How a customer data platform helps create banking customers for life
- January 19, 2021
- By Orion Addis
When I was younger (notice I’m not giving dates here), my mother came to the bank with me to open my first checking account. I tracked every transaction in a check register and deposit book. Looking back, it was a dangerous time, living among the dinosaurs, but at least managing my account was simple. I had this checking account through my college education, but after graduation, I decided I was getting hit with too many unjustified fees on my limited budget, and I switched banks. Now, perhaps the fees were “justified” technically, but I still believe I was right.
Switching banks was easy. I withdrew my money, maybe even with a little sneer of disdain, walked across the street to a competing bank, and made a deposit. I was ready to start my professional life with a new, better banking relationship. The years passed, online banking took off, and I kept with my old ways. I gathered receipts in an overstuffed wallet. I reconciled my account and bank statements with my personal finance software.
Over time, I came to realize that this online banking thing wasn’t so bad. I could pay all my bills without writing checks, filling out forms, buying stamps, remembering when bills were due, and so on. Everything was automated for me. Because of this, I have no desire to change banks ever again; I don’t want to rebuild all the convenience I’ve gained from my online banking relationship. For me, this is great news. For banks used to winning new customers, though, it’s a challenge.
Digital transformation for financial institutions
No industry is exempt from the forces of “digital transformation” sweeping the economy; and finance is no exception. Organizations that wish to keep up with the competition must understand their customers base and deliver personalized experiences. In finance, the model of growth by acquiring customers from other banks is no longer enough. The costs of switching banks for consumers is higher–after all, who wants to change over every recurring payment they have–so customer attrition rates are sinking. (It’s worth noting though that the #1 reason for churn is poor customer service.)
What strategy for growth do financial institutions have left if poaching customers is too costly? Growing wallet share, also known as assets under management (AUM).
The key to growing wallet share is understanding customers
Consumers’ banking and financial needs change throughout the course of their life. An individual customer may start out as a high school student working his or her first job and saving for college. Once they’re in college, they’re probably taking out a series of loans and building a credit history, perhaps with an introductory credit card. They may then graduate and get an entry level job, one that requires them to buy a car for their commute or rent an apartment in the city. The next stage of their life may see them purchasing a home, growing their family, and saving for their kids’ college education. They’ll be saving for retirement hopefully all along the way (perhaps even investing on their own or through a broker) and eventually funding their retirement.
Naturally, this hypothetical customer will be interested in a variety of different products and services across their life–checking accounts, loans and savings instruments, credit cards, and more. To grow wallet share, a bank or other financial institution has to be aware of their customers’ needs and offer the appropriate product at the right time–and perhaps even through the right channel, as one customer may prefer in-person banking and email messages, another web experiences, and a third using their app.
Delivering personalized marketing experiences to customers
What does “understanding customers” look like in today’s digital economy for financial services companies? Chances are it’s a lot like the service consumers have come to expect across the economy. Customers expect companies to know who they are–what products they’re using, their communication preferences, their transaction history. They want a seamless experience across all channels–mobile apps, chat, and customer service. They don’t mind getting relevant offers of products and services, but impersonal, irrelevant offers leave them feeling ignored or taken advantage of.
The key to delivering this level of customer experience is a smart hub CDP, what Lytics refers to as a decision engine. A decision engine does aggregate data, but it doesn’t stop at creating a customer profile. It uses machine learning to analyze the data that leads to desired outcomes, and delivers marketing experiences to further the customer along their journey. It represents a shift in focus from just collecting data to leveraging it in their customer interactions.
And what does this look like? Rather than acquiring third-party data about customers (names, addresses, income levels, etc.), they might look at their own first-party data and interest it. Data sent to their cloud warehouse might show recurring ACH payments to another company for a mortgage, leading them to make a favorable refinancing offer. A company that sees payments to a variety of student loan lenders might offer a debt consolidation product, and so on.
Applying this case to customers who have opted in for marketing offers can create both immediate interest and longer-term customer awareness for additional banking services. By gathering and leveraging first-party behavioral data, institutions can make product recommendations to existing customers in compliance with the increasing amount of data privacy regulations, like CCPA.
How financial institutions can benefit from a smart hub CDP
As customer attrition rates have decreased over the past year, deepening share of wallet has become more important to banks’ overall strategy. They need to understand the drivers that lead to increased AUM. For new customers, they need to deliver an exemplary onboarding experience, as that builds customer loyalty and increases the likelihood of further deposits. They should focus on decreasing fee-related problems, and adopt proactive messaging and communication strategies, not just fulfill a requirement to inform, to ensure customers understand what triggers fees. And they must understand a customer’s account holdings so they can offer appropriate products and services at the right time and through the right channels.
Lytics smart hub CDP can do these things–and even discover more ways to deepen customer engagement. Predictive modeling can help banks turn casual customer relationships into long-term commitments. Marketers can define desirable audiences, such as ones with high wallet share, and then identify other customers that resemble them and make personalized offers. Content affinity can allow banks to see what investment topics interest a consumer and offer up recommendations that move the customer down the funnel for that particular offering.
For financial institutions today, the question is not if, but when, they should invest in a decision engine CDP to increase their AUM and revenue. Assess your CDP readiness with Lytics CDP Readiness Guide.