How Financial Institutions Can Use Big Data and Converged Data Sets to Improve Customer Loyalty

Read a newspaper, listen to a streamed radio broadcast or go online and you’ll find the term Big Data still scoring major press and a topic of significant conversation across multiple industries. But what is Big Data? What is its relevance to the customer experience for financial services brands? And why is all of this important?

Let’s start with the first question. At its most basic, Big Data refers to the accumulation of massive amounts of information from many digital channels and the analysis of that data in order to derive granular customer insights and behavioral preferences. It’s about turning the data noise into a clear and actionable signal.

While many financial services companies are well-versed in some aspects of Big Data – electronically gathering customers’ transaction histories since the 1960s and 70s – the use of that data to fuel competitive advantage has been limited. For financial services institutions to continue reaching and engaging customers with relevant information, it is critical they broaden their data horizons, using the latest CRM software to do it. That means deepening customer relationships using omnichannel tactics – an enterprise-level initiative to drive, track, measure and reward incremental behavior throughout the enterprise and customer experience- to market themselves as distinct brands. Doing so evokes genuine loyalty based more on reciprocal emotional status and less on transactional behavioral triggers.

What does the loyal financial services customer profile look like? And what motivates the customer’s continued brand loyalty? For some, that brand buy-in is based on incentives like higher interest rates on savings accounts, fraud protection, the reimbursement of ATM fees or features such as smartphone apps that allow check deposits and other transactions. For others, bank loyalty is more about the path of least resistance. Young adults join their parents’ bank or become customers by default as one institution merges with another. The result is that bank cards and their loyalty programs become mechanisms for disposable cash and there’s no rational use for customers to use them beyond their face value.

While the 2013 Maritz Loyalty Report found that 73% of respondents are pleased with their financial services sector loyalty program, it also found that more than half, 53%, dropped out of at least one loyalty program in the last year across all verticals, including financial services. This is not the most encouraging picture.

Used correctly, however, Big Data can fundamentally change this picture by revealing how to better earn customer loyalty beyond ATM withdrawal free reimbursements, free checking or family history. That way, in future surveys, there won’t be a disconnect between overall loyalty satisfaction and customer experience and moderately high program dropout rates. Here’s how:

• Banks should be thinking more like other verticals, marketing their uniqueness in omnichannel ways. They should also expand beyond transactional datasets to include consumer “lifestyle metrics.” That way a bank can offer something truly distinct. For example, a customer donates 2% of his or her annual income to charity. Rather than distributing generic points toward discounts via branded credit cards, banks can incentivize loyalty by offering a selection of charities for this customer to choose from and donate. This demonstrates a financial institution’s tacit recognition of the customer as a person with interests beyond simple banking transactions. As for customers, it tells them: “this financial institution cares about the ‘whole me,’” driving a new level of loyalty commitment.  

• Another example is gamification, adopted by many verticals as an effective way to engage members and customers. Gamification’s particular strength (in this context) comes down to graphic visualization. Let’s say that in addition to offering customers charities from which to choose, a financial services provider also showed images of how many mosquito nets or lanterns or bottles of fresh water their donations directly purchased. Measures like this turn banks into places of genuine experiences and not just places to deposit money. It also strikes an emotional chord with the consumer – so much so, that under ideal circumstances loyalty becomes a moral obligation.

• Speaking of shopping, banks can learn about non-banking transactions only if they partner with other verticals, like retail stores, grocery chains and travel and hospitality brands, converging datasets under one de-siloed roof. That’s because this – rather than a bank branch or a mobile app – is where most consumer transactions live and evolve. Grocery stores are a great example as food store purchases reveal a tremendous amount of personal shopper information and lifestyle habits. Does your financial services customer buy ethnic foods? Do their travel habits suggest that they fly to certain regions of the world where those dishes are indigenous? Big Data can and does measure these types of metrics.

The key for banks is to combine that data with their existing customer profiles, using the latest CRM software to organize the merger. That ensures the next time a customer walks into a bank branch or accesses that bank’s mobile app, there will be an offer incentivizing their travel on an airline which flies to that region or offers discounts for signing up additional family members – especially if they’ve just moved to the US. And to think this level of granular analysis and improved customer experience began with what a shopper purchased in Aisle 6.

While Banking on Big Data Loyalty Success, Privacy is Big Must

Of course, adopting these techniques isn’t easy. Considering consumers’ data privacy concerns – 89% of US adults worry about their online privacy and 43% do not trust businesses with their personal information – data convergence must be accomplished carefully and with the right legal safeguards in place.

But if that delicate balance is successfully struck, the results can be truly impressive. For instance, Bank of America’s newly revamped loyalty program, Perks Advantage, already employs some of the above tactics, including tailored customer-centric rewards and charity-of-choice donation. The Royal Bank of Canada (RBC) has also upped its loyalty game and now offers the purchase of wide ranging product offerings – including gifts for pets like carriers, dog feeders and “doggie loungers.” And in recognizing the dollar value of eco-friendly purchases, Wells Fargo Rewards® has a subsection dedicated to a variety of green products like reusable shopping totes, bicycles and battery-powered chains saws.

Ultimately, loyalty is about trust and transparency first. And it’s in brands’ interests not to abuse Big Data and converged data sets but channel them into their most effective consumer engagement tool. Doing so allows financial services brands to expand beyond their traditional loyalty offerings and provide customers genuine experiences they never would have believed could come from a bank.

Bram Hechtkopf is the vice president of business development and marketing at Kobie Marketing, a provider ofloyalty solutions aimed at improving customer experience and engagement.