Data & Analytics

08:45 AM
David M. Wallace, SAS
David M. Wallace, SAS

Segmentation Can Help Banks Find Tomorrow's High-Value Customers Today

Banks must retain their current high-value customers while also trying to attract the high-value customers of tomorrow, notes David M. Wallace, SAS. A BAI study, he says, suggests how to do so via the latest segmentation strategies.

A Potential Gold Mine

It might be tempting to wait for struggling techies to morph into something more recognizable, such as dual-income direct depositors with a mortgage and some 401(k) money to roll over. Some banks certainly thought the same thing when the ATM arrived. But in the past, people searched for an institution with the best ATM locations, the biggest network or the lowest fees.

Struggling techies are smart seekers. Eighty-three percent of struggling techies will choose one financial institution for all their needs if offered a financial reward of some sort -- the highest percentage of any of the groups that BAI identified in its report, including those such as the "sophisticated opportunists" and the "satisfied traditionalists" who earn higher incomes and keep more money in their banking accounts. Seventy-four percent of struggling techies will choose one institution if it has everything they need (second only to sophisticated opportunists). Forty-eight percent are willing to switch financial institutions for one that is more innovative — the highest of any segment.

But how does that translate into portfolio growth? Despite being the lowest-earning group of those BAI identified, struggling techies can have the biggest potential portfolio growth if share of wallet hits targets. Attracting struggling techies to loans could increase growth by 46 percent. Attracting them to investment products could increase growth by 166 percent. The wealthier sophisticated opportunists group can help increase growth by 26 percent and 107 percent, respectively.

So how do you find these struggling techies and help them make a home at your institution? Age alone isn't enough to segment on, nor can you do it strictly by income. Financial institutions need to be able to go beyond basic demographic indicators like assets and income, and instead look at how existing customers interact with the bank. Do they bank online or in person? Do they move accounts when offered a promotion, or sign up for the latest app?

And remember — segments aren't cast in stone. Some banks might find segments within their customer base that are different from what BAI found. But they won't know until they ask the questions and explore the data. Ultimately, the coolest technological offerings — and the most robust social media operations — will be ineffective if institutions don't understand how they relate to the customers they have, and the ones they seek.

David M. Wallace is global financial services marketing manager for SAS. He is responsible for defining industry strategy for the global banking and capital markets segments and midmarket strategy across banking, insurance and capital markets.

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