Customer Insight in Banking Using Analytics for Growth and Retention

webcast summary

Customer Insight in BankingUsing Analytics for Growth and RetentionInsights from an InformationWeek Financial Services Webcast sponsored by SAS Originally broadcast in March 2010

Featuring:

Penny crosman, executive editor, bank systems & technology (moderator)edward Garry, Vice President of Global crm strategy and training, bNy mellonDavid wallace, Global Financial services marketing manager, sas

LoyaLty, RewaRds and VaLue: what do we want fRom ouR CustomeRs?

every bank would like to have a rich well of descriptive and predictive insight about customers. with such a resource, the bank could know, for instance, that savings account customer mark smith just bought a new house and is thinking about a home equity line; that credit card holder sally Johnson has a college-age daughter and seeks a student loan from a local institution; and that John Jones has had two unsatisfactory phone conversations regarding his Ira and is thinking of switching to an online investment site.

the bank that could gain a 360-degree view of the customer’s circumstances and relations with the bank could better meet the customer’s needs and save or expand the relationship.

However, big obstacles stand in the way of this ideal. In most banks, customer information is scattered across disparate databases owned by different lines of business. the insights hidden in those databases should be revealed, shared and published across the institution, but at the same time, data must be kept strictly private and protected. resolving these challenges requires It investment at a time when bank It budgets remain flat overall.

amid these realities, how do you get customer data under control? How do you transform it from information into insight? what do financial institutions gain from customer analytics, and how should it be implemented? these were the topics addressed by experts representing three different perspectives. In the one-hour, interactive webcast:

• Penny Crosman, executive editor of bank systems & technology, outlined 10 key ways financial institutions are using customer analytics to reduce risk and grow customer relationships.

• Edward Garry, Vice President of Global crm strategy and training at bNy mellon, described the governance model and strategy his institution adopted for its successful customer analytics program.

• David Wallace, Global Financial services marketing manager at sas, shared results of a bs&t survey representing a broad spectrum of the industry, from community banks to large national institutions.

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Top 10 Benefits of Customer Analytics in Banking

crosman opened the webcast by presenting a compelling case for customer analytics – in fact, 10 compelling cases for customer analytics, with real-world examples showing how institutions are using analytics for each purpose.

1. React quickly to changes in customer behavior.

“as customers bank online, through atms or through mobile payments, they are sending subtle signals about their preferences and frustrations with their banking relationships,” crosman said. “unless they are monitoring these activities closely, banks often don’t know what customers want or are unhappy with until it’s too late. so some banks use analytics software to watch customer behavior and to detect service problems and sales opportunities.”

minneapolis-based us bank was highlighted by crosman for its use of analytics to immediately spot changes in customer behavior, generate alerts and use that knowledge to make a sale or save a relationship.

2. Reduce customer and counterparty risk.

analytics can help banks monitor the creditworthiness of borrowers and the reliability of counterparties. London-based Hsbc, for example, is renovating its customer data infrastructure, in part to better analyze risk. Integrated customer databases will set the foundation for customer analytics, to enable Hsbc to assess at a glance its exposures to ailing counterparties and troubled clients. It will also be able to create 360-degree views of clients, for instance, gaining consolidated views of a customer’s accounts in multiple cities around the world, to decide whether or not to extend more credit to that customer.

3. Reduce operational risk.

“basel II rules are making banks look more closely at their operational risk, and here too, analytics have been playing a role,” said crosman.

For example, unicredit bank austria implemented a unified data warehouse with an overlay of analytics to reduce the operational risk associated with inconsistent reporting or silo views. Previously, the bank’s various business units had their own systems that stored and calculated disparate versions of the same market data.

“the bank implemented a unified market data warehouse and ran analytics and mathematical models on top of that,” crosman said. “redundant systems were eliminated, and data quality and traceability were improved. the time spent each day on manual data management tasks was reduced from several hours to less than 30 minutes, enabling employees to focus on more important tasks.”

