Below is an excerpt from our white paper, "How Banking Should Use Big Data to Be More Like Google."
In the last few years Google has rapidly expanded into new markets — selling laptops, inventing wearables, producing self-driving cars, etc. And yet nearly 70 percent of the company’s revenue still comes from a single source: Advertising.
Google’s advertising is profitable primarily because of their technique. They soak up loads of data from all the searches performed each day on their system, and they then use that data to deliver hyper-relevant ads to their end users. This relevancy enables Google to charge premium prices for ad space — and marketing departments are happy to pay up. They know it’s all about giving users the right offer at the right time.
Banks and credit unions have the opportunity to enact something similar. Just like Google, financial institutions are sitting on loads of data. Every transaction, every loan, and every checking account contains data that can be leveraged in ways that help their end users have a better experience — just like Google does.
Unfortunately, many financial institutions don’t know how to sift through all the data to find what’s relevant. As a result, advertising at financial institutions is sometimes clumsy and imprecise. For example, in a recent study Gallup shows that 53 percent of fully engaged customers received an ad from their primary bank for a product they already had and 66 percent felt like the offer was very general and could have applied to any of their customers.
Imagine if Google, with all their attention on algorithms and advertising, made these kinds of mistakes. How much would their revenue decline as more and more customers realized that bidding for ad space wasn’t worthwhile? It would be brutal.
The implications for financial institutions are similarly enormous. In their report “Banking Outlook 2014: An Industry at a Pivot Point” KPMG asserts that proper data analytics is key to growth in the digital age. They say, “Banks that develop an infrastructure allowing them to analyze data quickly, that staff up to do that work, and that make revenue-oriented analytics part of their culture, are the banks most likely to grow their top lines.” And a report from the Aberdeen Group found that banks that use analytics to understand customer attrition have a 12 percentage point lead in market share over those that do not. Year after year, a lead of that size adds up.
In short, financial institutions that effectively leverage data analytics and targeted marketing will gain market share for years to come, while those that ignore these benefits will be caught flat footed...
To learn how to effectively leverage data analytics and targeted marketing, download the full paper.