cloudera and Syncsort, to store one Terabyte of data in a mainframe costs anywhere from $20,000-100,000. That same data costs roughly $15,000-80,000 to store in a data warehouse. However, it only costs $250-$2500 to store it in a Hadoop cluster. That’s anywhere from six to 400 times cheaper than the alternatives! Big data infrastructure and tools, which are based on open standards, generally cost much less than their legacy, proprietary alternatives.

Smarter offers

To demonstrate how far banks are from being able to make smart offers today, in a recent US Gallup poll of 9000 people, it transpired that customers were being so poorly targeted that 53 percent of those surveyed reported already owning the products that were being marketed to them! Clearly, with all the data banks have available, they can do much better. For instance if a bank can see from a credit card statement that one of its customers has just purchased an expensive bicycle or rare painting, that customer’s manager could recommend a more comprehensive buildings and insurance policy to make sure those items were covered. Similarly if a credit card statement indicated that a customer regularly goes snowboarding in the Alps, the customer’s manager could suggest a travel insurance policy that covers winter sports. Even if banks aren’t ready to switch to modern IT architectures today or prefer to migrate over time, new tools are available that enable safe, cost-effective and easy data blending, without needing to move data out their existing systems.

Customer-friendly fraud detection

For the past five years I have been travelling to Orlando in February for our company’s kick-off meeting and every year, without fail, my credit card provider flags my card as potentially being used for fraudulent transactions. Surely, it can see a pattern here by now! Getting smarter about using data for fraud detection is a simple way banks can improve the customer experience by giving the impression that they care just as much about the customer experience as they do its own risk.

Measuring customer sentiment

According to a recent survey by Bain and Company, the rewards of securing greater customer loyalty can be substantial, around $10,000 more in net present value over the lifetime of an affluent ‘promoter’ customer versus one that is a ‘detractor’ (note: US data). But most banks go about measuring customer satisfaction in a haphazard, outdated way. Retail banks are crazy for surveys, with some banks’ customers being invited to complete a survey after every transaction. I personally find these annoying and either ignore them or complete them so quickly that they are probably not very useful. A much more revealing and less intrusive way to establish customer sentiment is to combine less frequent, more detailed surveys with social and online content that customers voluntarily publish. Big data analytics tools can help mash up these different data sources to help banks continually design better services.

Beyond Valhalla

Retail banks have considerable work to do to build the infrastructures and transform their cultures so that they can deliver the integrated, 360 customer views that will serve as the foundation for the ‘Valhalla’ that is CVP. I firmly believe it’s worth the effort because beyond that the rewards are even greater. For example, when customers trust their banks enough to allow them to share data with their favourite retailers, data could have a very high monetary value indeed. Furthermore as the trend in omni-channel banking grows to include things like ‘smart ATMs,’ touch screen walls, mobile applications and kiosks the opportunity to create sophisticated service experiences driven by high quality, integrated data are practically limitless.

But remember, majestic structures like Valhalla can only be built upon strong foundations. Retail banks need to figure out how to monetise their own data, before they can even think about commercialising it externally. Fortunately the right tools are available in the market today to embark on this journey.

big data in retail banking

big data in retail banking

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Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact

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Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact 1

The Covid-19 pandemic has shunted aside existing challenges to sit atop treasurers’ priority lists, according to “The resilient treasury: Optimising strategy in the face of covid-19”, a survey run by the Economist Intelligence Unit (EIU) and sponsored by Deutsche Bank.

The results show that treasurers are looking to diversify their investments in a bid to mitigate the pandemic impacts, including heightened liquidity, foreign-exchange and interest-rate risk. As many as 55% plan to increase investments in long-term instruments, with 48% increasing investments in bank deposits, another 48% in local investment products, and 47% in money-market funds.

“The Covid-19 pandemic has drastically altered business plans in 2020. It has placed a certain level of strain on treasury processes, but the challenge it presents has been managed by traditional treasury skills. It is clear that pandemic risk will be on the treasury checklist for years to come, but it is one of many risks the department faces and will continue to manage,” says Melanie Noronha, the EIU editor of the report.

Despite Covid-19 looming large, other challenges wait in the wings. Notably, the replacement of the London Interbank Offered Rate was identified by 38% of respondents as the main challenge of their function.

Technology, meanwhile, continues to be a pressing issue, with treasury teams becoming increasingly reliant on IT solutions. Here, data quality is rising up the list of concerns. Already highlighted as very or somewhat concerning in 2019 by 69% of respondents, the figure rose to 78% in 2020. Acquiring the necessary skill sets to realise the full benefits of this data and technology is also a continuing priority – with some progress registered from last year. In 2020, 30% of respondents say they have all the skills they need to manage technological change, up from 22% in 2018.

