The advantages and challenges in leveraging customer data in today’s Financial Service Sector.
It’s no surprise that the financial services sector is one of the most data-intensive industries in the global economy. Banks have historically always had access to large amounts of customer data, be it through deposits, withdrawals at ATM’s, purchases at point-of-sale, and / or online payments.
However, traditional financial institutions (FI’s) are still developing the ways in which they use data to provide added value to their customers, and have yet to tap into this data’s full potential. At the same time, today’s customers expect personalization in the products and services that they consume, across a variety of industries including their finances.
While this is tough to achieve in a highly regulated sector, incumbents are facing stiff competition from FinTech entrants. Due to changing customer expectations and the rise of these FinTech players, banks and insurers are also beginning to embrace the power of rich customer data to maximize customer satisfaction and gain valuable insights into preferences and buying habits. While this may sound easy, the challenge lies in managing vast volumes of data and leveraging it to get valuable insights.
To overcome this, incumbents need to evolve from the simple rule-based data models, and take advantage of emerging technologies such as Artificial Intelligence (AI), Machine Learning (ML), and Next-Product-To-Buy (NPTB) — the latter can help identify customers with a high tendency for early offers for loans, mortgages and more. This switch may be a challenge for those who rely heavily on legacy systems but the increase in complexity and pivot to using new technologies can pay off in many ways, such as improved customer service, customized product / service offerings and better decision making.
Another aspect that Financial Institutions (FI’s) need to consider is the safe and ethical usage of customer data, ensuring that data handling and storing protocols fall within the guidelines established by regulators. Interestingly, evolving technologies like AI and ML can help make everyday banking more secure, instant, and accessible, by merely eliminating human interactions and error.
To conclude, rich customer data has allowed companies in Financial Services to provide personalized products and services, as well as compete with new entrants in the Fintech industry. However, for FI’s to make the most of customer data, they need to identify ways to pivot from legacy systems to leverage emerging technology like AI, which cannot only help in gaining insights from data, but also provide security and accessibility for their customers.
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