Transforming a bank’s capacity to model data will also transform its relationship with customers
Digital business is transforming the customer interaction. Consumers own their online presence, and they keep their data current. This presents a massive opportunity for banks who are able to master the digital model. However, they must develop a strategy now as competition from other banks and from financial technology firms will only continue to grow. Historically, targeting customers with products and validating their identity had been challenging and costly. A lack of data led to a broad-brush approach when approaching customers, for example, blanket mailshots offering prepaid credit cards and loans.
Shifting to the digital model requires a rethink of the bank technology stack. Using related databases which store data in a rigid structure is not enough. Now data of all sorts – graphics, recordings and text – in multiple formats, can be stored, searched and retrieved in much the same way that Google searches the internet. This has been facilitated through open source data platforms like Apache Hadoop, a storage and retrieval model developed in 2006 from a paper written by Google engineers in 2003.
By combining unstructured and structured data from multiple sources and across various channels, a more nuanced and accurate picture of customers can be developed. This can assist both in selling at the right point, for example cross-selling products where a specific life event is occurring, and complying with know-your-customer (KYC) regulations.
A challenge that firms will face in migrating to the digital model is the operational structure and processes that are intertwined with legacy technology. Where systems have been developed to support specific products, for example mortgages, customer data is siloed. By developing technology from the front office to the back, firms can capture customer data more effectively and develop a 360-degree view of their client, which allows them to interact in a more dynamic and targeted way.
Investing in the latest technologies to handle data can transform the bank and its relationship with customers. A system that can create a single picture of a customer, based upon globally available data, is massively advantageous. For example, knowing that your customer has applied for life insurance and announced the birth of a child could be the right time to show them how to best save for the future and hedge their risk.
Banks are facing heavy competition from the big online retailers and even social media providers, who both own and analyse data as a matter of course. In China, internet retail giant Alibaba has become the country’s largest distributor of mutual funds following a tie-up with an investment manager.
Many banks are employing chief digital officers in order to manage the process of change, often working with the chief information officer to facilitate transformational ways of working. New processes and technology, based on a more flexible approach to capturing and analysing data, will be key to success. However the real differentiator will be the ability to support the customer most effectively.