[{"id":2614118,"date":"2023-10-17T08:14:05","date_gmt":"2023-10-17T15:14:05","guid":{"rendered":"https:\/\/techcrunch.com\/?p=2614118"},"modified":"2023-10-17T11:53:55","modified_gmt":"2023-10-17T18:53:55","slug":"leverage-banking-data-to-scale-effectively-and-remain-compliant","status":"publish","type":"post","link":"https:\/\/techcrunch.com\/2023\/10\/17\/leverage-banking-data-to-scale-effectively-and-remain-compliant\/","title":{"rendered":"Leverage banking data to scale effectively and remain compliant"},"content":{"rendered":"
With more and more non-bank companies now offering banking products, data that was previously accessible only to financial institutions is now in the hands of fintechs and other companies launching embedded banking products. This data can provide a wealth of insights into the financial health of customers, along with information about how they spend their money and where.<\/p>\n
The only question is, what to do with all of it?<\/p>\n
This is a question banks have grappled with for decades, but for newcomers \u2014 and especially untraditional finance companies like X, Apple and Walmart that are joining the game \u2014 it may be tough to know where to even start.<\/p>\n
As a former chief architect for a large financial institution, a previous CTO at an innovative challenger bank, and an adviser for a fintech investment firm, I\u2019ve seen this question from all sides.<\/p>\n
I\u2019ve seen large banking institutions miss out on valuable revenue opportunities because their legacy systems and poor data architecture prohibit them from getting the right data at the right time. I\u2019ve also seen fintech newcomers struggle to fully understand how their customers are using their product due to not knowing how to interpret the banking data in front of them.<\/p>\n
The companies that really succeed are the ones that do both well. They structure their banking data in a way that allows their team to easily understand how customers are using their product. Then they\u2019re able to turn this understanding into actionable insights that allow them to improve their customer experience and mitigate fraud.<\/p>\n
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\n\t\t\tThe deeper you understand your customer, the better you\u2019ll be able to make product improvements and refine your marketing and sales strategy.\t\t\t\t\t<\/blockquote>\n\t<\/div>\n\t<\/p><\/div>\nAs a recovering banking chief architect, I still keep in touch with some of my friends who remain in that world. And I used to have a running joke with the chief architect of one of the largest banks in the world, based in the U.S. and who will remain nameless. Whenever I would see this friend, I\u2019d ask him a simple question: \u201cHow many data systems do you have now?\u201d It was a joke because he would never know the answer.<\/p>\n
Forget learning how to use data. If you don\u2019t have a single source of truth for your customer data that is easily readable, you\u2019ll never be in a position to properly leverage it to scale. Unfortunately, my friend\u2019s dilemma is all too common in the banking world, both in legacy institutions and emerging fintechs.<\/p>\n
Fixing such a dilemma can take years \u2014 I should know, because I had to do it. But getting your data structure right can make a world of difference in the long run.<\/p>\n
<\/p>\n
So what\u2019s the key? First and foremost, it\u2019s important to have all of your data housed in one centralized system. Having data scattered across multiple systems, all with different data points, will only make things harder at scale.<\/p>\n
Second, it\u2019s important to understand what<\/em> sort of data you will be collecting as a bank so that you can ensure it is structured correctly in your system.<\/p>\n
Banking data can be broken into three pillars:<\/p>\n
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- Customers<\/strong>: This is all of the data related to who your customers are, including their demographic data, contact information and behavioral history.<\/li>\n
- Accounts<\/strong>: These are your different products and the attributes associated with each. For example, if your savings account has a minimum account balance requirement of $100, or if your credit card product charges a specific monthly interest rate, this data would be housed in the account pillar.<\/li>\n
- Transactions<\/strong>: These are the records of all the money movement happening using your product, whether that is money moving into, out of, or within your product.<\/li>\n<\/ul>\n
Now, once all of the data pillars are structured correctly, the next step is to make sure that the relationships between them are clear and well-defined.<\/p>\n
This is key to giving your team immediate insights into who is using your product (customers), which products they are using (accounts), and how they are using those products (transactions). At scale, having this clear view will allow you to leverage the data to grow.<\/p>\n
Delivering a better customer experience with data<\/h2>\n
The deeper you understand your customer, the better you\u2019ll be able to make product improvements and refine your marketing and sales strategy, with the ultimate goal of delivering an exceptional customer experience.<\/p>\n
In my previous life as the CTO of a challenger bank, we embarked on a mission to truly understand how our customers were using our banking product. We knew building savings was a key use case (as it is for many banking products), but we didn\u2019t know exactly what those customers were saving for.<\/p>\n
So we dug into the data. We found that many customers had their savings accounts labeled as \u201cMexico\u201d or \u201cEurope.\u201d Now, we knew they weren\u2019t saving up to buy all of Europe, but we did uncover that many of our customers used the savings product to fund their vacations.<\/p>\n
Since all of this data was centralized in one location, we could easily see this as a common pattern among our customers, helping us understand the cluster size of travel savers versus other types of savers.<\/p>\n
This learning prompted us to build new savings features tailored specifically to vacations, build out cross-selling campaigns for products that specifically benefit international travelers and influence our marketing strategy to appeal to the adventurer. All of this led to happier customers and increased customer LTV.<\/p>\n
When you can use data to truly understand your customers, that is where the gold is. When you can clear up these mysteries, that is where the opportunity lies for your company to deliver compelling offers just at the right time and solve problems for them that other organizations can\u2019t. If you don\u2019t know your data, you don\u2019t know your customers.<\/p>\n
Mitigating Fraud With Data<\/span><\/strong><\/h2>\n