The world still hasn’t fully recovered from the financial crash of 2008, and financial services firms face even more challenges ahead with a new era of regulatory oversight and the rise of non-banking competitors. Customers are also demanding more transparency and new ways to bank through whatever channel they choose.
Despite these challenges, the projected value of global financial assets is expected to reach US$371 trillion by 2020, an 87 per cent increase from 2010, according to the McKinsey Global Institute. That means there’s plenty of opportunity for firms who are able to tap into this market.
But many firms are trying to run new applications or execute new business strategies on siloed, legacy infrastructure. While they may understand the need to provide better customer service, develop new markets and roll out innovative products and services faster than their competitors, they’re hampered by duplicate IT processes and inflexible technologies.
“The data-rich financial services industry has not yet truly been able to leverage the mountains of information residing on their servers across organizations and external locations,” according to HfS Research. But this data could be used to grow revenue, improve efficiency and quality, and provide better customer support.
While most financial services firms are at some stage of integrating their customer data, many industry watchers point to predictive analytics as a way to separate the leaders from the followers in an industry that favours the fastest and smartest.
If a firm is looking to improve customer service, insight from predictive analytics — such as which channel they’ll use to interact with the bank for certain transactions — can be used to create strategies that offer personalized service, product offerings and multichannel experiences across touch points. This, in turn, can help to attract and retain customers.
They can also gain insights into buying behaviour, product usage, profitability and risk, which can help deliver the right services at the right price to the right client segments.
Before they can start taking advantage of these insights, however, they need to align processes, operations and technologies using a common architecture?and infrastructure platform. That means centralizing operational data and processes across consumer, commercial banking and payment channels.
With better information, firms can address regulatory requirements and risk while improving services. A recent report from Aberdeen Group found that financial services firms that used predictive analytics saw a 10 per cent increase in opportunities for identifying new customer opportunities and an eight per cent increase in cross-sell and upsell revenue.
Industry watchers say financial services firms need to move beyond regulatory compliance to focus more on creating customer value. Those firms leading the pack are already discovering benefits such as better customer acquisition rates, increased revenue per customer and lower operating costs — and are better poised to tackle the challenges of the days ahead.