The first quarter of the fiscal year is the time that banking industry analysts provide clients with their vision on the key challenges and solutions in banking for 2012. TowerGroup’s Nicole Sturgill recently wrote that “understanding consumer use of the financial institution’s delivery channels is a critical element” for institutions going forward. She also said that the way for banks to raise their trust factor was by “helping customers succeed.”
Banking executives are also talking about their prescriptions for future success. Richard K. Davis, Chief Executive Officer of US Bancorp, told an audience at the recent American Banker Best Practices in Retail Financial Services Symposium that in retail and small business banking “it’s all about execution” and banks must “pivot to win.” He also listed three actions that banks need to take to be successful in the current slow economic and increased regulatory environment:
- Take costs out
- Adjust business models
- Reprice and innovate
The theme of pivot to win is very timely for retail banking, and it is not just because it is basketball season here in the US. When you pivot, you are facing a different direction than before. For banking, that is an excellent analogy for how institutions should be planning to face their customers. Most banks today plan to face their customers primarily in the branch. Banks will face many of tomorrow’s customers, like the Millennial Generation, in a direction that will be almost exclusively online, mobile and social. How will banks understand their customers, help them succeed in their financial lives, and execute flawlessly for their “unseen guests” while attempting to grow revenues, reprice and take costs out?
Customer data overload
There are two answers to this question. The first is about understanding customers. Having the deepest customer insight possible, including channel preferences, likes and dislikes, propensities for products and services, and unmet needs are all available to banking institutions through their own data from transactions, interactions, product usage, online banking behavior, CRM systems and more. Combine that with social media data - especially from Millennials who are living their lives socially and making important life decisions based on recommendations from their social network - and you have a treasure trove of data … but it is Big Data.
And this is where the second answer comes in, which as Richard Davis highlighted, is innovation. Innovation is about mining all of the Big Data to achieve perfect foresight on how institutions will interact with customers in the future, moving away from what customers view as “offer overload” to achieving a level of customer experience excellence that can only be obtained when customers see the perfect offer or communication at exactly the time when they want and need it.
How can banks achieve this state of customer perfection from the terabytes, petabytes and exabytes of Big Data? The answer is analytical innovation. The most innovative banking institutions have long used predictive analytics to gain more customer insight. However, achieving the level of analytical insight needed for customer perfection requires a different paradigm.
This new paradigm is about visualizing and analyzing all of the big data to reveal those previously unseen patterns, sentiments and relationships that can mean the difference between delight and deluge to customers. It’s about speed, because speed of execution can mean the difference between revenue addition or attrition. It is about precision, because precisely delivering the most relevant offer that is also the most optimal (the best) offer across segments, products and channels given constraints like cost or contact policies can mean the difference between profits and losses. And, it is about delivering customer experience excellence that will make “unseen guest” customers go beyond “like” to solid recommendations to their network instead of closing accounts.
Banks can move up to the next level of analytical innovation now. With the slow recovery and dramatically increased regulatory costs, revenue growth must be on every institution’s agenda. The institutions that can pivot fast, and score first, will win against competitors both within and outside the banking industry. If you would like to explore how your institution can pivot fast using analytical innovation, check out Banking on Analytics or comment below.