Banks are Sitting on a Goldmine

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In the digital age, information is power. But if this is indisputably so, why aren’t banks omnipotent? Consider the magnitude of data to which they have access: personal, credit, financial, and perhaps most importantly, transactional. And yet with all of this intelligence, it is just the opposite: half of the small banks are on the endangered species list.

The real-time nature of transactional information opens doors to a whole new level of marketing, which the tech giants are anxious to get their hands on. Apple Pay, Apple Card, Google Pay, and Facebook Libra are all attempts by big technology companies to increase their access to this coveted transactional information.

It doesn’t take a sophisticated artificial intelligence algorithm to notice that a moving truck, Babies “R” Us, or a wedding cake purchase are indicative of key life events. These and other transactional event triggers are not only important to selling financial products, but also numerous retail products and services. With the appropriate privacy constraints, banks could leverage this information for entirely new revenue streams to counter their tightening margins.

So with all this power at their fingertips, why aren’t most banks using transactional information in their marketing? Historically, banking has been face-to-face interactions in a branch. Even today, most checking accounts are opened in a branch. It was up to the branch employees to “Know Your Customers” and notice when a customer stopped depositing checks or had a new baby. The most important marketing decision was the location of the branch.

Banks have embraced digital banking, but most of them rely on core service providers that control the transactional information. Some of these core service providers have even been known to charge banks for access to their own customers’ transactions. Most bank digital marketing efforts are targeted on new customer acquisition. Very few combine the behavioral, CRM, and transactional information to determine the next best customer action.

FinTechs have started generating valuable insights from the transaction data, but often require the customers to log into their online banking to view them. These insights often provide the perfect trigger for a marketing cross-sell, such as a bank noticing a customer’s large deposit or tax return and subsequently advising them to open a savings account.

Some banks are making money with FinTechs partnerships that offer merchant discounts. Customers opt into offers based on their transactions or location information; for example, a customer receives an offer from Wendy’s after eating at the local McDonald’s yesterday, or the offer appears as they drive by a Wendy’s location.

Account aggregation and transaction categorization are often offered by personal finance management tools. Account aggregation provides customers a centralized view of their accounts and transactions from other institutions. Categorization of transactions is used to group transactions into predefined categories like home, car, food, leisure…. These tools help customers establish financial goals, monitor spending or create budgets. However, their real value is in the data generated from adding transactional information from other banks and categorizing them. Imagine sending a customer a push notification every time a competitor bank changes them a fee. Some personal finance management tools are asking customers to categorize their transactions or verify a transaction as soon as a transaction occurs.

Few banks have taken the next logical step and provided targeted, relevant, real-time financial cross-sell opportunities based on their customers’ transactions. This is a great way to establish trust and loyalty with existing customer base and enable banks to increase their share of wallet in a cost-effective way.

Mining transactional data, defining insights, developing customer journeys, and proactively pushing the right content to the right channel at the right time is a significant undertaking. It requires a number of platforms, integrations, and regulatory concerns.

DigitalBankingTransformation.com provides the subject matter expertise to define the digital marketing and digital banking strategies, identify strategic partnerships, optimize the experience, and deploy in a cost-effective way.

Get Started by emailing info@DigitalBankingTransformation.com

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