Banks And Customer Analytics

An American Banker article titled Customer Analytics Growing in Banks, which reported on research it recently conducted,  made the following points:

“Most (71%) of the 170 bankers in the weighted survey do not [do customer analytics], but within a year that might not be true. Among those non-users, the plans to buy analytics are not impressive. Only 2% plan to buy customer analytics in the next six months, 4% in the six to 12 months and 14% in more than a year from now. What’s going on here? One problem may be definitional: some of the surveyed banks may well have solutions that conduct customer analytics but go by other names. Cost was the biggest barrier, noted by 36%. About 32% said a focus on other initiatives was the primary obstacle to using customer analytics. 23% [expressed] skepticism about the ability of the software to provide business value or a return on investment.””

My take: These findings contrast the research I’ve done, and how I think about the world of customer analytics.

According to the research I’ve done, more than seven in 10 banks have some sort of predictive models in place to support their marketing efforts. Those models may not be deployed across product lines, but they’re there. AB hints at what may be the issue: “Some banks may well have solutions that conduct customer analytics but go by other names.”

That raises the question: Then what are the banks calling it, if not customer analytics? In my experience, people in the industry are more likely to call what they’re doing customer analytics, regardless of the analytical component, than the other way around.

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The future buying plans of non-users of customer analytics was surprising. Among the FIs I’ve surveyed, I’ve found a much higher level of interest among the non-users (who I’ve found to be the minority, not the majority).

The clue to the differences between my view and AB’s findings might just be found in the statements about “buying” customer analytics and the “skepticism about the ability of the software.”

In my view of the customer analytics world, banks don’t “buy software solutions.”

Customer analytics is a business competency or capability, that might certainly utilize various technology capabilities, apps, and solutions. But I’ve never thought of customer analytics as something you can buy off-the-shelf, like an accounts receivable package.

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The barriers to deploying (or “buying”) customer analytics surprised me as well.

I’ve found the top two barriers to be skills and data — specifically, the lack of both.

In my research, the banks  that don’t have deep analytical capabilities cite the lack of skills as the biggest barrier to developing a customer analytics competency. For banks that do have some degree of customer analytics capability developed, the lack of easy to access data is the barrier they cite to making more investments.

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The AB’s survey respondents also had some…let’s call them interesting…views on the benefits of customer analytics. Or I should say customer analytics software. Thirty-seven percent said the software improves the impact of marketing efforts, and 28% said that an increase in wallet share was the top benefit their institution reaped from customer analytics.

First off, when they say it “improves the impact of marketing efforts,” what kind of impact are we talking about, what degree of improvement is it having, and exactly how did they measure that improvement?

Second, regarding the increase in wallet share, my reaction is: OH REALLY? Exactly how did these bankers know what share of wallet they have, or had before deploying customer analytics? Reality: Banks have no clue what wallet share they have, and therefore have no clue what impact customer analytics has on that metric.

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Anyway, apologies to American Banker for tearing into its research. It might not sound like it, but my objective is not to tear down the research, but to take the conversation regarding the use of customer analytics in banking to a more detailed, well-defined, and quantitative level. 

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3 thoughts on “Banks And Customer Analytics

  1. @RonS:

    When customer analytics is applied to retail banking and other B2C industries, the approach suddenly changes from “mass market marketing” to “marketing to an audience of one”. Accordingly, it’s the worker bees who use customer analytics in such industries since VPs of Marketing don’t sell to individuals. This upends the stereotype of analytics being used by the top management of a company and the data being supplied by the worker bees. Salespersons in a certain midsize bank have regularly been using our HEATMAP360 social media sentiment analysis app to spot disgruntled customers of their competitors and target them with better offers from their own bank. Obviously, such a sharply-targeted business development effort bears fruits. However, sine they don’t get any fancy dashboards with bells-and-whistles, C-Level executives in this bank still complain that they’re not harnessing analytics to the extent they should be! This might reconcile the apparent difference between your findings and those of AB’s.

  2. Ron, you wasted my time with this blog post. But I do not blame you. I blame the American Banker research. My only thought after I read the article was I should email Penny and see if I could get a copy of the questions asked and strategy briefing of their research project.

    The article led with “To our surprise, most (71%) of the 170 bankers in the weighted survey do not, but within a year that might not be true.” That was my WTF moment.

    The article closed with “As this month’s cover story points out, data-savvy competitors like Amazon and American Express are sure to push banks to get better at customer analytics, it’s just a matter of time.” I read the article again because I was in shock at the crap I had just read. And now it is still wasting my time.

    Did I email Penny? No. I did not want to waste my time any longer and I did not want to waste hers.

    For those of you who did not read the original article. Please do.

  3. Ron & Dave… interesting read. But doesn’t surprise me. Despite clear trends happening right before their eyes, bankers tend to look everywhere but the mirror for answers. I’d say 7 out of 10 banks I dealt with over the past decade had multiple factors going against them in their ability to make customer analytics work:

    1. Poor Porject Benefit Realization: Which in over 90% of cases translates to poor quality of implementations, where manual work around are the ‘accepted’ way of realizing a benefit. This includes building before data frameworks to ensure the underlying data is of a usable quality.
    2. Banker Brain: Bankers by default only understand two forms of analytics. Risk & UpSell. Everything else is as foreign as soil samples from the Mars Rover.
    3. Blind Dependence: The large majority of ALL bank major initiatives in the Technology space have been either compliance or risk based. Basel II, AML, CTF, and more, all left banks with very little project appetite. So unless the regulator tells banks that need to do Customer Analytics, they won’t do it.

    In parallel. Other industries are adopting is as core to their mission. Amazon, Facebook, Spotify, Apple, etc. all use analytics to drive insightful customer experiences, insights that either make the browsing experience more enriching, or the service delivery more contextual. The banks that will dominate the retail market in 10 years will be drive by data. Know any banks like that? ;)

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