Over the past week, I have reached out to many of my banking industry colleagues in the U.S. and abroad asking for examples of where 'big data' is being used effectively in retail banking. The response was underwhelming to say the least, as the majority of banking leaders provided examples of 'works in progress' or 'initial wins', with some of the most mentioned case studies being in the areas of risk and fraud prevention as opposed to marketing.
In addition to a post on big data by Aite Group's Ron Shevlin on The Financial Brand, and widely covered discussions about 'big data hype' on blogs from Gartner and CapGemini this past week, most industry leaders believe banks need to focus on data close to home before expanding their pursuit of the next shiny object. To this end, a friend from the U.K. offered to provide a guest post on the topic from his perspective as a supplier to the financial services industry.
Consumer banking behavior is changing rapidly before our eyes. Will this changing consumer behavior mean that incumbent retail banking 'zombies' may become corpses walking the halls of banking, as energizing and engaging competitors take enlightened customers away from them?
I firmly believe that many retail bankers are operating on autopilot in an increasingly dynamic and complex environment. They are trying to understand, develop, deliver and manage new solutions with buzzwords such as cloud, big data, mobile, social, NFC and mobile wallets to name a few.
I'm going to highlight one of these trending terms within the context of retail bank marketing, and the mots de jour are 'big data'.
We hear it, we allegedly see it, but we can't touch it. We can't touch it because we don't know what 'it' is. There are official and unofficial definitions of big data mostly distributed by vendors who want to sell a 'solution' to the industry. 'It's big', 'It's fast', 'It's varied', 'It's unstructured', 'It's social', 'It's not technology', 'It's data programming', 'It's a process', 'It's statistics', 'It's analytics', 'It's hype', 'It's bullshit' . . . and so on.
If a bank were truly using big data, bank marketers would be engaging customers in ways that were unforeseen only a few years ago and their technologies would enable this. Retail banking would be operating faster than the speed of changing customer behaviors, similar to the post a couple weeks ago on this site written by Scott Bales from Movenbank entitled, 'Finding Serendipity in Big Data'.
Full digitization of financial services offerings would be available to the majority of customers and the bank would be in constant omni-channel dialogue with their customers to self-individualize their chosen offerings as shown in the illustration below. Those who wanted physical interactions would be able to have physical units. Those who wanted digital could have digital. Those who wanted everything, well . . . they could have everything. This wouldn't be an issue for banks, as their technology would be agile enough to individualize every interaction and every offering.
Customers would have adopted their physical modus operandi because it would be truly self-personalized, cheaper, with much better service and with richer benefits. The automated banking service would encompass full and transparent management of personal and business finances, within the personalized context of the individual customer (not the customer group).
Much of the big data use to date has been around risk monitoring and fraud control. Bank marketing big data examples that are currently expounded tend to rely on using data for customer engagement and satisfaction. 'We'll send you an individualized statement of your account', 'We''ll ping you with an offer as you walk past your favorite store' and 'Access personalized offers online, via mobile or at the point of sale' are not examples of big data in action. They are examples of taking structured and/or unstructured data, analyzing it and using it for marketing purposes.
Data may be pulled from disparate sources and targeted at a customer, however, it's unlikely that this communication is truly at an individual level, real-time automated and as sophisticated as payment scheme processing, authorizations and risk/fraud management is today. The day that a retail bank's marketing infrastructure is fully data integrated and as sophisticated as a payment scheme's processing infrastructure is the day that I believe big data is well and alive in retail bank marketing.
Individualized engagement and dialogue to create self-personalized products is my idea of applied big data. It's not just about real-time, 1:1 push and pull marketing. Retail bank marketers need to realize that they are operating at a speed that is slower than the changing behaviors of their customers. The more they talk about big data and don't deliver the way other industries are delivering, the further away from the reality of truly next generation products and engagement they will be.
The consumer is becoming more aware of what is possible with today's insight and computing capabilities, while retail bankers are looking more like zombies, bereft of consciousness yet able to barely respond to surrounding stimuli.
Non-Bank Big Data Examples
Let's take a look at two companies that retail bank marketers can learn from.
Borders Group, Inc. and Blockbuster are great examples of companies that failed to keep up with the digitization of consumer behavior. Once seen as the corporate face of physical sales on main street, they battled for survival and then collapsed. They went from market dominance to death, in a relatively short time, with no strategic reinventions. They are the most cited, but by no means the first or last case studies that could be used.
Conversely, Amazon and Apple grew from nothing to prominence in digital sales globally (books and music among other things) in a relatively short period of time in comparison to the growth of most banks. This marketplace distribution disruption didn't happen overnight, so retailers had every chance to fight back as some still are.
Why do the examples above matter to retail bank marketers? The key for me is the amount of publicity that retailers receive in terms of public sentiment along the lines of, "I love the store experience and enjoy going there (Borders), but I never buy anything from them". In retail, this phenomenon is called 'showrooming', where a customer visits a bricks and mortar establishment only to buy online later. Whether for convenience or to drive down pricing, this activity is disrupting the distribution model.
Retail Industry Parallel to Banking
Are visits to your branch as frequent as in the past? Are your customers still using checks as much as they did in the past? What about those customers that are already 100% digital and haven't visited a branch for years?
Trendsetter customer behaviors are likely to become mainstream customer behaviors at some future date similar to the trendsetting mobile banking customer or the trendsetting photo check deposit customer. When will these behaviors become mainstream? I have no idea. But people who follow the financial services industry would say it is sooner than most retail bank marketers would hope for (see recent post entitled, 'From Passbook to Mobile: The Evolution Of The Bank Account' by author and Movenbank founder Brett King).
Relying on incremental technology advancements and talking about or playing along with the latest fads, such as big data, will not put you ahead of the new competitive aggressors. We arguably already have examples of fintech start-ups big enough to enter the mainstream banking sector such as PayPal globally, Intuit in the U.S., Square in the U.S., Fidor Bank in Germany and M-Pesa in Kenya.
Even newer and smaller start-ups such as Simple, Bluebird from American Express and Walmart, GoBank from GreenDot and the soon to be introduced Movenbank should be watched for innovations and trends that can quickly move market share.
The specific challenge for retail bank marketers is to realize the potential of big data (or whatever you want to call expanded customer insight) and to stay up with, or eventually move ahead of, customers and the competition. Find ways to use the data at your disposal today more effectively and efficiently. Find ways to interact and communicate with customers in the manner they prefer in real time. Become proactive as opposed to reactive to customer needs.
The ultimate goal is to not sit on the sideline and become a dinosaur that is driven to extinction by an unforeseen player that created a new future.
About the Author:
Darren Oddie is the CEO and co-founder of AGILEci, the only business intelligence consultancy and customized software provider uniquely designed for marketers. Darren has held senior marketing positions at Visa, American Express, Glaxo SmithKline and Reuters. He has worked across all marketing disciplines for 20 years. He holds an MBA from the University of Cape Town. He also manages a customer insight blog for marketers.
Marketing & Big Data http://www.iab.net/media/file/2012-BRITE-NYAMA-Marketing-ROI-Study.pdf
Consumer Decision Journey http://www.mckinseyquarterly.com/The_consumer_decision_journey_2373
Social Voice of the Consumer http://www.wharton.upenn.edu/wcai/files/Insights_Moe_WCAI.pdf