With so many customer touchpoints available to banks – in app, online and over the phone to name a few – the amount of data available to them about their consumers is vast. As well as basic personal and financial details, which banks were always expected to know, banks are able to learn a lot about their customers from their behaviours and interactions with key products and services.
In general, consumers know that banks are generating and storing data on them – but are banks using the information they have to the fullest? Have we reached maximum efficacy with use of customer data or, as some consumers suspect, are banks harvesting and storing data without putting it to use?
This was one of the points on discussion at the CX FS Summit, which was hosted by MoneyNext last week. Below, our panel of experts – including speakers from Nordea, NatWest and Lloyds – share their thoughts about the ways in which banks are using customer data.
Do banks use data as much as we think?
Banks need to make good use of the data they already hold on customers in order to add value and create new digital experiences. That was one of the recurring themes of this year’s CX FS Summit.
Nathan Williams, Strategy & Delivery Lead for NatWest Trustee & Depositary Services, says: “I think that the use of data is something that every financial institution really has to be consistently evaluating if it’s going to make the most of its proposition and service customers in the right way. I just want to bring up a couple of examples whereby we do have a lot of headroom for that. One of the key use-cases that the banking industry is currently looking at is how do we use customer data not only from internal but a variety of external sources to really map their journey with a financial institution from inception to completion. And which of the double-figure number of needs can we fulfil along that journey, at what time and to what extent? The capability is there to do that but it’s now a case of organisational decision-making, saying we really want to be able to say to a customer ‘this is what your journey with us could look like. If you have any questions at any point we can do an intervention or have a conversation.’
“The second one, and I think that is an emerging risk that the industry has to be very conscious of, is the fact that a lot of the newer generation are very concerned about the sustainability of the banking industry as well as their banking holdings. One of the key risks that’s emerging is greenwashing, in other words organisations – not just in the financial sector but all over the world – making themselves appear more sustainable in terms of their activities and their footprint than perhaps they really are. That’s because the data throughout their supply chain that would give a true picture of their sustainability exists, but it’s not being utilised to effectively communicate an entire picture.”
Williams argues that failing to use data to its maximum potential also creates a lot of risk, which the industry must be constantly aware of.
Ezgi Biber, Head of Digital Insights for Nordea, says that banks have made a lot of progress but can still do more to utilise customers’ data. “I think we have come a very long way, especially the very promising use-cases in the financial industry when it comes to utilising data – for example financial crime prevention, credit scoring and especially when we look at financial institutions and include the fintechs, there has been a lot of distance been made,” Biber says.
She is keen to point out that all this takes place within the confines of healthy regulation, respect for the customer and an attention to protecting sensitive information. But that shouldn’t detract from the good work that has already been done.
Biber continues: “I think within the limits and within what the customers expect, we can definitely do more. We also need to acknowledge that there has been a lot of development that has been delivering great value, both to customers and to the institutions.”
Have banks reached peak efficacy with data?
So with all the opportunities that data presents to banks, have we already reached the zenith of what can be achieved – or are there still use-cases that are beyond our reach? Have banks already reached the limit to what they can achieve by making the most of their data?
Vilmos Lorincz, Managing Director – Data and Digital Products for Lloyds Banking Group, doesn’t think so. It all depends on how you define maximum efficacy. He tells MoneyNext that there’s still “headroom” in a number of different spaces and that he views the challenge that banks face through 3 separate lenses.
The first is the regulatory lens, Lorincz explains. “Are we doing everything that we are allowed to do? In banking, being compliant is very important so I don’t think that banks have ever been trespassing these boundaries but you can find other industries where you could even argue that, from a compliance perspective and what’s becoming the new norm with the new data regulations, it’s already at 200%. So you would expect scaleback [there] rather than scaleup, depending on how the customer relates to the use of their data.”
The next lens is the customer angle – are you already doing everything that the customer expects or is there still room for improvement? “That’s not because banks or financial institutions wouldn’t be trying their very best,” Lorincz continues. “We just need to be mindful that we are interacting with a fast-moving and evolving market so… what is the benchmark? Where is the 100%? That is a moving target, so from that perspective I would say it’s… close to maximum efficacy, but room to improve and grow.
“And then the final lens I would use for this question is the operational one. Have we connected all the different data sources in the best possible way, in the most automated way that we could use to offer greater value and benefits for the customers? And then the answer again is no, there is headroom.”
What more can we do with customer data?
If there is still headroom in the ways banks use their customers’ data, what more can be done to improve efficacy and take it to the next level?
Nordea’s Ezgi Biber thinks that the scale of the problem is similar to the expectations placed on banks pre-digital, but that it has just evolved: “It’s no surprise that banks collect data and it’s nothing new. I think since the emergence of the banks, we were always expected to know where our customer is, what they spend, when they withdraw money. We have always, as an industry, been very data-focused.
“I think when it comes to using this data, how it can benefit or it can be harmful to the customers – there are a lot of boundaries… I do think the financial industry is definitely on the safe side and for good reason, because financial information is very sensitive; the decisions and impact we can have on people is very big. Of course that does not let us off the hook, that we shouldn’t serve the customers better. I think we should.”
Biber suggests that strong use-cases including enabling customers to understanding savings more easily. People often don’t understand savings, the different products available to them or what each product means. So how can banks show the data in an understandable way for customers that is relevant to them and easy to work with?
Nordea has been experimenting with a self-service advisor that is easy to play around so customers can adjust their risk level and understand the different options available to them. But Biber says that banks should be really careful that, as well as understanding a bank’s products, customers are fully aware of how their data is being used.
“We really need to be careful that customers also understand and [be] very explicit on consent, on what they give permission to banks or any other industry to use the data for and what does it mean when this data is used? I think we can do both – a better job on using it, and we can definitely do a much better job on explaining the implications and the benefits of these utilisations of their data.”
NatWest’s Nathan Williams agrees that communicating with the consumer about the use of their data is important. But he argues that there are other forces at play, too. He also underlines the importance of the argument by marking what’s at stake if it all goes wrong.
Williams says: “Part of this question revolves around the extent to which we can use the customer’s data, and this is dependent on a bank’s culture, its technology and its data architecture as well as its risk appetite. We have to bear in mind that banks are still not the most popular type of institution with that massive reputation loss the industry as a whole suffered in 2008. People are still learning how to trust banks and financial institutions again to a large extent.
“We have to be very careful about how, where, when and why we use customer data and for the purposes that we make up as individual institutions. We also have to be very careful that we disclose what we are able to within the confines of regulations such as GDPR, which isn’t perfect and which isn’t really set up to deal with the big data revolution that we’re in the middle of.
“I think it’s entirely dependent on to what extent an organisation puts the customer first; to what extent their architecture is capable of utilising data for what purposes and to what ends; and finally what is the bank’s risk appetite and potential reputational, market or financial damage if it gets that wrong?”