Modernization = Speed?
November 15, 2022 | 1 min read
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February 16, 2021 | 0 min read
Data-enabled disruption has overtaken key industries again and again, perhaps most famously when Netflix and Amazon overpowered competitors from Blockbuster to Sears.
To get a sense for how massive this change has been, look at how Amazon’s market capitalization grew from 2006 to now — an increase of more than 5000% compared to a increase of roughly 30% for Walmart and a decrease of 100% for Sears.
The primary benefit Amazon provides is an effortless, one-click experience where products show up on your doorstep two days after purchasing them, and data powers everything behind the scenes.
It works like this: The more engaged users that Amazon has, the more user data they acquire. This data helps them offer a more compelling experience to these users (and promote their own products), which in turn drives up the number of profitable users. The whole cycle is a flywheel that spins faster and faster with each turn, widening the gap between Amazon and their competitors.
Financial institutions and fintech companies can and should leverage this same data flywheel effect. After all, they collectively capture trillions of data points, creating a goldmine of essential insights on end users.
To do it well, focus on data aggregation, data enhancement, data analytics, and data discovery. All of this represents the foundation of all effective digital experiences.
You have to lay the right foundation.
Financial data aggregation enables users to see all their accounts and transactions in one place. For example, if ACME Financial offers account aggregation, users can log in and view data from potentially anywhere they have a financial account — all through ACME Financial banking portal. In short, aggregation turns ACME Financial into a one-stop financial hub.
The process generally requires either “scraping” a financial institution’s website by mimicking human behavior or connecting directly through a data exchange. Of the two, connecting via a data exchange is a vastly better experience since it’s the fastest and most secure way to aggregate financial accounts.
However it happens, data aggregation empowers both the end user and the financial institution. The end user sees all their finances in one place, and the financial institution gathers all the data it needs to best help their end users.
Of course, it’s not enough to just aggregate data — largely because raw transaction data is often totally incomprehensible. Who knows what a transaction description like CSI-308613/22120-CHV refers to?
The fact is that consumers feel frustrated with unclear transcription descriptions, with 71% of consumers saying it happens at least yearly and 17% saying it happens at least once a month, according to an MX survey of 1,000 random U.S. consumers.
This results in user frustration, complaints to your call center, and a negative perception of your brand. In addition, it does little to help you understand your account holders. How can you make use of the data to empower people to be financially strong if the data isn’t clean?
If you’re going to fix this problem, you’ll want transaction data that has been cleansed, categorized, and augmented.
When your users can’t understand a transaction description, they don’t get upset with the vendor or the card provider. They get upset with you. They dial in to your call center and drain your employee’s time. You can prevent this problem by cleaning all descriptions.
Your users are looking for help with their finances, and they don’t want to spend all their time tracking their spending habits. By adding automatic categorization to your transaction feeds, you help these account holders better manage their money while improving user loyalty, driving revenue growth, and paving the way for future technology.
When you properly classify transactions, you can see which of your users’ transactions are marked as bill pay, direct deposit, fees, and more — giving you the ability to more precisely target end users. For instance, you might target account holders who use bill pay with your competitors to use bill pay with you instead (amping up your bottom line). You can also bring in additional metadata to make the data even more useful.
Enhancing financial transactions in this way — through cleansing, categorizing, and augmenting — sets the right foundation for not only a better mobile experience but also for whatever the future may bring. For instance, if you want to offer voice-assistance or AI-enabled features, you need clean data. (These features are useless without it.) As Ron Shevlin, Managing Director of Fintech Research at Cornerstone Advisors, asks, “If you don't have good data and analytics capabilities, what good will an AI-first strategy do?” You have to lay the right foundation with data before you start dreaming of an advanced user experience.
Do you know how many of your account holders use your digital products at least weekly? Do you know how many have aggregated an external account? Or what percentage have a loan with you? If you have this information, is it easily accessible — or is it buried in a database that’s difficult to view?
To transform into the digital era, you’ll want all essential data to be instantly available via a realtime dashboard.
This might include:
Credit Card Data
By putting your financial data to use, you can create better money experiences, which in turn lead to more users — leading to more data. Financial services companies that start cranking with this data flywheel today will have a tremendous advantage in the future.
Want to learn more about how you can win the future of banking? Read the Ultimate Guide to the Future of Banking or schedule a demo with us so we can show you how MX can help you start the financial data flywheel today.
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