Googling “Banking Analytics” always seems to yield presentations featuring sober-suited men with dark framed glasses, looking searchingly out of corner office windows. Think corporate dashboard, think “from intelligence to insight”, or from “data to decision”. OK, at the heart of these spin encrusted offerings is sound advice: Businesses have the tools and techniques to track and optimise performance and with the advent of In-Memory computing they can now interrogate vast amounts of data in seconds.
Financial services have always been leading adopters of analytics and most banks have their own In-Memory programmes in full swing. But in mytime working with retail banks I’ve met few sober-suited window-gazers. This is a shame, as to realise the full value from In-Memory analytics banks need to stop focusing introspectively, running traditional reports at light speed etc., and consider
Real-time analytics as a revenue generating service.
Customer Analytics for Customers
Deloitte’s 2011 study Building Customer-Centric Business Models in Retail Banking, identifies priorities for banking. Amongst these are the familiar: shifting to a customer-centric operating model, consolidating customer data and developing business analytics. The report also highlights the pressure on retail banks to differentiate commodified offerings to reduce churn. Although the report does talk about micro-segmentation and personalisation, it doesn’t quite take the findings to their logical conclusion: analytics are retail banks’ new value-adding service.
In the UK we’ve seen Lloyds TSB provide customers with basic spend analytics. This gives visibility, but does this add value from a customer’s perspective? For me value equals either saving money, or making money.
I’ll love the bank that saves me cash
Let’s first consider the saving perspective: Banks are rolling in data. They know what, when and where I spend. They know what people like me like to spend on. They then have the potential sell/tell me:
When my spending patterns could potentially push me into my overdraft
When changes in external factors, such as base interest rates could push me into the red
Where I’m paying more than my peers in specific product areas, such as insurance.
To do this leading indicator monitoring banks will need to review swathes of data in real time and there’s only one way of cost effectively and that’s using In Memory data bases.
I’ll stay loyal to the bank that makes me cash
Similarly, In Memory could also be used to make customers money. Now that encourages loyalty. Here banks need to steal a tactic from another churn crazed, commoditised industry, mobile phones. Like banks mobile telco’s focussed on loss leader deals, but found that customers would not be tied into long term (i.e. profitable) relationships following the deal period. The smart telco’s used analytics to assure that, whatever the customer’s usage pattern, they would be automatically shifted on to the most profitable call plan.
There are several ways that banks could repurpose this model. At a basic level “desirable” customers could have fees and interest rates evaluated monthly to assure that the customer was getting the best deal, rather than best deals being reserved for new customers. From a more radical perspective banks could monitor rates and fees across competitors’ product types to assure that it’s “desirable” customers always got rates and fees in the top quartile, reducing churn reasons.
So, we can see that this approach ticks Deloitte’s requirements re. customer centricity, customer data consolidation, analysis and the need to differentiate, but there still are two fundamental questions to ask:
Will customers see sufficient value in proactive services to either pay a premium, or view this as a churn preventing USP? Perhaps some truths about spending deserve to remain grey areas? I know that benchmarking my spending in gym membership and wine purchasing may not be value adding messages that I’d like to hear.
Would assuring long term best buy rates help to reshape retail banking away from short term discounting towards model that offered better deals for customers and lower acquisition costs for banks?
Or perhaps this is just an idle window gazing topic for the sober suited? I hope not.