By Achim Griesel
The term “Big Data” is stirring up plenty of excitement for banking executives and marketers. But they’re also wondering what to do about it. And for good reason. Just consider some of the facts.
Big Data Keeps Getting Bigger
As recently as the year 2000, three-quarters of all our data were analog. By 2013, analog comprised only 2% of all data. Digital data exploded from a one-quarter share in 2000 to approximately 98% only 13 years later. Truly, we are in the Digital Age.
Where does all this digital data originate? It comes from you, your co-workers, your customers, friends, everyone. Like the engine exhaust that trails behind a running car, the average person generates a trail of digital data throughout the day. Use your cell phone. Visit a website. Follow an online search. Make purchases in-store or online.
Every one of these and other actions creates data. Look at these staggering examples:
- The big 4 online storage services are estimated to store a combined 1,200 petabytes. (That’s one million terabytes, and one terabyte is 1,000 gigabytes.)
- Facebook has 300 million new photos uploaded and 3 billion new comments posted every day.
- YouTube gets over 6 hours of video uploaded every second.
- Twitter has 500 million tweets per day.
- The Federal Reserve shows there are over 120 billion annual non-cash payment transactions per year.
This glut of information would be overwhelming if we approached it with the same methods used in the past. Traditionally, researchers used data to answer the question “why.” But using big and non-traditional data makes it hard to apply causality when making decisions or predictions. Instead of addressing the “why,” big data addresses the “what.” In other words, the big data approach looks for outcome and does not necessarily try to determine why that outcome.
It’s also important to note that big data has introduced a new set of risks and ethical issues. Because human beings both generate and study big data, study results are not always entirely accurate. There is room for error. And questions of fair use and privacy continue to evolve.
Big Data in Banking
All these developments have major implications for the banking industry. Marketers are wondering whether we can use these new data sources to gain customers and generate more share of the customers’ wallet.
The answer, of course, is a resounding “yes.” We always need to add new data sources to drive our growth. In the world of marketing, modeling has long been a key tool in growing a core customer base. And even using the financial institution’s own data to determine target markets provides a set of small-scale big data. When your customers find you convenient, appreciate your brand, and utilize your services, the same will be true for their neighbors. It is not about the “why.” All you need to care about in this area is the “what.”
Other data sources are now available to enhance this. We now live in a world where each consumer leaves a digital footprint through their GPS-enabled device. These devices can be utilized to determine traffic patterns for people who are more likely to utilize your services, online and in the branches. Again, it is about the “what”—in this case, the fact that these people are likely to be closer to you more often. They are likelier to pick your organization when they are looking for a new financial services solution. We recently tested this notion with impressive results. The integration of big data from 150 million cell and GPS-enabled devices and hundreds of activity points from these sources allowed a better, more predictive targeting approach. Remember, though, conclusions drawn from Big Data are not infallible. As with all data, continued testing and verification is key.
Banking Transaction Data—The Holy Grail?
Your financial institution may or may not have tried to mine the accountholder data you maintain. But certainly there is a large amount of personal information available. Early banking used simple handwritten accounting ledgers. Current banking transaction data collection has become far more sophisticated and efficient. Today’s systems are capable of reading the payee line on checks, endorsement information, and can interpret debit card or other electronic transactions.
Your banking systems hold a wealth of highly-targeted leads for your sales and marketing teams, including:
- Commercial loans, including amounts borrowed, collateral properties and uses for the cash
- Merchant services, depicting who uses what services, how often, and in what amounts
- Brokerage/wealth management, with details about investments, savings balances, and beneficiaries
- Insurance, which like brokerage/wealth management services, offers personal information about the policyholder
Every retail or commercial product and service your financial institution offers dips into each individual’s personal or business lives. And this is extremely useful data. If I pay my mortgage at another institution from your checking account, you know it. If I have an insurance product somewhere else, you know it. If I have credit cards, you know it. If my business has a commercial loan somewhere else, you know it.
What Do You Do With the Data?
Your customer freely opts-in to your “service” and your staff members analyze the individual’s spending patterns. Then, your team makes helpful recommendations and offers for other products and services. What a great lead source for your team!
There are many ways bankers can turn their institutions’ websites into a 24-hour sales force. Sadly, many websites are deficient in this area. (But that’s a topic for another article.)
Besides using banner ads on your website to promote your own products and services, consider making an advertising arrangement with your local businesses customers. Look for purchases made at those businesses by consumers. Put a non-invasive banner ad in front of them when they log on, promoting your business customers.
Now let’s make this personal: My financial institution knows where I spend my money!
Within the bounds of ethics, yet with an eye toward expanding your financial institution’s reach, how can you use that data? How can you monetize this extremely valuable data? Has this become the real value of an account like checking?
Organizations like Living Social or Groupon spend millions of dollars advertising products that may or may not apply to their subscribers. Would there be an option to provide a benefit to your customers and have these organizations be willing to pay for it?
Or, if it is not Groupon, could it be a benefit for your own business customers? It’s food for thought, and you can bet that other banks are thinking about it now.
Achim Griesel is Chief Operating Officer at Haberfeld Associates, a leading customer acquisition marketing and profitability consultant for community-based financial institutions. Email: [email protected]