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Adaptation is Key for Banks to Succeed

A report from Equifax says that banks need to change how they define themselves internally and externally and adapt their mindset, operations, products and services to better meet customers’ evolving wants and needs.

For banks to succeed in the future, they will need to change how they define themselves internally and externally and adapt their mindset, operations, products and services to better meet customers’ evolving wants and needs, according to a new report from Equifax Financial Services.

The report, titled "The Changing Role of Financial Institutions" is based on the insights of a panel of senior banking executives who spoke at a recent Equifax forum, the company said.

[See Also: Capitalizing on Big Data Yields Customer Value]

Firstly, the reports advises banks to redefine the relationship between financial institution and customer. "It is imperative that financial institutions adapt to meet customers where their wants and needs are, rather than forcing customers into traditional banking models," a portion of the report reads.

For example, Equifax notes that banks "need to go beyond the checking account" and reach out to people who have a pre-paid card or other financial relationship. "There is profit to be made by catering to this new breed of bank customer who prefers various relationships conducted through multiple channels," the report says.

Equifax also says that data shows financial institutions are seeing a reduction in credit card activity, indicating that today's consumer looks at credit cards more as a payment vehicle than a credit one. This is especially true among Gen Y consumers, says Equifax, who are more cautious when using credit and more leery of accruing debt than older generations.

Also, the company advises financial institutions that affinity card usage is being driven by rewards, benefits and coupon offers rather than the status or affiliation with the brand as has been the case in the past. Being aware that rewards are driving transaction revenue, banks can improve take rates by focusing their efforts on designing products that attract reward seekers, says Equifax.

Among the other findings in the report is the need for banks to be viewed as a "true partner" and tailor products and services to particular customers' needs.

"Customizing offerings and pricing per customer will require banks to narrow their focus from a broader segment perspective to viewing customers through an individual lens," advises Equifax. "That, in turn, will necessitate collecting and mining the growing availability of customer data to better identify opportunities and risks."

However, the company notes that attaining a single customer view is not easy. "It requires banks to make large investments in their operations at a time when revenues across the industry have shrunk and regulatory costs have risen," the report says. "Also, the single view of customer is only as good as an organization’s ability to use it. Even if companies achieve this holistic view, often only a few people in the organization are actually able to see it and use it effectively."

Finally, Eqiufax notes the challenges banks face in developing new products and investing in innovation during a time when budget priority at many institutions is earmarked for compliance. The company says that as much as 80 to 90 percent of bank IT budgets are dedicated towards satisfying regulatory compliance requirements.

Still, Equifax notes that "the banks that are best able to match the change in the marketplace will have a clear competitive advantage in the years ahead."

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

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Personetics
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Personetics,
User Rank: Apprentice
3/20/2013 | 6:11:20 PM
re: Adaptation is Key for Banks to Succeed
Great article. I agree that the financial services industry faces a lot of challenges both internally and externally. One of the biggest advantages they have though is the vast amount of data they have regarding their customers. What products they have and don't have and how they use them.

But getting at all that data isnGăÍt always easy. Our approach is to use a financial institutionGăÍs EXISTING systems so there is no need to start from scratch, build anything new or expose the bank to unnecessary risks. Personetics has the expert ability to be able to find and access data from across siloes and disparate systems to help our clients accomplish their goals. Digital Banker accesses whatGăÍs already available G㢠taking what banks already know about their customers G㢠and augments it with a large batch of proprietary data services to offer personalized insight.

Adapting to change doesn't have to be a mega project when you find the right technology.
In the spirit of full disclosure, I head up marketing efforts at Personetics Technologies. Deborah Katz, deborah.katz@personetics.com
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