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How Financial Institutions Can Adapt to Stay Relevant

Oct. 2, 2017 ⋅ Categories: Branching Topics

The retail landscape is evolving rapidly as technology advances, and financial institutions are struggling to reconcile the gap between their cycle of business and increasingly rapid changes in consumer preferences. It’s absolutely critical in today’s economy that organizations understand their members’ or customers’ needs, and financial institutions need an effective meta-strategy that enables the entire organization to contribute to this goal.

To successfully adapt and thrive in this environment, there are three interconnected processes that organizations must invest in: data gathering and maintenance, developing market insights, and creating flexible omni-channel retail strategies. By coordinating these efforts, financial institutions can better adapt to change and maximize their growth and return on investment.

1. Establish a Data Strategy that Works

Data scientists are doing amazing things with data, from enabling highly targeted marketing campaigns to boosting retention by predicting churn, and even measuring the performance of strategic decisions. But for teams across an organization to perform these tasks, they need good, clean, relevant data and they need to be able to communicate and share it freely.

The often overlooked catch when extracting insights from big data is that analytics is the easy part. Real world datasets are astonishingly messy, and data scientists usually end up spending about 80% of their time cleaning up data and only 20% on analyzing the data. There could be incorrect data, missing data, data useful to one team that could have been gathered by another but wasn’t, or the database could be in a format that’s difficult to work with. And flawed or messy data not only wastes time and resources, it leads to flawed analytics because the concept of “garbage in, garbage out” generally holds true.

Core banking systems are often treated like a black box, but creating a concrete strategy that produces clean, organized data that can be shared across the organization will pay dividends in the future and can function as a tool to align strategy across departments.

2. Build on Your Data Strategy to Understand Your Customers

Traditional market segmentation has been misleading businesses for decades. Millennials don’t exist, and it turns out people are more complicated and don’t fit into the neat, oversimplified categories that we often use to define markets.  

But if you have good data in your CRM, your marketing department can analyze that data to tease out attributes of your customers to get a much more complex and dynamic understanding of who they are and what drives their financial decisions.

Ernst & Young recently published a Global Consumer Banking Survey where they analyzed trends in consumer preferences and relationships with their financial institutions. One of the most interesting results of their analysis is an innovative segmentation strategy that places consumers on a grid with two axes: digital savviness and financial savviness.

You could use this information to run a direct mail marketing campaign that only targets less tech-savvy but financially proactive customers. This would significantly reduce costs and boost ROI over an age segmented campaign because it would exclude customers in the target age range who would likely see the content online and include customers outside the target age range who don’t use your website or mobile app.  

Understanding your customers and creating accurate, detailed segments allows you to personalize the banking experience in a way they’ve come to expect in an increasingly technological world. You can send accurate marketing messages based on their life stages, tellers can use the information to provide relevant advice and pursue cross selling opportunities, and on a higher level you can see how overall trends are forming and shifting.

Gaining a meaningful understanding of your customers and the market relies on a strong data strategy. If that foundation is solid, it will enable you to extract accurate and meaningful insights.

3. Apply the Knowledge You’ve Gained to Retail Strategy

The business cycle for financial institutions tends to be slow and stable, which presents a challenge to adapting physical and digital retail experiences to the rapidly moving target of customer expectations. Front end and back end teams have their own performance metrics (sales and retention versus uptime and speed, for example) and change is often treated like a cost center. The solution to this is to take on a FinTech mindset of putting the customer experience first and foremost. 

On the digital side, a report by Backbase recommends creating a distinct separation between front-end and back-end IT departments. The back-end team will focus on the slow and steady maintenance objectives, while the front-end team is free to make more rapid changes, experimenting, testing, and deploying innovative solutions to match the pace of consumer demands.

In the physical retail branches, designs that shift the focus from transactions to conversations allow financial institutions the flexibility to fulfill customers’ needs on a rolling basis, and make strategic changes without requiring significant physical alterations to the facility.

Ideally, these departments will collaborate and share data to create truly seamless omni-channel experiences that offer tailored services that meet customers’ expectation. For example, a form started on mobile can be completed on a tablet with a staff member, or a recommender system for online messaging or email marketing could provide in-branch staff with recommendations for cross selling opportunities.

Monitor, Evaluate, and Adapt

The key purpose of this meta-strategy is to adapt to and take advantage of change. It cannot be a set-it-and-forget-it strategy, but rather a flexible approach that can learn from successes and failures.

The data you’ve gathered can be used to monitor the performance of both individual strategies and the overall meta-strategy, and this feedback can be used to evaluate whether your organization is on the right path. The data can tell you which strategies are working well and are worthy of increased investment, or it can highlight areas where the strategy is flawed and needs to be re-evaluated.

A retail branch and a branch network strategy that supports it, like any other strategic initiative, do not exist in a vacuum. To maximize your return on investment, it is critical to look at them in the context of the bigger picture. An effective meta-strategy guiding your organization-wide efforts can transform high-level concepts into achievable goals.

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