Since the global financial crisis began in 2007, banking customers have lost confidence in financial institutions. This has taken a devastating toll on customer loyalty.
In fact, 50% of all banking customers have either changed banks or are planning to switch, according to a recent global consumer banking survey by Ernst & Young.
In order to regain customer loyalty, banks need to create relevant product offers that address the unique needs and preferences of individual customers.
But in order to gather and act on customer information, as well as adapt to the changing regulatory and market environments, banks need to obtain efficient, low-cost customer data that expands beyond their legacy systems, says Hank Prybylski, a partner and advisory leader with Ernst & Young’s Americas Financial Services Office.
Prybylski notes that just a quarter of his clients are undergoing major data engineering projects. The reason: the high investment costs make centralizing and upgrading data systems a high-risk proposition and potentially an investment trap.
However, banks that are too locked into relying on legacy systems won’t be able to leverage the full range of customer data they need to benefit from changing customer behavior.
Consumers are increasingly willing to have banks and other companies use big data analytics to analyze their behaviors and alert them to security risks. But they’re much less willing to have banks access their social media profiles.
For example, 82% of consumers say they expect their banks to mine personal data to protect against fraud, according to a global study of 5,000 consumers by Infosys. However, although 73% of consumers are willing to have banks access their email addresses, only 9% say they’re willing to have banks penetrate their social media profiles.
Banks can also draw on sentiment that customers share through the various channels they use to interact with banks (traditional web, mobile, chat, email, voice, etc.) to learn more about customers and prospects to tailor relevant offers and messaging.
For its part, Wells Fargo has developed a big data lab to more accurately identify each customer’s needs and interests. Meanwhile, Capital One now offers discount deals through email as well as its mobile app that are customized based on the customer’s past purchases. A customer can act on the offers using his Capital One card.