“Treasury’s focus on technology is not only helping teams operate more efficiently in a remote-working environment, it has long played – and continues to play – a key role in realising their long-term priorities,” notes Ole Matthiessen, Head of Cash Management, Corporate Bank, Deutsche Bank. The survey shows that

Release 1 | 2  managing relationships with banks and suppliers (highlighted by 32% of respondents) and collaborating with other functions of the business (also 32%) remain top of the agenda – and seamless digital systems will help give treasurers the bandwidth and insight to be more effective partners for both internal and external stakeholders.

Based on a global survey of 300 treasury executives, conducted between April and May, the survey explores stakeholders’ attitudes among corporate treasurers towards the drivers of strategic change in the treasury function – from the pandemic through to regulation and technology – and their priorities for the next five years.

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Digital collaboration: Shaping the Future of Finance

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By Ryan Lester, Senior Director of Customer Experience Technologies at LogMeIn

With heightened economic uncertainty and increased customer expectation becoming the norm in the banking industry, it is understandable that the sector is struggling to keep afloat. Due to its precarious nature, banking institutions are trying their best to ensure they remain relevant in the competitive landscape and guarantee that their customers continue to be a priority.

When it comes to the first half of this year, the pandemic has shown how easy it is for industries to fail. Customers and companies alike had to get used to the new normal, as physical locations started to close. The banking industry felt this first hand, as banks were made to restructure how their business ran, with restricted opening hours and a wider push to motivate people to use online banking.

While some had already embraced digital options prior to the pandemic, this proved to be a stark contrast to the elderly population, who frequently visited branches to access their finances. Moving forward, banks have to adopt new methods to ensure customers get the most out of our their accounts, without their experience suffering.

Heightened Customer Expectations

When the pandemic reached its peak, people were encouraged to use online banking, as telephone contact was under strain with long waiting times and pressure mounting on contact centre agents. According to Fidelity National Information Services (FIS), which works with 50 of the world’s largest banks, there was a 200% jump in new mobile banking registrations in early April, while mobile banking traffic rose 85%.

With branches remaining closed, customers were continuously being urged to limit the amount of calls they made to the most urgent cases and consider whether they could solve their answers through mobile online banking or checking the company website. Although already being adopted in pockets of the industry, this was a real catalyst that spurred banks to up their game on digital channels and with self-service tools.

Banks are challenged with precariously balancing customer needs with the cost of personalised support. With the demographic of customers changing over the last few years, customers are becoming increasingly younger and more comfortable with technology. Influenced by the “Amazon Effect”, their expectations have raised to an all-time high, placing record strain on the sector

Customer experience isn’t just about support anymore, it’s about serving your customer at every point in the journey. Companies have an opportunity to elevate the experience they provide by moving beyond one-and-done interactions to create continuous engagements with their customers. It is starting to become a primary competitive differentiator in the market and one that doesn’t have a lot of variation. Deploying AI chatbot technology will be able to strategically help banks improve customer experience and raise the level of support that agents provide.

Digital collaboration: Working around the Clock

The benefits of adopting digital channels and self-service tools are second to none. By implementing chatbots, fuelled by conversational AI, banks will be able to help serve a wide range of customer queries and ensure they are protected from fraud and scams.

Ryan Lester

Ryan Lester

Conversational AI is exactly what it sounds like: a computer programme that engages in a conversation with a human. When it comes to service delivery, conversational AI can be deployed across multiple channels to engage with customers in ways that effectively address evolving customer needs. At a time defined by COVID-19, self-service tools such a conversational chatbots can work around the clock to solve customer queries in a concise and timely way. Of course, self-service tools won’t completely replace human agents in the banking industry, but they will help companies re-distribute customer traffic and workflows in ways that enhance customer experience. Self-service tools fuelled by conversational AI can also improve employee experience because service employees can handle fewer, but higher-level service tasks that chatbots might escalate to them.

Adopting new tools to help facilitate consistent and concise answers and help maintain customer experience is on the forefront of many industry minds. Banks such as the Natwest Group have seen this first-hand and are testament to the benefits that a good digital experience can provide. Simon Johnson, Capability Consultant, Digital at NatWest Group highlights NatWest’s use of digital tools during lockdown, “Over the last few months, we’ve learnt how to use digital tools to help our employees remotely. From a banking perspective, there have been a lot of changes including base rates, waive fees and the best ways of contacting our vulnerable customers, ensuring we keep them protected from frauds and scams.

“By introducing our Bold360 chatbot interface, Ella, we’ve been able to get relevant information out quickly, apply the best practice and ensure that our customer journeys are being developed correctly. Due to the volume of questions, some of our customers were finding themselves waiting longer than usual. So digital channels become essential to helping reduce the wait time. Using Bold360, we were able to mitigate issues and answer questions in a more timely way through our chatbot.

“Moving forward, as we open more digital services, we are analysing our data to see if customer will return back to their usual way of banking, now that they’ve seen what a good digital experience can provide. Either way, with Ella, we are ready.”

