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Data holds the Key to Empathetic Banking

Banks must leverage modern technologies to gain a singular view of their customers and support their needs and aspirations, writes Rivo Uibo, co-founder and CBO at Modularbank.

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Rivo Uibo/Modularbank

With the global pandemic still raging and the financial implications of this becoming more apparent each day, banks are in a position where they will be expected to provide an unprecedented amount of support to customers who are experiencing varying degrees of financial distress.

What this calls for is a personalised approach; financial advice, products and services which are tailored specifically to the circumstances of each individual customer. With a reduction in branch services and a significant shift towards digital channels, many banks are increasingly turning to internal and external data as a way to understand and cater to their customers. As with much of the transformation currently occurring within the banking sector, this is a trend that has been developing over time but has been accelerated by the explosion in digital adoption caused by the global pandemic.

The effective utilisation of existing data in banking to create value for customers has been seen as a key target for those in the banking sector for a number of years now, yet, there are still only a few players in the industry who manage to really get it right.

What separates the leaders from the laggards is not the access to data; it is the ability to effectively analyse and extrapolate it. This need not be the case, as with modern banking technology, data analysis can now be automated and carried out in real-time, and as demands for personalised services grow, these capabilities will become vital to maintaining a competitive edge.

Apathetic Banking vs Empathetic Banking

In a recent report on empathy in banking, Accenture has found those with strong capabilities for understanding and responding appropriately to the emotional state of their customers have been able to outperform their peers.

Whilst much of the emphasis on empathetic banking is centred around the customer relationship strategy, it also holds particular relevance to the product strategy; when banks approach a customer with a product that is not applicable to their personal circumstances (e.g. income, credit rating, assets), it shows to the customer that their bank does not have a clear understanding of who they are and what they need- apathetic banking.

Many banks are now fretting over the reduction of in-branch services, with just 3 in 10 banking executives surveyed by Accenture feeling they are able to sense their customers’ emotional outlook about their financial situation without asking them directly.

This is despite the fact that there is an astounding amount of rich data available to banks, which should, theoretically, allow them to plug this information gap.

What this reveals is a clear disconnect; banks have access to an extraordinary amount of rich data (e.g. market data, financial transaction details, product usage and behaviour), they have the opportunity to convert this into the development of personalised, relevant financial products for their customers, yet, many of them still fall short of being able to orchestrate this information into an individualised approach.

Creating a 720° View

Until now, many banks have relied on broad swathes of data when coordinating their product strategy.

The tendency has been to perceive a problem based on this broad perspective and to create financial products aimed at tackling this perception. Whilst this approach may yield some results, it is simply not refined enough to deliver real value to their target audience—just because people are living in a certain area, or belong to a certain age demographic, does not necessarily mean their financial situations are aligned.

Banks must adopt a more customer-centric mindset, utilising rich data to truly understand the needs and aspirations of their customers not as a bloc, but as individuals, and then offering personalised financial products and services based on this information.

A 360° view of the customer is often considered the holy grail, yet, with the availability of a wide range of both internal and external data, a 720° view can be achieved.

With traditional banking technology, customer data is siloed within different business operations. Suddenly, banks have multiple views of the customer; their lending profile, their accounts profile, etc. But which, if any, of these views is correct? Without the ability to coordinate these views, there is no way to truly understand the customer and generate actionable insights through analytics.

An example of a business that has been able to do this exceptionally well is Banco Bilbao Vizcaya Argentaria (BBVA), one of the earliest adopters of a customer-centric product strategy built around the effective use of data.

Combining the use of data with advanced machine learning techniques has allowed BBVA to personalise user experience, scale-up services and create relevance for users, as well as improve their efficiency and enhance their decision-making.

The Power of a Modern Platform

As is the case with so many trends in modern banking, those who are struggling to draw value from their enormous amounts of data find themselves in this position due to the limitations of their legacy systems.

With a modern core banking platform, the enormous amounts of data banks hold can be orchestrated into a singular view of the customer, revealing their needs and aspirations and allowing for a customised, empathetic approach.

In the context of the current financial crisis, banks can draw upon information highlighting those disproportionately affected by ongoing business closures, such as those in the hospitality and tourism sectors. This data can be utilised as an input stream that will allow banks to offer the targeted financial support that is so desperately needed by consumers and businesses today.  

Put simply, banks cannot deliver this personalised approach without the ability to draw data from several sources onto a singular platform to be analysed in real-time. Legacy software is simply not capable of this, it can only be carried out on a modern banking platform, underpinning the urgency with which banks must tackle their digital transformation.

Questions around how to make most of data in banking are not new, but they have never been more relevant than it is today. Those who can convert this data into improved products and services for their customers, particularly at a time of crisis, will find themselves able to improve customer loyalty, build engagement and generate new revenues.

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