Customer Engagement Challenges Banks Face in Acquiring Customers in a Digital-first Era

Banks and customers
Nov142018

In my role at FICO I have the privilege of engaging in strategic planning discussions with senior banking executives across the globe. Most of these meetings as of late are similar:

We are improving the customer on-boarding user experience, both through improved user interfaces, but also through improved analytics to bring everything we know about the customer to bear in our interaction…regardless of product line or channel. Right now we are working on our data lake.

At which point, I nod. Then I ask:

OK, so who is in charge of the customer journey that you are transforming?

At a strategic level, banks understand the challenge they are facing and where their organizations need to go in order to thrive. At a tactical level, the decisions become much more complicated. Who owns the customer? Is that new data source worth the risk of potentially slowing down my origination process? How seriously should I be looking at cutting-edge capabilities like artificial intelligence and machine learning – am I missing out?

When we dig into the details of our clients’ businesses and help them navigate through these big, transformational changes, we tend to see the same tactical challenges around acquiring, retaining, and growing relationships with their customers.

In this blog series, I will explore how banks are solving common challenges in acquiring and retaining new customers, from marketing to origination to onboarding; and how many of these processes are intertwined in delighting the customer.

Let’s start with marketing.

Most of the banks I speak with believe that there is headroom between the performance of their current marketing strategies and campaigns and the performance they could realistically be seeing. The tactical question then, is how can banks drive that improved performance?

Too often, the answer that most vendors give relies on tired clichés about personalization and the use of third-party data to identify life-stage triggers that might be indicative of a financial services need (‘she just subscribed to Horse & Hound magazine. WHAT DOES IT MEAN?’)

In FICO’s experience, the best thing you can do is avoid outsmarting yourself. Extract as much marketing value from the customer data you already have before you go questing for new, questionably useful third-party data.

For example, in the United States, banks competing for credit card business must run through a rigorous pre-screen process with bureau data that aligns directly with their specific eligibility criteria ensuring that nearly 100% of applicants will be approved, as well as modeling predicted borrower response.

In order to ensure alignment with eligibility criteria, most issuers are providing the risk specifications to their bureau data processing vendor and then engaging in a multi-step testing process to ensure the pre-screen process on the marketing side matches the production risk criteria for applications. Usually the lead time in testing and sign-off means that, at most, you can implement quarterly changes to strategies.

Sure this sounds obvious, but why settle for a couple strategy changes per year if you are trying to delight each of your potential customers while competing in a rapidly changing marketplace?

The typical reason is that the risk, marketing, and business units within the bank are not holistically aligned across both business and technology strategy.

Examples abound, but the common theme in this series will be addressing tactical marketing challenges with practical solutions that produce a real return on investment.

My next blog post will focus on similarly practical solutions to common challenges in the origination process.  And I’ll get to the Data Lake before the series concludes.

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