Achieving Success In Retail Banking With Analytics

Analytics could help retail banking get past some of its current challenges


A succession of revelations about ‘dodgy’ practises in the banking industry - Libor, PPI, FOREX, HSBC’s dubious tax schemes - have proven to many people what they thought they already knew about banks: They are not to be trusted.

This loss of faith comes at a particularly bad times for banks, with the rise in FinTech giving customers a range of alternatives. According to global consultancy McKinsey & Co., retail banks could see as much as 60% of their profits disappear to FinTech firms over the next decade. Major players such as Google and Apple are making a land grab into the payments sector, with banks set to lose as much as 35% of market share to the tech giants. Crowdsourcing is also providing firms with a root to funding outside bank loans, while a number of online-only banks are beginning to make waves. According to a recent Accenture report, 17% of millennials who switched banks did so to online-only models, while 31% of consumers aged 35-39 did the same.

According to António Horta Osório, CEO of Lloyds Banking Group, in order for banks to regain trust, they need to focus their efforts, and they have to really start putting customers first: ‘Companies need to have a purpose and not do everything for everyone. At Lloyds we concentrated scarce resources in the UK as we thought it was where Lloyds would be most successful and because I felt we had a debt to the UK public.’

Engaging customers in any industry has never been harder. In today’s complaints-driven economy, fuelled by social media and online review sites, the balance of power has shifted to consumers. People are also now handing over more data than ever, and they expect a more personalized experience as a trade-off for doing so.

For banks to retain their customers’ business, they have to improve relationships with them across face-to-face and digital touch points. To do so, they need to embrace data. Retail banks can now draw on information from all stages of the customer journey. From this, they can leverage the necessary insights to provide a personalized consumer experience consumers now demand.

Solid analytic frameworks around customer satisfaction and call center activity can pinpoint areas where upstream and downstream processes linked to specific customers need tightening. Banks are able to make unique, timely, and relevant offers based on available customer insight, instead of just offering what they themselves would like to sell. This both cuts costs and lowers the risk of customer dissatisfaction. If done correctly, customer analytics can also be done in real-time, so tailored product and services can be offered over the phone, or even at the cashier.

There are a number of different areas banks can apply analytics in order to drive customer satisfaction, particularly social media analysis and sentiment analysis. These are useful in that they can help get a sense of how effective sales and marketing are being with their campaigns.

Banks also face a challenge of moving people to digital channels. Banks need to analyze this migration for engagement and shifts in channel to monitor customer satisfaction, and keep an eye out for re-pricing opportunities.

It is not just customer retention where analytics can drive a retail bank’s success. Predictive analytics models like the FICO scoring system can analyze consumers’ credit history, loan or credit applications, and other data to assess whether the consumer will make their payments on time in the future. Not only does this save money on hiring staff to analyze the data, it invariably provides a more accurate and thorough picture.

In the face of digitalization, banks must undergo a top-to-bottom reinvention to survive, or risk being left behind. To do this, they need a holistic reinvention, and this must be data led to keep up. There is good news for banks though. According to the Accenture report, customers in North America overwhelmingly trust their banks to securely manage their personal data over other industries. This is an advantage they need to exploit - and exploit ethically, without breaking regulations.  

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