Banks Not Using Data Are Dead to Consumers

Posted by Jeff Pelliccio on Jul 30, 2018 9:00:00 AM

In ICS insights, hiring trends

Today, using customer data is something that’s necessary for a wide array of performance indicators, which are beyond the usual cost reduction: process improvement and revenue for banks. Therefore, data has to be utilized to help enhance the consumer experience and to deliver superior business results.

In an effort to get ready to succeed in a banking environment that is becoming more and more competitive, credit unions and banks need to be intelligent organizations that enable insight-led, fast decision making. Today, more than ever before, the best of the best financial institutions are going to leverage new talent, analytics, and data to help transform their organizations internally and to engage with their consumers to meet the ever-changing expectations they have.

Growing consumer expectations, exploding data availability, and new digital technologies are now the driving forces behind the need for credit unions and banks to completely transform the way they do business and to move toward being more intelligent organizations. In fact, according to a recent study:

  • Almost 80 percent of all organizations are now concerned with competitive threats and disruption, especially from newer, digital-savvy companies.

  • Data is now a main driver of the competitive and operational advantage. With that said, approximately 80 percent of the respondents from the aforementioned study estimated that 50 to 90 percent of all their data is unstructured from several sources. There are few who are adequately prepared to leverage the data for the consumer’s advantage and in real time.

  • While having a strong strategy regarding customer experience is the single most significant driver of internal agility, approximately 50 percent of enterprises have said their back office is not capable of supporting a seamless digital flow.

In order to win in today’s modern market and ensure viability in the future, it is crucial for organizations to capture the value quickly, to change direction at pace with others, and to deliver and shape new services and products. Additionally, organizations need the ability to maximize the use of “always on” data and intelligence in order to predict, sense, and even act on market developments and the changing customer.

Even though the future may seem somewhat ominous, more than 40 percent of all executives believe there are more opportunities than there are threats compared to just two years ago. The key to this is being able to break down all the silos and to leverage insights and data in order to support both external and internal business needs.

The Five Essential Elements of Intelligent Organizations

There are five main ingredients of intelligent organizations that work to contribute to an impactful and lasting business process transformation. These work to provide the solid foundation for a responsive, flexible, and agile organization that is able to act quickly to the market and to consumer changes, as well as put the business in a better position to achieve success.

1. Innovative Talent

It is important to understand that the talent of tomorrow needs to have creative problem-solving skills, along with strong operational, domain, and digital expertise. This requires organizations to revise the function of their human resources department, as well as recruiting efforts to ensure they leverage the open talent marketplaces.

2. Data-Driven Focus

Advanced analytics and data can help organizations generate the required customer insights in order to meet expectations. This includes a strong and data-driven strategy that works to leverage both unstructured and structured data from both external and internal sources. The main differentiator will be how well a certain organization is able to turn data into actual insights and then actions.

3. Applied Intelligence

By combining analytics, ratification intelligence, and automation, companies will have the “holy grail” of the process and business transformation. With these powerful tools in place, they require the combination of transformed back-office operations, along with technology and creative talent.

4. Harnessing the Power of the Cloud

With the combination of leveraging the power of cloud technology and infrastructure with modern legacy systems, there’s a massive increase in advanced analytics and data now and in the future. While there are many organizations that have plans to replace their legacy back offices, due to the process being slow, the rewards are extremely significant.

5. New, Innovative Ecosystems of Open Banking

It’s clear that actively partnering with fintech organizations to expand and build a customer-focused ecosystem will to help to enable organizations to exploit better market opportunities. There is more good news – traditional business service providers are working to collaborate with more and more outside organizations on the behalf of various smaller partners in order to help enable positioning that is able to compete with the larger players out there.

If you wish to remain competitive, then a financial organization will need to utilize the dual business strategy of investing to become a more intelligent organization, while still reducing overall costs to remain on par with the digital-first financial service organizations. There are quite a few studies that believe that the legacy organizations may have developed a cost structure that is a minimum of 25 percent more than their digital competitors.

The Marketplace Challenges Continue Creating Ongoing Headwinds

Even though all of the surveys that have been done in the previous 24 months have placed an improved customer experience at the top of the list when it comes to a financial institutions' business priorities, the survey respondents show that top-line growth is the number one challenge, along with being able to generate profitability. The next biggest pressure is to stay competitive, to improve the customer experience and to boost overall productivity.

When questioned about the drivers that were impacting the business strategy, the respondents to the survey had noted the ability to make much more predictive and data-driven decisions – all in real time, followed by more personalized customer interactions, then creating digital experiences, rather than physical engagements, and to remain ahead or at least match the various digital disruptions. Something that most financial institutions can agree on is that they need to reduce overall costs.

Intelligent Operations that are Driven by Customer Expectations, Digital Technology and Data

The key to overall competitiveness and the survival of banks, credit unions, and other banking organizations, now and in the future, lies on the ability to make data-driven and contextual decisions that are based on real-time data. Unfortunately, the majority of organizations currently have much more data available than what they are using, and the ability to convert the data into actual insights and finally to an improved consumer experience is currently impossible.

The basis of quite a bit of this challenge is the increase in the unstructured data, which is often unprocessed or is simply inaccessible. When referring to unstructured data, this typically relates to voice messages, paper-based documents, web content, videos, digital pictures, consumer conversations, and social media feeds, which all provide deeper insights into member and customer needs and behaviors, and eventually the ability to provide superior experiences.

In addition to the threat of data explosion, is the actual realization that today’s digital technology is now opening the door for new experiences and competitors. The need for transforming a digital banking organization goes past the mobile experience, which includes the digitization of processes and the back-office operations. The main challenge is presented by the siloed internal processes, which is something that 80 percent of organizations has referenced as a barrier that is preventing them from achieving their overall business goals.

Understanding the factors here and utilizing data to its full potential is something that banks and other financial institutions are no longer able to ignore. In fact, doing so can lead to a wide array of issues and other problems now and in the future.

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