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Inform Your Financial Services Strategy with Customer Data

February 28, 2020 by Joan Clark

Using real customer data to make informed strategic decisions is an intelligent business tactic. According to an article in Harvard Business Review, however, only 11% of customer-impacting decisions are backed with data insights, a fact which suggests that the majority of decisions are based on guesswork or, at best, intuition. Financial Institutions (FIs) that focus their efforts on understanding their customers with a data mindset develop better products and services, deepen customer relationships and, subsequently, will realize stronger growth and performance than competitors.

Only 11% of customer-impacting decisions are backed with data insights.

– Harvard Business Review

In aggregate, payment and transaction data defines the unique financial narrative of each customer, providing a wealth of insights about the financial services most needed. FIs that connect the dots between these insights and the development of financial services and products addressing customer needs will win the trust of their customers.

The use cases below illustrate scenarios of how financial institutions can leverage customer data insights to inform their financial services strategies.

Effective financial wellness initiatives address customers’ financial status, behaviors, and attitudes

In 2017, the Stress in America™ Survey revealed that 62% of Americans reported money was a “significant source of stress in their lives”, a statistic indicating that a high percentage of consumers may consider themselves financially unwell. An assessment of “financial wellness” may be unique to each one of us, but can be influenced by a combination of factors including one’s overall satisfaction with their current financial situation, their attitudes, and knowledge of finances, and demonstrated financial behaviors.

Financial wellness programs are more than retirement preparedness, credit repair or debt management. True financial wellness initiatives are broad and deep focusing on the mission to change lives, improve attitudes, affect behaviors and increase knowledge. To develop programs that have the capability to impact lives, financial institutions need to truly understand the current state of their customers’ financial status and their emerging realities. This includes more than just the products they have with the institution, but the products they have with other financial institutions, and their spending patterns for life’s necessities and their discretionary spend. With a deep understanding of their customers and an awareness of their future needs, institutions can deliver financial wellness services and recommendations based on each customer’s unique life stage and financial situation.

In order to understand each individual situation, financial institutions need access to a wealth of data from the transactions and payments customers process on a daily basis. Those transactions and payments define a customer’s priorities and tell each customer’s unique financial story - the held-away products they have with competing institutions, their preferred merchants, and the services they elect to purchase. With the right tools and technology, transactional data can be used by a financial institution to assess its customers’ financial wellness, life stage, and priorities.

Financial institutions should use the customer data they have at hand to develop holistic financial wellness programs including budgeting tools, debt consolidation options, financial education, retirement planning, and more. And once implemented, the success of these programs can be measured through CRM and product team customer touchpoints in a continuous data collection effort.

Stay constantly informed of trending financial technology trends adopted by customers

We’re in an era of abundant information. As portrayed in KPMG's exploration of the multi-dimensional customer, consumers are in a near-constant state of connectivity, with devices playing a central role in their daily routines, and a growing prevalence of voice- and AI-powered assistants in our homes. It’s no wonder that consumers are becoming increasingly more reliant on these devices and technology to make their lives more convenient, especially their financial lives.

Technology doesn’t just make our lives easier, it enables financial institutions to help make our lives easier, and in doing so build stronger connections and longer-lasting relationships. With this opportunity, however, comes the need for institutions to dramatically step up their data and analytics capability to better understand and address consumers’ needs and willingness to embrace new technology.

Technology doesn’t just make our lives easier, it enables financial institutions to help make our lives easier, and in doing so build stronger connections and longer-lasting relationships.

Financial institutions need to stay in-tune with financial technology trends, specifically those trends adopted by their customers. Take, digital peer to peer payments (P2P), for example, which are increasingly becoming the new social norm. With many everyday use cases including splitting the rent, sharing the dinner bill, sending birthday gifts and splitting vacation costs, P2P is here to stay. P2P payments represented $309 billion in payments and are expected to rise to nearly $400 billion by the end of 2020. These payments pose a threat to both fee income and customer loyalty for a financial institution. To offer the type of products and services that customers demand, FIs need to stay informed of their customers’ P2P activity and their preferred P2P tools. By leveraging this data, FIs can provide like-services that will better meet the needs of their customers and adapt to the customer’s shifting transactional demands.

Deposit displacement: an opportunity not a threat

Today, the banking industry is experiencing enhanced competition and disruption from neo-banks and other FinTech providers. Digital technology is intensifying the competition and revolutionizing the way consumers think about and conduct their banking.

With the advent of the smartphone and the overabundance of apps that consumers use to manage their lives, the displacement of deposit funds is on the rise. Consumers are continually pursuing ways to make it easier to handle their finances - from peer to peer payments such as Venmo; merchant apps such as Starbucks; and savings tools such as Acorns. Funds traditionally held in deposit accounts are now often diverted to the cloud for ease of access with the swipe of a finger.

Financial institutions should shift their perspective of these Fintech disruptors. Instead of classifying them as competitors, institutions should acknowledge the convenience these tools bring to consumers and identify how to maximize the institution’s role as the center of money movement technology and data. Financial institutions should provide digital banking tools and services that match consumer expectations for personalization and customer experience.

Partner to develop institution-wide, data-informed strategies

Solutions that provide the level of customer insights identified here are virtually nonexistent. Segmint’s proprietary technology, extensive analytics toolkit, and expert team of advanced-degreed library scientists accomplish this mission with speed and accuracy. Segmint’s analytics platform cleanses and categorizes billions of inconsistently labeled transactions to produce actionable and usable insights, made available to FIs via intuitive visualizations within the Segmint platform or through data services APIs for ease of integration with an institution’s existing toolset. Segmint is the market leader in providing FIs with opportunities to analyze data, develop data-informed service strategies, and create personalized interactions.

For more discussion on applicable use cases for this data throughout the institution, check out subsequent articles of the following topics:

  • Evolve your product to meet your customers’ financial needs
  • Recapture business from your competitors

Stay Tuned! Subsequent articles will discuss the use of data across the institution through a range of topics:

  • Evolving your product to meet your customers’ financial needs
  • Recapture business from your competitors

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