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4. Fine-tune marketing campaigns.

analytics hasw long been used in retail environments to improve marketing campaigns. banks were not the first to adopt analytics for marketing, but within banks, marketing departments have been among the first to recognize the value.

First tennessee bank is a prime example. “the bank brought in customer analytics to test its assumptions and to create product propensity models,” said crosman. “For instance, the bank’s marketers might have an assumption that 45 percent of customers who open checking accounts also open savings accounts. the marketing team inputs the numbers around each campaign, analyzes the results and adjusts its models accordingly. more recently, the bank has been using its customer analytics platform for predictive analysis, for instance, to forecast revenue and make sure a campaign has acceptable return on investment before it is launched.”

5. Predict the right communications channel to use for each customer.

Ideally, banks would like to determine the best combination of price and response rate for different customers and segments, by product. First tennessee is developing a system to provide those answers – a predictive model that helps determine which channels are important to each customer, according to customer preference, while factoring in the cost of that contact channel to the bank.

“this will be a combination of calculating the likelihood of response and likelihood of spend,” crosman said. “If a model predicts that a customer will bring in $100 worth of profit, and there’s a 60 percent chance that person will respond to a phone call, then it might make sense to add that person to a telemarketing campaign, even though a phone call costs two dollars versus two cents for an e-mail.”

6. Efficiently provide branches with lists of solid sales prospects.

bb&t, a winston-salem, Nc-based financial holding company, analyzes a combination of household data and product ownership data every month, and then supplies each of its 1,400 branches with a list of customers most likely to show interest in additional bank products.

For example, customers who have a direct deposit account and credit card through the bank might be good candidates for a debit card promotion. customers with a bb&t checking account and mortgage are good prospects for a home equity line of credit. these reports to the branches formerly took two weeks a month to produce. Now they are generated in less than a day.

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7. Manage debt collection.

capitec bank, a retail bank in capetown, south africa, recently began using customer analytics to help with debt management and collection. the software identifies capitec customers who have fallen behind in their payments and flags those who might be having financial difficulties. the bank also uses analytics to segment the customer portfolio into customer types so it can assign the right type of collections effort to each case.

8. Catch criminals right away, before they leave the branch.

In an unusual application of customer analytics, union savings bank in Danbury, ct, has reduced fraud by 80 percent in its 18 branches using facial recognition technology, video analytics and customer data analytics. the bank connects teller operations data to its video surveillance platform to locate video footage of individual transactions. It can then do cross-searches and search video by account and transaction type, so when a fraudulent transaction takes place, the system finds the face of the perpetrator, which speeds up the identification and prosecution of criminals.

9. Detect credit card and online banking fraud.

banks have long used analytics to detect card fraud, but recently they have begun using similar techniques for analyzing customer activity, looking for unusual behavior that might indicate online banking fraud. wells Fargo, for instance, profiles every online banking user and monitors behavior to watch for unusual events. “For instance, if a customer suddenly logs in from a different address, that could indicate foul play,” crosman said. “If they’ve never used online bill pay before, and they suddenly use it, or if the frequency of their payments goes up dramatically, those could also be red flags.”

10. Provide better research and reports to salespeople.

some banks use customer analytics and customer relationship management (crm) systems to improve the sales tools they give their salespeople. bNy mellon standardized on one common crm platform and applied analytics to it to reveal new insights about sales opportunities with its financial institution and enterprise customers. armed with this analytically derived information, salespeople can give more timely, targeted and relevant presentations to customers.

