Banking / Finance

Big Data and Payments Drive Loyalty in Consumer Banking

With less than 3 weeks left to Sibos I am eagerly awaiting the start of the conference. One of my favorite events within the event is Innotribe – a forum for forward thinking debate, discussion on innovative technologies, learning about new solutions, and collaboration through exchange of ideas. This year I am intrigued by the intersection of big data (and large amounts of little data) with the payments business, and will follow the conversation at Innotribe. Specifically, my interest is this: can the payments business become the foundation for growth across the bank – to both retail and business segments? Today I’ll address the retail banking customer segment, and address the business segment in a subsequent post.

The Customer Loyalty Conundrum

Banks face a customer loyalty challenge. Research from Capgemini and the European Financial Marketing Association (EFMA) indicates that consumer customer loyalty risk averages 40% globally. Four out of ten customers are unsure if they will remain with their bank for greater than one year. Furthermore, 53% of customers at risk cited ‘quality of service’ and 49% stated ‘ease of use’ as the primary reasons they would switch banks. This counters the traditional wisdom which places a lack of trust in banks (following the financial crisis) and fees as the dominant issues driving customer churn. The Capgemini/EFMA study correlates closely to unrelated research from Celent into the uses of Big Data in financial services. Fully 75% of bank respondents identified marketing and customer experience as areas where Big Data projects would be deployed. With the cost of new customer acquisition being higher than customer retention, banks clearly have the need to increase customer satisfaction and loyalty. Interesting. Does the payments business connect the two trends?

Big Data and Payments to the Rescue?

Earlier this year I surfaced the idea that banks need to move their payments business to an information business in order to remain competitive. The premise was that banks are missing out on an opportunity to become more influential in influencing where people shop and what they buy, rather than just how they pay. Of course we have seen several major banks dive into the world of card-linked offers. Some solutions I’ve looked at appear to develop better offers than others, and the key to success with this is the depth and reliability of the purchase data and the data analysis to drive and targeting the offers. By analyzing spending habits of customers, comparing to a broader universe of payments data, demographic information, social media connections and location information, it is possible to drive valuable and desired offers to customers that might change shopping behaviors.

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