Financial institutions are unique among consumer-facing organizations in that their products primarily take the form of ongoing services. A bank account, a credit card, and a home loan are not physical items, but rather managed relationships between the financial institution and the consumer. As a result, banks have more of a need to understand their customers’ needs, wants, and desires than practically any other organization.
Banks must use this understanding to maintain their customers’ brand attachment. The longer banks maintain a positive relationship with customers, the more profitable financial products become. The impact of customer retention is thus magnified, and even though a five percent increase in customer retention can lead to a 25 percent increase in profit, banks could likely see an even higher increase given the nature of their business.
It’s a good thing then that financial institutions are well-suited to understanding customers – at least from a data perspective. They already collect and store extensive transactional and behavioral information about their customers. The problem is that this insight is locked behind operational silos created by a combination of regulatory compliance and internal policies. Despite this, banks still stand to gain much from a solution like a customer data platform (CDP), which can integrate data across operational silos into a centralized location. Banks do have unique needs for their CDP, however, including technical flexibility, operational and security features, and the ability to perform complex analytics.
Financial institutions often have specific technical needs that are more complex than other industries. This includes an extensive stack of technical infrastructure, such as SWIFT wire transfer systems, EDIX-12 transactional systems, mainframes, COBOL apps and files, service buses, and message-queue-based solutions – all storing business-critical data that needs to be preserved. These systems, while technically robust, are not often designed for modern web services and other interoperability specifications.
Any customer data platform deployed within a bank needs to be able to handle data from these legacy systems, as well as integrate online and offline information into a centralized location. When done effectively, this means the CDP acts as a single point of customer data control for the entire organization. Unifying customer information across operational silos is already a huge win; 57 percent of banks say that having too many data silos is the biggest impediment in effective decision making.
Unifying the vast amount of first-party detailed data across the organization into a single solution means banks can more readily understand who to send which message to. Banks are already doing this in many cases for fraud prevention, which makes a technically flexible customer data platform valuable far beyond orchestrating marketing messages.
Financial institutions are second only to perhaps healthcare and the government with the number of regulations they need to comply with, including areas such as liquidity, consumer privacy, and operational rules. It’s because of this tight regulatory environment that any CDP deployed in a financial institution needs to have specific functionality that helps the bank remain in compliance. This includes non-product features like single sign-on, data encryption, and security certification.
Single sign-on is particularly important because banks need to manage access to customer data for their employees as well. It’s for this reason that ethics walls are built between investment and advisory branches in investment banks, and the bank employees that deal with deposits may not have insight into mortgage loans or credit card applications. Banks looking for a CDP need to be cognizant of their security needs and ensure that the solution they’re looking at has the right security features.
Financial institutions have some of the most complex analytics needs of any industry, owing to the volume and complexity of the transactional data they collect every day. Banks also often extend their anti-money laundering systems as part of their analytics, and those systems already perform a substantial amount of analysis for compliance. This data complexity means that the plug-and-play marketing analytics of smaller-scale providers won’t serve the needs of financial institutions.
Banks already possess a high level of analytics sophistication, which often results in a depth of expertise lacking in many other industries. As a result, any customer data platform deployed within a financial institution must include a full-blast analytics workload or provide easy access to tie into one. Banks will also often have a preferred analytics solution, which further means the customer data platform must have the flexibility to integrate that system into its operations.
Customer data platforms can power substantial results for financial institutions, especially given the volume of consumer data those organizations already possess. Not just any customer data platform will serve, however. Banks require a CDP with the technical flexibility to integrate with legacy solutions, operational and security controls to maintain regulatory compliance, and the ability to integrate powerful analytics capabilities. Only then will financial institutions enjoy the increase in customer retention that a customer data platform can provide.