Eric Brandt, Senior Market Analyst, NCR Voyix
The financial services industry is one of the most data-driven industries, relying heavily on data for decision-making, risk management and day-to-day operations. The wealth of information our industry collects can help surface insights into consumer behaviors and channel preferences, transactional patterns and recent life events. And banks and credit unions can use this information to personalize their products and services and improve customer satisfaction.
Data can also help reveal opportunities to drive revenue, make an organization more efficient and avoid costs. And it can provide insights into how to increase profitability.
But the fact is, not all financial institutions are effectively using their data or analyzing how people are interacting with their products and services. And many lack the resources to develop strategies to increase profitability.
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Eighty percent of financial institutions have limited confidence in their institutions’ ability to forecast and manage profitability performance. Ninety-one percent believe their institutions should be doing more to leverage profitability analysis to inform strategic decisions.
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As financial institutions continue to speed up their digital-first transformations and work to gain cross-channel efficiencies, reduce operating costs, improve experiences and increase profitability, data must be a top priority. And it needs to be viewed as an asset to the organization — not a scary four-letter word.
But all the data in the world won’t make much difference without a defined starting point.
Establish baseline metrics
When organizations understand where they’re starting from, they can define where they want to go. However, too often, we see financial institutions measuring things like website traffic, digital banking logins, new account openings and bill pay enrollments. But often overlooking the metrics that matter most, like annual attrition rates, opportunities to educate, and where to increase engagement across channels and demographic behaviors.
Why? Many institutions don’t have the resources or systems in place to do so. And others are unable to measure those metrics because they don’t have clean data or the ability to surface it in a way that allows them to analyze it comprehensively.
Establishing KPIs and measuring success is nearly impossible without a baseline understanding of what a financial institution’s users are doing and how they interact with their products and services. Equally, measuring the impact of new enhancements or initiatives without baseline metrics is not feasible.
Knowing that only 10% of a bank’s digital banking customers are using bill pay, for instance, can highlight the need for a marketing program to boost adoption and usage. Similarly, understanding the top actions a user conducts when signing on to their mobile banking app can help inform areas for investment, where to personalize experiences and even how to alter or segment the experience based on demographics. Determining that a specific feature, such as card management, is the third most used feature, but knowing that it’s also three clicks deep, for instance, can surface an opportunity to make that feature more prominent in the navigation.
Not having those baseline metrics makes it difficult to know where to invest and make improvements, who to market to or what other products and services consumers are more likely to adopt.
Identify trends in the data
When baseline metrics are established, financial institutions can work to identify trends in their data and measure the impact of various channels and services over time. They should be looking at month-over-month and year-over-year reporting to better understand the profitability of their products and features and determine which are tied to higher retention rates.
By identifying and analyzing trends, financial institutions can make better decisions regarding their efforts to positively impact profitability. A bank might determine that its active bill pay users are more likely to own more products, such as the bank’s credit card, making them stickier and more profitable than non-bill pay users.
Because of its established baseline data, the bank already knows only 10% of its active digital banking customers are actively using bill pay. By identifying trends among its active bill pay users, the bank can create a targeted marketing campaign to encourage non-bill pay users to pay their bills digitally. And once they get them over that hump, the bank can market specific products and services its existing active bill pay users have been more apt to adopt.
Financial institutions can also analyze trends to identify improvement areas, whether with the customer experience or operations, for example. Perhaps an institution learns that their personal financial management tool has high usage among Gen X, but adoption falls off considerably among 18-25-year-olds. The bank could use that insight to enhance its financial wellness efforts and show this demographic how to set and manage a budget, track their spending and become more financially fit. The bank also could use that data to survey the younger demographic to better understand if usability challenges prevent them from wanting to use the solution. And if so, use those learnings to improve the user experience and workflows.
Likewise, financial institutions can analyze their data to identify trends at their physical locations to help optimize operations. By looking at trends over time, such as the number of visitors to a particular location at peak hours, types of transactions conducted or use of Integrated Teller Machines (ITMs) at different locations, they can learn where to adjust to increase efficiencies and cut costs.
By analyzing historical data, financial institutions can better inform future initiatives such as rolling out new features, modifying workflows or optimizing their branches. And they’ll be able to provide the individualized experiences consumers want and expect.
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Meeting consumer expectations is nearly impossible without an effective means to analyze and glean insights. But the importance and utilization of data will only continue to increase. Banks and credit unions should lean on their technology partners to help establish baseline metrics, identify trends and track growth using profitability studies. This can help them understand what each user is worth, which can help inform efforts to drive engagement, increase wallet share and maximize retention efforts.
