Banking Disrupted: How Analytics is Transforming How Banks Traditionally do Business
According to a recent PricewaterhouseCoopers industry overview report, Retail Banking 2020: Evolution or Revolution, over half of senior retail banking executives believe non-traditional financial service providers are a threat to traditional banks. And, nearly all executives (90%) are in agreement that there are six key priorities for digital transformation success in 2020:
- Put Customers First
- Transform Traditional Branch-Based to Digital Banking
- Simplify Business and Operating Models
- Harness the Power of Big Data
- Proactively Manage Risk, Regulation and Capital Expenditures
Startling as it may seem, in spite of these trends, only 20% of the respondents feel as if they are prepared. These sobering facts underscore the adverse reality that many banks are falling behind on opportunities for growth. They have yet to capitalize on the power of new know how, especially analytics.
In our hyper-connected world, most banks have realized the importance of having a digital plan as part of their core strategy. And today, most retail banks have in place a certain degree ofmobile strategy to enhance the customer experience. Overall, these apps provide customers with a positive, user-friendly experience, resulting in large user adoption.
These banking apps have also enabled many banks to reduce operational costs — essentially replacing the need for customers to use the branch bank for simple transactions that were once handled by a bank teller. However, this technology enhancement has not helped banks drive top line growth, as they have yet to realize that the potential for mobile banking extends beyond a cost optimization and customer experience.
In the traditional model of doing business, banks could genuinely connect with their customers and create customer value by cross-selling and upselling new products. Except this way of doing business is a practice from the days past.
Consequently, now is the time for banks to think integrating their mobile strategy with analytics. What does this mean? Quite simply if banks were to start applying the power of analytics to their mobile banking through customer segmentation, profiling, and analyzing transaction patterns, these banks would gain actionable, real-time customer insights. And with these insights, banks could improve their bottom line and increase customer engagement by offering customized products for individual customers as that customer is doing a transaction digitally. With the right set of analytics solutions, banks can even know what their customers need before they do. That’s the core essence of digital transformation: predictive analytics.
Let’s look at the retail industry, which overall, has been savvy users and early adopters of big data and analytics to predict customer trends, understand sentiment, create customized offers, optimize pricing and increase customer engagement both online and in stores. For example, Walmart is one of the first pioneers of analytics, successfully identifying customer preferences on a regional basis and leveraging customized push notifications to bolster sales while increasing their customer engagement both in-stores and digitally. Another key example is Nordstrom, which has successfully used analytics to create superior customer engagement both online and in their stores by customizing the experience for each individual. Additionally, with the power of analytics, they enable their customers to see in real-time on their mobile devices where a product is located and when they can expect to receive it.
The time is NOW for banks to start thinking — how can they can build their capability to create real-time, targeted offers through the digital channels that their customers are using? This can be only done if banks gain insights from social and mobile engagement with their customers. And here, analytics is the key to success for customer segmentation, campaign, cross-sell and upsell.