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The State of Customer Marketing in Financial Institutions Today

according to an informal poll of the webcast audience, there is considerable room for improvement. when asked to rate their organization’s current situation, only about 14 percent said their customer strategy “was very effective”; 58 percent described it as “somewhat effective”; which leaves the remaining 28 percent apparently none too impressed.

what gives? why are some institutions able to mine customer data to optimize customer relationships and value, while other institutions struggle to simply understand the totality of the customer’s relationship with the bank? why are some capturing the most profitable accounts while others are unwittingly alienating them?

the answers can be found in the results of a bank systems & technology online survey conducted in November 2009, which showed that few institutions take full advantage of technology solutions that can make the difference.

the 272 survey respondents represented a diverse cross-section of the financial services industry, evenly split between institutions with greater than $5 billion in total assets and those with less than $5 billion in total assets. about one-third of respondents were from regional or national institutions with assets of $50 billion or more. about 30 percent were from community banks and credit unions. there was also an almost even split between respondents from business groups and technology groups within those institutions.

when asked about the challenges their organizations face in trying to optimize customer relationships and revenue, the most prominent issue that came up was also the most fundamental: simply managing customer data. that’s bad news, because even the most sophisticated analytical tools will be ineffective if they draw on bad data. the good news is that data quality and data integration challenges are readily resolved with available technologies.

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■ the challenge is not just with the size and growth of customer data, but also with those interactions and behaviors getting organized, cat-egorized, analyzed and distributed in a way that provides the lift that executive management is expecting.

David M. Wallace Global Financial Services Marketing Manager, SAS


to what degree have banks adopted technologies for turning data into usable customer insight? according to the BS&T survey, they have started on the right path. about two-thirds of respondents said their institutions are using some type of customer analytics technology; more than half are using technologies to assess risk and customer profitability.

“the results raise two interesting points though,” said wallace. “First, customer marketing projects often succeed or fail based on the degree of focus on data integration, yet less than one-half of the respondents are using data integration solutions. the second interesting point is that fewer than 40 percent of respondents are using analytic tools for online customer and web insight. this is very fertile ground for growing relationships with customers at the point of their digital interactions with the institution.”

what tools and technologies are being used to manage customer interactions across channels? It is no surprise that a majority of institutions use campaign management and e-mail marketing tools. slightly more than one-third are doing real-time decision making, contact optimization and managing contacts with event triggers.

“this is interesting because, with more and more of our customers, clients and members doing business with the institution through digital means, the customer relationship can be much less ‘sticky,’” said wallace. “as institutions, we need to make sure we have a responsive and fulfilling relationship with those customers on a digital basis, since we may never actually see them in person. real-time decision making and event triggers are some of the technologies that optimize those digital interactions at the point in time when the interaction actually occurs.”

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■ we must make sure that we have a responsive and fulfilling relation-ship with customers that we may never see.


■ at sas, we believe that the use of customer analytics solutions is key to turning the mountains of customer data into actionable infor-mation that can be used to expand and grow the relationships with each customer, client and member.



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the bs&t survey indicated that the use of marketing performance reporting tools is widespread (61 percent), but the use of marketing optimization solutions is not (31.3 percent). “this is an area where increased focus could yield big results for institutions,” said wallace. Institutions that can track campaign results at a granular level can feed that information back into the system to further optimize the next campaign, and the next.

■ being able to track each customer interaction, and the success of every campaign, and then feeding that information back in a closed-loop way to determine the best method to execute future cam-paigns is a key to success.


■ real-time decision making and event triggers are some of the tech-nologies needed to optimize each digital interaction at the time of the interaction occurring.


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Constraints to Adopting Customer Analytic Technologies

If tools for data integration, real-time decision making, contact optimization, event triggers and marketing optimization are out there – available as packaged, custom or even hosted solutions – why would any institution not take advantage?

the answer banking professionals give is not surprising in this economic climate: cost. even though analytical solutions pay for themselves, they do require up-front investment in dollars and people. In the webcast poll, about 40 percent of respondents acknowledged that their institutions had technology shortcomings, but 63 percent said tight budgets were an ever-present constraint.

a good percentage of them do see a brighter future for deeper customer insight. they report that in the next 12-24 months, their institutions will likely invest in customer analytics (46.7 percent), data integration (39.3 percent), customer profitability (35.7 percent), and risk analysis and assessment (31.6 percent).


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“It is interesting that less than 30 percent of respondents foresee their institutions investing in technologies for online and web customer insight,” said wallace. “I would mark this as an area of concern.” Nearly half of respondents (45.6 percent) report plans to increase investment in e-mail and mobile marketing; will the tools to analyze and optimize those interactions keep pace?

