Can data make banking personal again?

Every individual and every business is unique. It’s high time banks started treating them as such. We’ve put together this article to show how this is finally possible.

Once upon a time, banking was all about trust and personal relationships. The only way to do banking for the average customer – let’s call her Sarah – was for her to walk into her local branch. There, she’d be greeted by name by the bank manager. He knew how well her business was doing, or if she needed a little extra help with financial planning, and knew what loan, pension, or savings account she needed.

Then all that changed.

Today, Sarah might move from her hometown to go to university, then land a job with a large multinational. She’ll spend a couple of years in London, then relocate to Paris, and then get sent to Singapore to open a new office. No single bank manager in any of those places could possibly keep up. What’s more, with the proliferation of online, telephone and app-based banking channels, she no longer physically goes into the bank branch anyway.

How can banks provide a personalised service to customers if there’s no longer any personal interaction?

People aren’t numbers. But numbers can help

As life has become more complex, people need financial products and services that cater to their specific requirements more than ever. But they’re not getting them.

Survey after survey shows that customers, on the whole, are pretty unsatisfied by their banks. In the U,K for example, government research showed that anything from a quarter to half of customers at the major high street banks wouldn’t recommend them to their friends.

Meanwhile, as many as 50% of viable loan requests by small businesses are getting rejected, usually because their banks are relying upon outdated forms to measure their creditworthiness, instead of looking at their actual performance.

Across all the key touchpoints in their customer journey, people are facing hurdles that they have to overcome just to access the financial services they need in order to get on with living their lives.

Fortunately, there’s a solution, and it comes in ones and zeroes.

Every single day, people generate a combined 2.5 quintillion bytes of data. And this information can – and is – being used in innovative ways by companies to give their customers the right individual experience through the right channel, at the right time.

Netflix and Spotify feed our viewing and listening data into their algorithms to work out what movies or songs we’ll like. Amazon gives us recommendations for products we might like to buy based on what we’ve bought in the past. Google, Facebook and even your local supermarket use your behaviour to personalise ads and offers to make sure you get exactly what you need – even if you don’t know what it is you’re looking for in the first place.

The data all of these companies hold on us is useful, but it pales into insignificance compared to what banks have. They’re legally obliged to collect know-your-customer (KYC) and other regulatory information on us, and they also know our spending patterns and our savings habits. Couple that with all of the publicly available information they can tap into, from credit ratings to business registration data, and the possibilities are almost endless.

Making data work for financial services 

Currently, banks organise their customers into segments based on certain characteristics. They know that, for example, customers aged between 30 and 40 might need a mortgage, or that those with a certain income level might be in the market for an investment account. This segmentation is limited because it lacks granularity. It relies on basic assumptions, and treats everyone in a segment as if they were completely identical. But we know that people are anything but, so their financial services shouldn’t be treating them as if they are.

Through advanced analytics of everything from customer demographics to products held, transaction data, mobile payments and credit card statements, banks have the power to define thousands of microsegments of customers. Artificial intelligence (AI) can uncover hidden similarities that could predict exactly what each one of these customers need, and instead of offering a small set of one-size-fits-all products that actually fit no-one, banks can use all the data they’re sitting on to provide a truly personalised service, tailoring terms, rates, and pricing to meet individual requirements.

This would make banking work the way it’s supposed to, and bring back the personal touch in this impersonal world.

It’s not just customers who would benefit from this, either. According to BCG estimates, for every US$100bn in assets that a bank has, it can achieve as much as US$300mn in revenue growth by personalising its customer interactions. It’s a win-win. So why aren’t banks doing this?

Breaking down the silos

Essentially, banks just aren’t set up to leverage data properly. Their internal systems are a tangle of fragmented parts that just don’t talk to each other, and as a result, the data ends up sitting, untouched, in silos.

Banks have it harder than many other industries, too – they’re among the most tightly-regulated sectors on earth. Compliance concerns, plus laws like Europe’s GDPR and the California Consumer Privacy Act of 2018, mean they have to take enormous care in how they use our data.

Within these protective boundaries, though, banks have a real opportunity to take full advantage of their data, and we can help them do it. By getting all parts of their systems to talk to each other via APIs, we can enable them to create a data lake that can be analysed to pull out trends.

This doesn’t mean tearing everything down and rebuilding from scratch – the Tuum system means banks can get started today.

Tuum is a full core-banking suite made up of flexible and independent modules covering end-to-end everyday banking processes. Every module is built to comply with international banking regulations, right out of the box, and they connect together through APIs, so all of the data is in one place, ready to be harnessed for the greater good.

The tools are there to make banking personal again. All banks need to do is implement them.

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