While Australian financial services institutions (FSIs) have substantial first-party data assets, they’re often under-utilised.
This happens for a number of reasons: chief among them is that FSIs operate in a highly-regulated space, which drives them to be extra cautious with customer data; and related to that, their data is often not a single consolidated asset, but is instead a collection of decentralised data stores controlled by divisional teams or lines of business.
When data isn’t centralised, there can be challenges for other teams that want access to it to perform their own work. They must initiate conversations with multiple data owners and then join and collate unstandardised and potentially semi-structured datasets, each with its own taxonomies and variable data quality.
The FSI also trusts that the owner and recipient of the data handle it acceptably. There will likely be rules around how certain customer data can be reused for analytics projects or marketing campaigns. For example, some customers may need to be excluded from marketing communications owing to their circumstances or a recent history of issues.
When humans are the ultimate arbiters of meeting such standards, there’s a higher potential for inconsistency in the application of these rules. At the scale that FSIs operate, leaving governance to divisions and teams may ultimately fall outside of the risk appetite of the institution, as well as its regulatory overseers. We’ve seen regulators intervene in Australia, even recently, to push FSIs to uplift their data standards, quality and governance.
One of the key ways that FSIs can overcome customer data accessibility and governance issues is by standing up a Customer Data Platform (CDP). Such platforms have quickly carved out a place in the data architectures and strategies of major customer-facing industries and organisations.
There are five key reasons driving FSIs to adopt CDPs in Australia:
The right data for reuse
CDPs are well-suited to setting up a consistent access and governance framework for different customer data sources. With a CDP in place, an FSI business can centralise and control the type and amount of customer data made available to other internal users, such as marketers. This ensures marketers aren’t inadvertently given access to sensitive data that shouldn’t be used to build or drive personalised experiences or campaigns, and there’s psychological safety for the marketers, too, knowing the data they have access to through the CDP is only what’s allowable and nothing more.
In FSIs, where data assets are decentralised, and access is granted on a case-by-case basis, the onus is on the data owner to understand the nature of a request, so they know which fields to include or exclude. There may also be differences in regulatory requirements to factor in, depending on the use case or communications channel to be targeted. There are often regulatory repercussions for getting it wrong. A CDP is designed to prevent that and provides an audit trail to prove rules and policies were followed.
Reducing customer churn
The financial services market is highly competitive. Customers shop around and switch products and providers to access a better deal, such as a lower interest rate on a mortgage. The rise of open banking has made it even easier to switch institutions. As a result, there’s a strong focus among FSIs to improve their overall customer experience and reduce churn.
One way to do that is to communicate with customers on the right channel at the right time for things they want to hear about. This is achieved via increased personalisation, which is driven by the data that’s available in the CDP.
Sustaining customer relationships
Data in a CDP can be used as an input to demographic and propensity modelling, enabling financial offerings – and communications about those offerings – to be tailored to specific customers and needs.
Customer-facing industries often like to focus on customers’ “life events” or milestones, and a CDP can help achieve that. For example, people of a certain age may be starting to think about property investments, so an FSI can put messages in front of them about the state of home deposits or similar topics that could lead them to engage in the institution’s loan products. For customers nearing retirement age, conversations around accessing or managing superannuation may be relevant.
Increasing share of wallet
FSIs face competition from fintechs and non-traditional players for an increasing array of financial services. Customer data can indicate the nature of relationships a customer has or is forming with other products and players. Knowing this, the FSI can communicate about its own similar services (or perhaps those of a sub-brand or partner) to these customers and provide specific inducements to try to win (back) that customer’s business and meet more of the customer’s needs in one place.
Recognising future high-value customers
An emerging use case around CDPs is ensuring that an FSI’s current high-value customers are recognised and communicated appropriately – excluding them from mass digital campaigns in favour of more one-to-one communication they may prefer, for example. There’s also value in utilising the CDP dataset to find people whose current behaviours indicate they are becoming private banking customers in the future. Communications can then be tailored to try and convert them to high-yield products or services.
In selecting a CDP, FSIs need to understand that not all are the same. Ensure that the one you choose has an open data structure that allows you to import all the data you need, even from your old legacy systems. It should also meet the highest security and privacy standards (SOC2 & ISO) and integrate with your internal security protocols. In addition, check if it allows for historical identity matching to leverage your customer insights. Finally, ensure that it has demonstrated operational experience in this highly regulated and complex sector, as this will save you significant time and money in building out your customer engagement.
Our CTO, Damian Williams, wrote this article initially for Australian Fintech. You can read the original here.
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