Not in the short term, according to webcast audience members. when asked where their institutions plan to make technology investments in the next 12 months, the biggest focus remains simply managing the growing volume of customer data (37 percent).

the ability to extract deeper insights from that data is perhaps still a future priority for some. Fewer institutions are planning investments in those areas: predicting customer behavior (18 percent), detecting and redressing customer service issues (14.8 percent), profiling and segmenting customers (11.1 percent), improving direct and indirect marketing campaigns (11.1 percent), and measuring and reporting on marketing performance (7.4 percent).

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Global Customer Relationship Management at BNY Mellon

bNy mellon is a global financial services company whose customers are financial institutions, corporations and high-net-worth individuals. the company provides services in asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide, client-focused team.

bNy mellon once faced the same customer relationship management challenges as any large organization, said ed Garry, Vice President of Global crm strategy and training. “we had multiple reporting platforms for sales data, multiple touch points to manage for each customer, multiple databases that yielded multiple sources of the truth.

“I spent 13 years in the retail banking business, and the questions and challenges are very similar. whether you are managing b2b or b2c relationships, you want to know, ‘who is my customer; how do I service my customer; and what does the business look like?’”

to answer those questions, bNy mellon developed a global crm solution that 2,500 active users rely on to manage more than 60,000 customer relationships, representing some 200,000 contacts and 90,000 call reports to date. the system provides a detailed analysis of the sales process, including new business opportunities, active and closed opportunities, even competitor activities.

executive management now has a “single source of the truth” for sales reporting, employee performance management, cross-selling and customer relationship management. sales executives have a 360-degree view of the client relationship and the sales process associated with that relationship for the entire relationship cycle. sales representatives get a richer and more productive set of contact referrals and sales propositions.


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Consistency and 360-Degree Visibility Across the Global Organization

“everyone is using the same platform across all lines of business,” said Garry. “we find that to be a unique value proposition that we have, [and] that other financial institutions are looking to develop. It is definitely a competitive advantage for bNy mellon.”

the companywide sales tracking and coordination system enables the institution to perform as a single, integrated solutions provider, rather than an assortment of silo lines of business. “we want to be sure that when sales executives sit down to talk with clients, they understand the totality of the relationship with the customer and can talk intelligently about other relationships the customer has with the institution,” Garry said.

“with a consolidated view of each client, we can focus more on solution selling, where we can look across our product lines and across the customer’s needs and put together not just a product sale but a more holistic value proposition for the customer.

“with a laser focus, we have also identified relationships where maybe we have not had a complete product or we haven’t met the client’s needs when it comes to service, and it has allowed us to take a step back, re-evaluate those relationships, and see how we can change and restore the relationship.”

A Focus on Opportunities

Naturally, the crm system at bNy mellon has full-featured contact management capabilities. “but unlike other crm solutions that are focused around the contact, we have taken a different approach,” Garry said. “we built our crm solution around opportunities. Our goal was to provide a single source of truth around sales opportunities - across all b2b lines of business, all regions and all customers.

“we felt that if we understood our customers and the opportunities we have with them, we can better service that customer, understand and anticipate future needs, and help drive additional business and solutions for them.”

cross-functional sales teams are formed to match each opportunity. there are salespeople – product experts, essentially – in each line of business, such as issuer services, asset servicing, wealth management and broker-dealer services. Larger customers, whose relationships with the bank span multiple lines of business, are served by a Global client management team that coordinates and manages the total relationship.

“Global client management is that premier customer’s face and contact into bNy mellon,” Garry said. “the Global client management executive will pull in the appropriate line-of-business representatives to make up a sales team for each identified opportunity. there could be different sales teams for each opportunity, but everything is coordinated through that Global client management point of contact. so we have a cohesive sales team that is driven together and organized through technology to present one face to the customer.”

■ “ we have standardized, stream-lined and formalized our sales process and the tools we use. If it isn’t in the crm system, it didn’t happen.”

