Innovations in banking have happened since 1880 together with the technology boom. Now, the key drivers of innovation can come from Big Data, Dark Data and the 720 degree view of the customer.
Big Data is described as very large data sets where conventional methods of data processing are not applicable. According to IBM, this data increases at a rate of 2.5 exabytes per day. An exabyte is equivalent 1 billion gigabytes.
Financial institutions are originally thought to be in the money business however, they are actually in the data business. The challenge of making sense of the contents of the Big Data can be a key driver in developing new innovations in banking.
Banks hold data in very large numbers imagine credit card numbers, ATM and online transactions are just some examples. Making sense of all these to identify profitability for customers, developing new market channels and mining customer needs can be beneficial to financial institutions like banks.
Many companies only make use of about 5% of the data that they collect and the challenge for many financial organizations like banks is to make use of the data that is under-utilised and unused. This is known as Dark Data.
New banking innovations can try to make use of this so called Dark Data. Google and PayPal have been pioneering in the collection of these data. By using these data companies can understand customer sentiment and desires and offer new products that answer all these needs.
The 720 Degree View of the Customer
Most banks make use of the internal perspective of the customer when they collect data. However, companies now need to extend that and include the external perspective. It would be helpful to the banks to incorporate the internal views of the client with the external social influences from Facebook and Twitter.
American Express has recently partnered with Foursquare to offer promotions based on the data collected by the social networking site.
An example on a bank that uses a Big Data strategy is BBVA. They take a targeted approach where they target the right offer to the right customer based on insight and intelligence. BBVA also offer the right rates and pricing based on real time intelligence. The bank also undertakes in predictive analysis where they analyze customer life events and forecast future needs and wants. Lastly, the bank can deliver new innovative insights to improve customer loyalty.
- Big Data: 2.5 exabytes per day is being added to the data bank
- Dark Data: Only 5% of the total data is utilised by banks and other organizations
Join the conversation here or on our Facebook page.