With Big Data Comes Great Responsibility (to Your Customers)

Big Data represents a significant opportunity for banks to enhance the customer experience and boost retention. But digging through massive amounts of data to find the right information on a customer also presents a great challenge to overextended IT organizations.
In 2009, the McKinsey Global Institute estimated that U.S. banks and capital markets firms collectively had more than 1 exabyte -- or one quintillion bytes -- of stored data. In the subsequent years, that figure surely has grown exponentially, as banks continue to amass massive amounts of data on customers.

All that data means there is a prime opportunity for banks to glean information to improve their customer experience and retention. There are challenges, however, to getting there. Banks have talked for years about using data and analytics to get a better picture of the customer -- and with all the data available today, the industry finally may be close to reaching that goal. But how can banks mine the massive amounts of data they've accumulated to pull the most pertinent information that will allow them to best market to a customer, especially when that data is housed in multiple silos?

The problem of how to access the right data from so many disparate locations is a prime concern for many financial institutions, says Emmet Cox, SVP of customer experience for BBVA Compass, a subsidiary of Madrid-based BBVA (US$740 billion in total assets). After all, he notes, all the data in the world is worthless if you can't use it. In fact, Cox says," Data without use is overhead."

For that reason, Cox says, BBVA has embarked on a large-scale project to centralize its data and build a master data set. The endeavor is not going to be easy, he acknowledges, but it will be well worth the effort. "It's not something you do overnight, or within a year, but it takes a three- to four-year strategic plan to do," Cox reports. "The difficulty is huge, but the potential is so great that it far outweighs the cost and complexity." He adds that while the centralized data project is being built, BBVA still has the capability to access the data as it is migrated, and the bank can use the master set as it is being built.

According to Cox -- who was the senior group manager of analytics and insights for Walmart Financial Services before joining BBVA -- financial services companies, while getting better in recent years, lag far behind the retail sector in terms of mining data and using analytics for marketing purposes. But, he adds, most banks now realize the importance of managing big data and likely have some sort of plan to centralize data. "Everyone is going through the same type of growing pains," he notes.

Keeping the Customer Happy

James Gifas, EVP, head of global transaction services (GTS) solutions, U.S., for RBS Citizens ($130 billion in total assets), says mining big data and leveraging analytics play a vital role in customer retention at the Providence, R.I.-based bank. "We employ a variety of proprietary and third-party tools and technologies to facilitate the sales process and to monitor client effectiveness, client usage and client satisfaction," he relates. "We believe this constant interchange of information -- a continuous loop of market intelligence -- enhances the customer experience and bolsters customer loyalty by improving efficiency on their end."

Efficient data mining allows RBS Citizens to be more customer-focused and to develop solutions based on market intelligence and data that "tells us what the customer wants, not what we think they want," Gifas says. "Harnessing customer data also enables us to help identify clients that could benefit from efficiencies, streamlining operations, consolidating banking relationships, and improving the management of their payables and receivables. And it allows us to spot any problems customers might be having -- it could be a training issue, it could be a product issue, it could be a defect in the offering -- that we then can quickly address."

Obtaining such a view of a customer is especially crucial in today's business climate, in which customers have no patience for communication they feel isn't specifically targeted toward them, says David Wallace, global financial services marketing manager for business analytics services provider SAS, (Cary, N.C.). "In general, customers are much less tolerant of interacting with institutions they don't think understand what their needs are," he says.

Wallace notes that the relationship consumers have with their banks is fragmented across more channels than ever before. A bank needs to be able to recognize the same customer's interactions with the institution on the web, via social media, on a mobile app and in the branch, and use that information to try to give customers exactly what they are looking for, he says.

Wallace stresses that banks can best utilize big data by harnessing it to improve service and the customer experience, rather than just for pitching new products. "Across banking, the data exists now to understand how to best serve the needs of customers," he says. "The key is to continue to improve and refine the customer analytics to understand them better, and use those analytics to create and nurture ongoing, interactive, real-time dialogue with customers."

The Vast, Unstructred Data Universe

According to Framingham, Mass.-based IDC Financial Insights, the overall volume of digital content will increase 48 percent this year from 2011. More than 90 percent of this information will be unstructured -- such as images, videos, MP3 files and information on social media sites. This data will be full of rich information, IDC says, but challenging to understand and analyze.

As such, IDC expects to see an increased number of offerings that more closely integrate data and analytics technologies, such as in-memory databases and business intelligence tools, move into the mainstream market. But this digital content will only add to the massive data pile most banks already deal with, notes David Potterton, VP of global research for IDC.

"There's a data explosion," he says. "Unstructured data, like social media, is going through the roof." According to Potterton, banks need to figure out how to effectively store and mine this unstructured data, as this kind of data will soon be a primary way to glean an accurate profile of customers.

SAS's Wallace adds that many consumers interact entirely with their banks via digital channels, so the old data models will have to be reinvented. He says small community banks and credit unions in particular will have the hardest time adjusting to this, as those institutions traditionally have had more personal, face-to-face interactions with their customers. "The challenge for them will be to deliver that same level of customer experience in an environment where you aren't talking to the customer across the table or counter anymore," Wallace explains.

Wallace notes that smaller institutions also may lack the infrastructure to store and analyze big data. As a result, he says, it often is more cost-efficient for those institutions to use solutions on a software-as-a-service basis to help process and analyze their data. "We have seen an increase in the hosted delivery of these kinds of solutions for smaller institutions," Wallace relates.

Ultimately, says RBS Citizens' Gifas, effective management and mining of big data is essential for banks to provide an optimal customer experience and engage and retain consumers. "In today's economic environment, customers are looking to be efficient and nimble and do more with less," he says. "The better information we can provide them, in a usable form, the more we can contribute to their efficiency and, in return, the more loyal they will be to us as their banker."