Ed Garry Vice President of Global CRM

Strategy and Training, BNY Mellon

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Enriching CRM with Business Intelligence

at bNy mellon, business intelligence has been implemented as an overlay that sits on top of the crm solution. “It is a vital component to crm that focuses on aggregated sales reporting and the success associated with a consultative sales methodology across multiple lines of business,” Garry said.

“Our first goal with respect to business intelligence is to deliver information that is relevant to users and their roles, so it is not cluttered with information that does not relate to their customers, their sales process or their activities, but only the information that matters to them. the second piece is that we want something actionable to come out of it, to tell them how to take action in a timely manner. so all of the elements we’ve built into this crm solution come up with some type of actionable result. It helps the salesperson come up with a strategy and better manage [the] sales process.”

Closing Thoughts

“we all have data, and it’s growing exponentially every year,” wallace said. “the question becomes, how can we manage and leverage our customer data in a way that helps us grow relationships with each customer, each segment and in each geography? and how do we do that effectively in the current economic climate, where our executive management team is either saying, ‘Do more with the same,’ or more probably, ‘Do more with less’”?

wallace and Garry provided tips for financial institutions seeking to augment their customer relationship management tools to generate deeper and more valuable customer insight:

Collaborate. “consider the governance model and support that will drive this solution,” Garry said. at bNy mellon, functional analysts, business analysts, trainers and relationship managers collaborated to define system requirements – in synchronization with technology and consulting partners. all of these groups overlap, because there are synergies and dependencies among them. bring them together in designing the system and determining how it will be supported.

Leverage analytics. what passes for “analytics” in many banks is not much more than slicing, dicing, sorting and drilling the information for hindsight reporting. even if you can gain consolidated and detailed views, it is not enough to know what was. Descriptive and predictive analytics can uncover deeper value from existing data resources, revealing hidden opportunities and pointing the way to the most productive initiatives.


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Track online behavior. “at a time when digital interactions are increasing with all types of financial institutions, firms should really focus on tracking, examining and understanding online behavior as well as offline,” said wallace. Firms cannot afford to ignore the rich new possibilities for gathering customer insight and better servicing online customers.

Create a cycle of continuous improvement. close the loop by measuring the impacts of interactions, and using that knowledge to refine models and improve future marketing activities. “you can really maximize performance by tracking all customer interactions and the success of each marketing campaign, then constantly feeding this information back into the system to improve and refine results,” said Garry.

above all, don’t be afraid to embark on this path just because you’re not prepared to solve every problem with your available data. that would be unrealistic anyway. even global bNy mellon focused its efforts on achievable realities, addressing the sales teams’ highest priority issues.

“being a global solution across all lines of business, it is not going to meet every challenge out there,” Garry noted. “It is not going to solve every issue that our sales representatives have. but we took a very strategic approach in identifying the primary pain points that are consistent across all lines of business and created a solution to address them.

“we have achieved one single source of truth across the entire organization, across all regions, to measure success and have a clear understanding of what is happening with our customer relationships. and we have provided tools to answer the questions that they told us keep them up at night.”

to view this webcast on demand, visit: www.sas.com/bankinginsight

For more information, please visit: www.customerinsight.banktech.com

www.sas.com/industry/banking

Advice from SAS: Five Key Marketing Strategy Components

1. Track, examine and understand

customers’ online and

offline behaviors.

2. Leverage analytics to develop

deep insight on your customers.

3. Get, increase and retain

customers, while cross-selling

and up-selling to increase

wallet share.

4. Optimize each customer contact

with a carefully planned campaign

that draws on intelligence derived

from the analytics efforts.

5. Maximize performance by

tracking all customer interactions

and the success of each

marketing campaign, then

constantly feeding this information

back into the system to improve

and refine results.

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SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration. Other brand and product names are trademarks of their respective companies. Copyright © 2010, SAS Institute Inc. All rights reserved. 104462_S51021.0410

Customer Insight in Banking Using Analytics for Growth and Retention

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