The fight is real
While every traditional business understands the need to get closer to its customers to increase retention and maintain a competitive edge, finding methods to do it quickly and cheaply is difficult. Just having decades worth of valuable customer data stored away will not get businesses to where they want to be.
High street banks are increasingly facing more challenges in their efforts to be closer to their customers from start-up banks and Silicon Valley businesses. At the same time, customers’ expectations are changing, influenced by the quality of service they get from other industries such as telecoms and retail.
Banks are one of the most trusted sectors in regards to data security according to research by Accenture; this gives banks the bandwidth to use data more effectively. Using analytics and gaining a comprehensive view of changes in the market will allow banks capitalise on new trends, which in turn leads into customers. The digital communications industry is a trusted template for banks to follow when they embark on a journey to improve customer insight.
The market is witnessing the rapid growth of several disruptive non-traditional players who are more agile and can go-to-market faster with more relevant customer offers than their stodgy old rivals. Statistics do not lie, UK challenger bank Virgin Money saw its profits grow 37 percent in the first half of 2015 thanks to new customer acquisition on its savings and mortgage offerings. Simple Bank is having a similar impact in the United States. This means a higher rate of customer churn is reality for the big banks, leading to flat lining or decreasing growth.
The onset of new regional and local regulations can be seen by some banks as an inhibitor like what telecoms providers experienced in the 1990’s, but it should be also seen as an opportunity as well because new regulations around data management nudges enterprises to think about their own IT processes. Distracted by ever-increasing regulatory needs, established businesses are spending a lot of their time, talent and budget on compliance and keeping the lights on. This ultimately reduces the bandwidth of growing the business through the creation of innovative deals.
The squeeze on topline and profitability can no longer be business as usual for banks and digital communications businesses. An easy but poorly advised solution would be for businesses to offer cheap deals for customers because this does not help generate profit. Organizations must radically change the way they do business and this is where having contextual data helps. Product, account and marketing managers need to move from looking at a static picture of their customers to viewing their customers in full colour, moving HD-quality entities. To succeed, true customer insight needs data which is real-time, operationally actionable and predictive.
Learn from your rivals
Technology companies such as Google, Apple and more recently, Samsung, have a lot to teach traditional industries like banking and telecoms about gathering accurate customer insights. It is no surprise established banks and other financial services providers are in a rush to partner with technology companies. Unhindered by clunky heritage technology architectures, technology businesses have a wealth of consumer insight related to product preferences, customer shopping habits and spending patterns. It is only matter of time before they offer wider financial services such as mortgages, car loans and saving accounts to the masses and really testing the response of high street banks.
Businesses need to move as quickly as their customers because trust, earned through decades of operation, is the only thing keeping customers onside and soon that may not be enough. Achieving customer insight provides organizations with a clear map on what the next profitable step should be in addressing modern customer needs. The transparency provided by contextual data will give banks and digital communications businesses the option to fill gaps, improve efficiencies and ultimately make better pricing decisions. It will also help create customer-centric outcomes and improve the overall customer experience, something their new rivals focus on.
The current state of banking IT architecture and data usage is fragmented. Customer data is fragmented across multiple systems, channels, geographies and other dimensions. This results in scenarios where identifying, collating and consolidating data across specific customers is a challenge. Most banks have not been able to satisfactorily solve this problem despite years of investment. Even if the internal IT architecture remains fragmented and IT managers are too nervous to rewire legacy systems, there are solutions which can bring these siloed systems together and deliver true insight about individual customer experiences.
So, the big question for the boardroom and bank CIOs, who are in search for a quick solution, is where to invest as they seek to improve customer experience and profitability?
Technology delivers customer insight
Intellectual property, based on having decades’ worth of customer data locked in core systems, is the key competitive differentiator. By creating a middle layer which can collect data from all siloed customer databases, businesses will know more about their customers and can develop new products and pricing based on historic customer relationships, something the younger challengers do not have.
To deliver what customers want within budget and timeline, the best approach is to have technology which works with various vendor business systems and can pull, transfer and analyse historic customer data from them. Peripheral applications such as mobile payments are less of a concern as they are becoming commoditised due to the decrease of hardware and software costs.
Without a middle layer, product teams have no insight into customer behaviour and businesses will still remain behind their rivals. Managing customer data will be a waste of time as siloed systems would still be impenetrable for IT teams.
Another benefit in deploying middleware is separating form factor from logic, which means instead of the IT team wasting extra time on coding and adding layers per new device or payment service, the middleware facilitates new technology by connecting the wealth of customer data to the platforms where customers digest their account information.
New ways to pay and to bank
This connected world creates over 2.5 quintillion bytes of data every day by consumers using social media, eCommerce and mobile payments. This provides mountains of information which businesses should use when defining core customer segments and product offerings. In essence, enterprises have more information about customers than ever before right at their fingertips. The vital ingredient missing is aligning context to the data banks have. Google and Amazon are good examples to follow if they want to deliver new customer offers based on contextual information.
Smartwatches and now televisions are becoming new delivery channels of customer intelligence, which are derived from data held within the financial firms. Nationwide Building Society in the UK launched a smartwatch banking application which customers can access their account information based on voice-recognition technology. This modern touchpoint is popular and already has had more than 12 million hits from users. If banking technology architectures can flex to satisfy the demands of customers without adding extra pressure to core IT, it is likely to rejuvenate established banks who can profit from and not lose out to change.
Achieving customer insight is unavoidable because regulators are pushing for fairer customer deals and start-up banks are delivering new personalised offers quickly. Banks should view regulatory change as a real opportunity like the telecoms industry 20 years ago to get the house in order and don’t view regulation as a blocker to innovation. To fully understand the market and deliver accurate customer offerings, established organizations should utilise the data held in the silos by installing a middle layer, which makes the process of creating a holistic view of a customer efficient.
Giving context to data allows more customisation on customer offerings as businesses can define and target sub-groups of customers by where they are based, how long have they been a customer, how often they log on to their services and what time of day they use their credit card at. With this knowledge, the traditional businesses and customers can both profit from better savings rates, current accounts and mortgage repayments.