Data and customer experience

How data can revolutionise a bank’s interactions with their customers and give them a crucial edge against the competition.

‘The customer is king’ – we’ve all heard that saying. But how do you really know what the customer wants? You could ask them, but their answers aren’t always the best indication. What really gives us away is our actions, and this will form one of the key battlegrounds for big data over the next few years.

Technology can be disruptive to banks; it aids smaller competitors and makes the landscape harder to predict, but it also creates opportunities, most particularly in the realm of data. Research from consultancy firm McKinsey found that only 18% of banks were realising all the value from the industry. Whether it’s in their interactions with customers, or insights into their own business performance, data can work wonders.

McKinsey highlighted the following examples:

  • A bank used machine learning to identify which customers were thinking about leaving and so improved its customer retention figures.
  • Sales people at another bank were convinced their customer discounts were paying them back in higher value services. Data insight revealed a pattern of unnecessary discounts which could easily be corrected. Revenues rose by 8%.
  • An Asian bank used big data and machine learning to identify 15,000 microsegments within its customer base, which helped them dramatically increase the likelihood of their customers making a purchase.

These are just isolated examples, but by incorporating data and analytics into a business, a bank can reap powerful benefits.

They can work out what customers really want by looking at what they do rather than what they say, they can drill down into their business data to see which areas are truly efficient and where profit lies; they can identify potential challenges, such as cash flow issues and develop resolutions before they become a serious problem.

Partnering points the way

The good news for banks is that in an increasingly competitive marketplace, where they find themselves having to compete with smaller, agile, tech-savvy start-ups, this is one area in which they can enjoy a natural advantage and gain a significant edge.

worker looking at multiple screens
The number of UK companies investing more than 15% of annual revenues in digital technology has more than doubled in the last year from 10% to 24% (source: PwC)

First, introducing AI technology which can make the full use of big data is expensive and requires highly skilled data scientists. A bank will have the resources and capacity to support a major project where a start-up will not.

Secondly, the landscape is shifting. The arrival of the internet and mobile technology has created vast quantities of data, but that’s nothing compared to what is to come. By 2020, each human being will be producing approximately 1.7 megabytes of new information every second.

Brave new world

Technology has already become an integral part of our lives, but that trend is still in progress.

The next few years could see the rise of wearable technology, devices for tracking health and well-being. Looking further into the future, biotech could even monitor details such as heart rate, blood sugar content and much more. Gadgets can already track our movements; soon they will become even better at tracking and predicting our behaviour.

AI data analytics, then, should sit at the heart of every bank’s future strategy. Those which adopt it will thrive, while others will fall behind. We often hear about transformative technology, but this could be one which truly lives up to the hype.