Chatbots and Humans: The Best Option for Customer Service

Over the last year, banking institutions have recognised the power that digital collaboration can have to their success. Delivering exceptional customer service and support is key for any business wanting to stay competitive in today’s market and banks are especially challenged with precariously balancing customer needs with the cost of personalised support. Leveraging the right technology, such as AI-powered chatbots, will enable the banking industry to provide better support and a more robust customer experience in the long term. Other institutions must follow suit, or risk becoming obsolete.

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A sleeping digital giant wakes? 4 key trends accelerating payments transformation in the US

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A sleeping digital giant wakes? 4 key trends accelerating payments transformation in the US 3

By Lauren Jones, International Payments Ambassador, Icon Solutions

The US payments industry is undoubtedly ripe for change. Before the unprecedented shock of COVID-19, digitization and payments transformation initiatives had been organic, piecemeal and predominately the preserve of the largest banks.

Now, increasing pressure means that financial institutions of all sizes are working to define a digital strategy to unlock new opportunities, drive business value, and stay competitive. But beyond the immediate impact of COVID, what underlying trends are accelerating digitization in the US?

  1. Real-time payments – the stimulus for change  

Real-time payments have been met with a degree of caution by US financial institutions. Risking traditional profit generators in return for potential revenues down the line is a gamble many have not been willing to take. But immediate payments are coming to the US whether banks like it or not.

Major payments infrastructure providers, including NACHA and The Clearing House (TCH), have moved to encourage immediate payment adoption in recent years. But the Fed, frustrated with a slow rate of progress, has announced that it is pressing ahead with the implementation of its FedNow system (despite significant industry objection). Although the Fed’s true intentions are open to interpretation and this may just be a play to accelerate private initiatives, it is a clear signal that they mean business.

This means holdouts risk their own ‘Kodak’ moment if they miss the huge opportunities in front of them by fixating on traditional revenue streams. Banks are in a position to support innovation across entire industries such as healthcare, which could be released from the constraints of paper-based bureaucracy and slow, expensive transactions.

Another opportunity that can be unlocked via instant payments is ISO 20022 (used in the TCH RTP system). It is the future of payments messaging standards and can greatly enhance various payments processes through increased data-carrying capabilities. More importantly given the current climate, citizens reliant on federal or state support can benefit from RTPs combined with additional data to immediately access emergency funds.

  1. The kids are growing up

The US is getting older. Consumers who were 10 when the iPhone first launched are now 23. This means we are seeing a ramp-up of digitally native Gen Z consumers (roughly those born between 1995 and 2010) accessing banking services.

Demographics are an inexact science and not perfect predictors (there are technophobe college students and 100-year-old Instagram influencers), but we can detect noticeable trends.

Younger customers don’t usually choose a bank because there is an ATM in their neighbourhood, a slightly better interest rate or an advert in the newspaper. Rather, a strong digital presence, personalised tools, rewards and experiences, and the trusted recommendations of friends and family, will have a more significant impact on customer acquisition.

Banks must look at the effect this will have on their longer-term digitalization strategy and be able to segment what this emerging customer base might want and how they will interact in years to come.

  1. Checkmate? Evolving corporate requirements

    Lauren Jones

    Lauren Jones

Corporate treasurers are people and their experience of seamless, immediate payments in their personal lives shapes expectations in the workplace. Although check usage for business-to-business (B2B) transactions is still the norm in the US and barriers remain, corporates are increasingly demanding the ability to transact in a real-time, omnichannel environment, 24×7.

The benefits are clear. Corporate treasurers stand to enjoy enhanced liquidity management and transparency, greater control over payments and enhanced data for reconciliation purposes. And for consumers, alternative digital payment options such as buy now pay later promote choice and flexibility.

  1. Increasing competition

A significant consequence of emerging consumer and business demand for digital offerings is the increase in competition from fintechs, technology giants and other third-parties. Traditionally, incumbent banks have enjoyed the advantage of consumer trust to offset more limited innovation. But as consumers become more comfortable entrusting their financial transactions to non-banks, banks must differentiate and digitize to remain competitive.

Data is where the technology giants excel, and their ability to personalise experiences and emotionally connect with their users is unprecedented. Banks need to learn from the positive aspects of this model to better understand their users and deliver meaningful, useful products and services.

For data to become the cornerstone of a banks’ customer relationship and take services to the next level, breaking the channel silos and extracting value from a comprehensive dataset will be decisive. But with only 18% of banks reporting that they are in the process of shifting from a transactional revenue model to a data-driven revenue model, this work has some way to go.

Taking customer propositions to the next level

Customers now expect services that work for them, not their banks. All banks, no matter the footprint, need to move quickly to offer a broad digital service platform that adds value to both the customer and the bank.

By defining a robust payments transformation strategy, banks of all sizes can remain fiercely competitive by rapidly lowering costs, unlocking revenues and promoting innovation

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