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Banks Set Stage For Customer Acquisition With Data Analytics

Data-driven customer acquisition will continue to be elusive for banks that don’t invest in effective data management processes and structures.

As the banking industry and wider economy emerge from the financial crisis, banks have been able to start shifting their focus from controlling the damage to actually growing their business. With customers starting to spend more, look for loans and weigh their financial options, banks are accelerating their moves to a customer-centric (rather than the traditional product- or channel-centric) model to both attract and retain new customers. But customer-centricity requires banks to truly understand their customers, and despite years of investment and effort most banks still can’t analyze data at the scale and speed to do that, says Rani Goel, senior director of analytics product marketing for SAP.

“There’s a lot more focus on data now. There’s more sophisticated analytics tools, and there’s so much more unstructured data than ever before. The problem is that banks’ legacy systems can’t handle all that unstructured data,” Goel explains.

Fewer than half (46%) of banks can analyze external data about customers, according to a survey of 100 banking executives SAP conducted last year in partnership with Bloomberg. Even fewer of those surveyed could analyze social media activity (32%) or their share of a customer’s wallet (29%), according to the study.

[For More on Data and Analytics: Big Data:Where to Begin?]

The most common challenges cited by the respondents to achieving customer-centricity were data and analytics capabilities: 40% said that volume of data was a key obstacle, and 37% said the same about the complexity of analytics tools.

The respondents were confident in the value of emerging technologies to help them understand their data and achieve their organizations’ goals, Goel notes. More than half of the respondents said that technologies such as cloud (62%), predictive analytics (59%) and real-time data processing (55%) will be extremely valuable to their strategic objectives in the next two years.

But before banks can start leveraging these emerging technologies and their value, they have to build a foundation for data management and improving data quality, says Seth Rosensweig, managing director in AlixPartners’ information management services.

“I spoke at a conference last year about the Volcker Rule and pulling in data to the enterprise level for compliance. A lot of the questions from the audience were around technology, and what they could implement. I told everyone it’s not about technology yet. It’s about understanding your framework for data management,” he shares.

Seth Rosensweig, AlixPartners
Seth Rosensweig, AlixPartners

Banks need to be thinking about the hierarchies and taxonomies that they will use to identify and manage their data sets before they start to build the architecture for data and analytics to drive marketing and customer acquisition. Those that don’t track these issues and work through them before starting to layer new technologies on top of their existing infrastructure and will be at a disadvantage down the road, Rosensweig warns.

“Until banks can extract data from different systems and relate it to data throughout their organization, the true benefits of big data will remain elusive for them,” Teresa Epperson, a managing director at AlixPartners, agrees.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio

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Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
2/18/2014 | 8:16:22 PM
re: Banks Set Stage For Customer Acquisition With Data Analytics
Yes there is a lot of experimentation going on right now. Even the banks that I mentioned in the article would admit that they haven't totally answered all of the questions around gaining actionable insights from their data, and are still trying new things. I am curious though, what do you think is unique about the potential for MCX? I think it definitely has to be taken seriously because of its backing from the retailers. But I don't feel that I know enough about it yet to judge its potential.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
2/18/2014 | 8:12:27 PM
re: Banks Set Stage For Customer Acquisition With Data Analytics
Yes that's totally true, but there is also the potential for new technology to go around the limitations created by data silos. SAP has been pushing in-memory analytics with it HANA platform, which is one example of a solution that tries to circumnavigate those obstacles. But there are still data quality issues that have to be dealt with regardless.
GHERGENROEDER211
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GHERGENROEDER211,
User Rank: Apprentice
2/13/2014 | 6:03:03 PM
re: Banks Set Stage For Customer Acquisition With Data Analytics
Bankers and retailers are sharing data to advance value chains for consumers. So far most of these initiatives have been fragmented and have not hit the mark yet. MCX is one initiative that is interesting. But, a lot more needs to be done to gain a critical mass of acceptance. The land rush is on and lots of people are spending a lot of money. it is going to interesting to follow this complex ecosystem of smarter commerce.
Ivy Schmerken
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Ivy Schmerken,
User Rank: Author
2/13/2014 | 4:49:49 PM
re: Banks Set Stage For Customer Acquisition With Data Analytics
You raise an important point around CRM. So many banks and brokerages adopted CRM even way back in the 1990s and post-2000s, so it's questionable as to why they are unable to access this data. Perhaps CRM data has been put into a silo that doesn't relate to hierarchy of reference data? Products like Salesforce are cloud-based. So would this be easier to integrate into a more holistic customer data analytics organization?
KBurger
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KBurger,
User Rank: Strategist
2/12/2014 | 9:00:56 PM
re: Banks Set Stage For Customer Acquisition With Data Analytics
It's a bit surprising to me that so many banks still are so far behind in terms of the infrastructure needed to gain intelligence from customer data. It's not a new topic and one would think that the failures/frustrations around CRM implementation from 10 years ago might have taught some lessons about what needs to be in place to really be able to derive benefits from investments in analytics and other tools. Probably part of the problem has to do with the focus on cost cutting, compliance, risk management, etc. of the post-crisis era -- but shouldn't they be able to leverage some of those efforts? Another problem is that, while banks are still building the foundations for effective customer analytics, other industries will a) potentially swoop in and grab some of the potential customers, and b) the analytics/big data talent that banks need to optimize these capabilities will go elsewhere.
Ivy Schmerken
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Ivy Schmerken,
User Rank: Author
2/12/2014 | 2:31:47 AM
re: Banks Set Stage For Customer Acquisition With Data Analytics
It seems like banks need to get their data management houses in order before they can move forward with analyzing customer data and use emerging technologies such as predictive analytics. If they need to first build the "hierarchies and taxonomies" to organize their data, this could take a few years before they are ready to build an architecture for data and customer analytics.
Byurcan
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Byurcan,
User Rank: Author
2/11/2014 | 5:04:47 PM
re: Banks Set Stage For Customer Acquisition With Data Analytics
The statistic about the most common challenges to achieving customer-centricity being the sheer volume of data is a familiar one. It seems like effective data analytics tools are more in demand than ever before.
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