Leveraging Analytics: What information could better your bank?
Analytics and “Big Data” are two of business’s favorite buzzwords, and for good reason. In recent years, analytics — and technology to perform analytics — have transformed and reshaped many industries.
by Kylee Wooten, Sageworks
Sometimes, the distinction between analysis and analytics can be blurred. Analysis focuses on understanding what has happened, while analytics concentrates on why something happened, as well as what will happen next. Analytics discerns patterns in data and helps forecast what may happen in the future based off of that data.
The lack of and limited access to bank-wide data, in addition to the time-consuming nature of traditional analysis, can hurt leadership’s ability to make well-informed, timely decisions. The banking environment changes frequently, with new regulations and laws constantly impacting this critical environment. Technology has already helped to navigate many of the time-consuming and turbulent areas in banking. However, community banks and credit unions are just starting to scratch the surface in using insights and analytics to help improve customer experience, identify new cross-sale and needs-based opportunities, mitigate risk and drive strategy.
Understand your customers, market the right products
Analytics has a vast array of benefits, but it’s been an especially helpful tool for industries that must market themselves to customers. Whether an institution is prioritizing cross-sales, customer or member acquisition, or customer retention, analytics is an essential tool for segmenting your audience and customer base. For example, millennial customers typically have vastly different needs from their bank, like mobile banking and fewer fees, than their baby boomer counterparts. Analytics aggregates customer data and provides an in-depth, holistic picture of each customer. Lenders will be able to quickly determine which segments are the most appropriate to target for different products and services, enhancing your bank’s relationship with its customers and ultimately increasing revenue.
Increase cross-sale opportunities
“Would you like fries with that?” is probably the best-known example of cross-selling. Restaurants have figured out that by asking customers if they would like to add on an additional menu item — or better yet, bundle menu items for a lower cost — they are more likely to boost sales. If you’ve ever shopped on Amazon, you’ve probably seen the “customers who bought this item also bought” section. The e-commerce giant’s cross-selling efforts reportedly have increased their revenue by 35 percent. For cross-selling, it’s important to know which products and services pair well together. By compiling data and gathering insights on your services, you can determine where to focus your marketing efforts and which segments to target those marketing campaigns. Analytics allows an institution to be more intentional about the way it goes about marketing, and therefore, be more effective.
Protect customers against bank fraud
Customers are very loyal to their banks, and they instill a lot of trust in their institutions, which is why safeguarding customers’ information is critical for financial institutions. To avoid losing customers, as well as the financial implications, detecting and preventing cases of fraud is an important consideration for any financial institution. Broadly speaking, most fraud cases can be broken down into two categories: card fraud, like identity theft, and deposit fraud, like check fraud. “These frauds are low-value and high volume in nature,” the Everest Group points out. “So they present an excellent opportunity for analytics to identify patterns and recommend preventative action.” Techniques used to determine fraud require recognizing patterns of people, places, systems and events. Implementing analytical and insight technologies can help to automate these findings, thus greatly increasing the speed and effectiveness of monitoring fraud.
Drive bank strategy and revenue
At its core, analytics makes data digestible and informative. Financial institutions serve a variety of different customers, in different locations, with different needs. Gaining a greater holistic picture of who your customers are will not only allow an institution to target products and services more accurately, but it can also help to determine the overall business strategy of the institution. In a Forbes report, The Rise of the New Marketing Organization, it was noted that data-driven marketing must be an enterprise-wide effort. Like any new technology implementation, the use of analytics is not nearly as impactful if the entire organization isn’t on board. The use of analytics and insights helps bank executives to narrow down what the goals of the organization should be, as well as communicate and illustrate those goals clearly.
Get started with analytics
Implementing new technology can seem daunting. With so much available, how do you know where to start? For community banks and credit unions with fewer resources and less money to spend on new technology, it’s important to note that there are plenty of ways to start small and still reap big benefits. For example, customer relationship management (CRM) systems can touch most of the things on this list.
CRMs aggregate all customer data into a 360-degree view of each customer. CRM systems take the guesswork out of managing your customer relationships and help avoid the challenge of keeping track of email logs, calendar invitations and spreadsheets. Relationship managers help direct customer and potential-customer relationships down the pipeline by logging activities and opportunities to track progress, identifying potential cross-sale opportunities, and sending out notifications when specific activities are due. Not only is this useful for customer relationships and cross-sales, but it’s also a critical feature for bank management. Relationship management systems provide up-to-date data on the daily activities performed by the lending staff, as well as a clear picture of where each customer is throughout the pipeline. When it comes to the overall goals of the branch, CRMs provide fantastic data on the probability of closing and close dates to help manage expectations.
It’s important to recognize the wealth of data your institution brings in every single day with each application, transaction, deposit and more. Analytics is not just another fancy buzzword — it’s changing the future of banking.