Why Banks Need to Radically Rethink Data
By Charlie Burgoyne & Dr. Meredith Butterfield
Over the last year, the global banking industry has been faced with profound changes that require immediate transformation. The COVID-19 pandemic has revealed deep flaws in the models used at every level of their operations. To adapt and thrive, banks need to better understand human behavior, adapt to evolving customer needs and expectations and radically rethink not only the products and experiences they offer but the very architecture their businesses are built upon. By now, we know enough to realize that any models that were effective eighteen months ago are unlikely to be effective eighteen months from now.
This comes down to the relationship between customers, products and experiences, which is fundamentally shifting. The signs were there long before the pandemic, and evolving consumer behaviors have dictated a set of new rules for modern commerce. From Gen Z to millennials, there is an entire population looking for novel solutions and experiences, for whom the concept of car ownership may be obsolete but are instead drawn to vehicle subscription models. They need new types of solutions and are increasingly finding them outside of traditional banking institutions with a new generation of agile financial services platforms and nimble digital providers. So how are we catering to this evolving class, continually understanding their journey and providing banking products that suit their needs? As a global industry, it is time to rethink assumptions and transform at the core.
The age of 800 credit scores, diversified investments and the 50-20-30 rule has come and gone. Instead, we need to cater to people from a variety of backgrounds and environments who want to capitalize on—and finance—new opportunities. First, you must establish a strong foundation of proactive, intelligent systems that guide the customer journey and talk to each other, taking behaviors expressed by your customers, providing solutions and interacting across mediums and platforms. Then, you need to make sure that you’re not just gathering data and storing it as static information. For example, if you are looking at a 19-year-old with no credit history, they have a lot more depth that should be uncovered and considered. Data should be intelligible: it tells us how decisions are made and contributes to a larger understanding of an evolving customer journey with fluid, ever-changing needs. Finally, once the overall architecture is designed and the roadmap for what can be achieved is outlined, you can put new tools in place to grow and support your development. What are the products, the new solutions, the new experiences you can create?
To get there, banks need to rethink the way they view their customers—from objects and bits of information that rarely get updated, to living, breathing, distinct individuals making unique decisions. These models should be persona-specific, where each person is a collection of journeys and experiences: complex, dynamic` but never static. The biggest mistake we continue to see is banks using data as information, without truly applying it to understand people. This stems from an underlying architecture built more than 15-20 years ago, with the initial goal of storing as much data as possible. We need to shift to a more in-depth methodology that revolves around complex intelligence. It is not just about having data for the sake of data, it is about truly understanding people and therefore changing our very approach to data and the ways in which it is applied to better serve customers.
Now is the time for banks to pivot quickly with the customer at the center of their strategy and with new tools to understand their behavior and new solutions to serve their needs. This is the moment to experiment, to take risks and test the waters as we chart a plan and put a stronger foundation in place to sustain our growth. New technologies, new products and new relationships to data aggregation are going to be the fuel for the future.
Charlie Burgoyne is the founder and CEO of Valkyrie. Dr. Meredith Butterfield serves as Principal Scientist at Valkyrie.
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