Big Data: what's in it for the consumer?

When talking to banks and financial services organisations about Big Data, the question on every executive’s lips is ‘how is this going to help us?’ Banks want to know how data can help them earn more, spend less, identify fraud, and design better processes, writes Jon M. Deutsch

When talking to banks and financial services organisations about Big Data, the question on every executive’s lips is ‘how is this going to help us?’ Banks want to know how data can help them earn more, spend less, identify fraud, and design better processes, writes Jon Deutsch

Whilst these are all admirable goals, where is the customer in all this? As customers grow increasingly aware of the value of their personal information, they will begin to demand more for it.

Trust in financial services organisations has taken a battering over the last few years. Rocked by miss-selling scandals and financial crisis, this has beencompounded by a media persona of feckless elitism. This reputation – alongside the rise in financial comparison services, new banking organisations and reduced obstacles to account switching-is chipping away at customer loyalty.

However, banking customers are still some of the most loyal around, with banking relationships on average lasting longer than mostmarriages. So why should banks care?

Younger demographics (a.k.a. your future customers) are particularly pessimistic and cynical about the motives of banks and their financial products. This mistrust, whether from millenials, the middle aged or pensioners, reduces the impact and value of banks’ communications and advice. It’s no use using Big Data to analyse and segment customers for marketing, if all your talk is ultimately met with weary scepticism. Banks need to care. Because nothing defeats the upsell – or erodes customer loyalty – faster than cynicism.

So how do banks go about scraping away the scepticism, restoring their reputation and instilling trust?They need to show theconsumer they are on their side. The caricature of selfish bankers can be undone through better understanding of the customer, better service and greater transparency. These goals are something that Big Data and analytics canplay a huge part in achieving.

A study from CEB tells us that satisfied consumers buy twice as many products from banks than those who are not (CEB Consumer Financial Monitor, Q3 2012). So, what satisfies a consumer? A good place to start is the consumer experience.

For many years, a great banking experience meant a great face-to-face interaction with a helpful banker. But with branch visits and transactions dropping up to 10% annually, that experience is more likely to take place on a web page or mobile app.

Effective use of Big Data will enable these digital experiences to become more than a substitute for in-branch transactions. By using freely available, open data sources, along with existing customer data, banks can make these tools invaluable to the end user. They could, for example, use geolocation to offer discounts for preferred products and services in the immediate area, or combine transaction history with inflationary information to offer investment guidance.

Banks are in a unique position. Many know more about their customers than their own families do. They know everything they’ve bought, earned, spent. They may know their savings goals and aspirations, and what their retirement will look like. There are few secrets kept from the bank.With this unique position, comes a unique duty. Banks that want to use customer data will need to make sure they are perfectly open about what they’re doing with that information, and how it benefits the customer.

By creating a two-way relationship, banks can secure a better understanding of their customers as well as building loyalty and trust. After a few years of reputational hara-kiri, banks need to position themselves on the side of consumers. Whilst banks may be using consumer data to market better or decrease fraud, they can use that same wealth of data to advise on the best time and day to buy flights, effect household budgets and spending strategies, or offer discounts.

Each generation is growing more cognisant of the fact thatpersonal information has value. With a greater number of companies offering free services in return for using data, consumers are increasingly aware of their own worth. The bar for more accurate, personalised and informative services is rising, as businesses seek to justify the information they harvest.

Personal financial management needs to become more than a pretty pie chart telling you where last month’s pay cheque disappeared to. Data and analytics present the opportunity for banks to become indispensible to daily life. Not just because they dole out the funds,but because they can provide smart, trusted advice that customers need and use every day. Retailers are stepping forward with this customer-centric view. Some are even venturing into the world of finance, but their data view is limited.

For now, banks have the data advantage.If they want to stay competitive, they have to learn how to use it.

Jon Deutsch is managing principal for banking, financial services and insurance at data and business intelligence specialist Information Builders