How Big is Big?

We all sense that the more digitalization spreads and the more parties are involved, the more data is being created, but if you want to see numbers supporting this feeling: IDC says we’ll have 163 zettabytes by 2025. It’s a ten-fold increase from where we are at now, with enterprises having a 60% share of the pie. It should come as no surprise that the financial services industry is producing data as intensively as few. Hundreds of billions of transactions every day and the regulatory requirements to keep the information on those transactions accessible results in a huge amount of the above-mentioned data.

Investments in Big Data in financial services, including the management and analysis of data assets, are estimated to reach USD 9bn in 2018 by SNS Telecom & IT and grow with a 17% CAGR in the next three years. According to IDC, banking is one of the industries that will spend the most on big data and business analytics solutions. However, the reason behind spending so much is also clear by looking at the revenue numbers: the USD 149bn recorded in 2017 is predicted to almost double in five years, to USD 260bn.

How Useful is Big?

The problem is, most of the data collected at the businesses remain so: collected but never analyzed. We can only hope that the situation has improved since 2016 when Forrester reported that 60-73% of the data in an organization goes completely unused. But it’s an untapped treasure trove and not only (directly) for more revenues. The analytics help enterprises grow customer engagement and come up with new products that meet customer demand: values that are essentials for today’s businesses. A report by Dresdner Advisory Services from 2017 paints a better picture already, claiming that 53% of the enterprises are using big data analytics, with the telecom and financial services sector being the fastest to adopt the new technology.

Use It for Customers’ Delight

So leveraging big data analytics is THE way forward for financial services as well. But what exactly are the best practices in this field? Success in the current business environment will not come without understanding your clients. Financial services providers should also focus on better serving their customers, especially when the whole industry is being disrupted by newcomers that build everything on this principle. From a data perspective, the bottom line is to collect data that is clean and secure to use and work your way from there to delight your customers through analytics.

The client’s behavior will give many hints for what kind of marketing activities would hit the target with them, makes credit assessment easier, as well as fraud detection. New user behaviors lead companies to innovate, for example, to create new trading solutions like High-Frequency Trading (HFT), where data algorithms search for trading opportunities and make the decisions, with or without human interaction.

Areas to explore

If the customer is driving our business decisions, the first thing is to find out what he or she really wants. Banks might have a hard time adjusting to this perspective, with smaller ones being better at it, but precision targeting is something neither of them can ignore. Bigger banks can also involve third-parties to help with the targeted marketing and sales efforts.

By analyzing the available data on customer behavior, e.g. saving and spending habits, financial institutions can make smart recommendations on products that are a good fit. Big data also allows to more precise risk assessment and that could mean more credit products to be sold without increasing the lending institution’s risks.

Activities that require personal interaction, such as a consulting session, can also profit from this type of big data usage, as the consultants can already have the targeted recommendations at hand when they meet the client. What is more, analyzing the consultant’s behavior is also beneficial in performance and resource management.

The many subsectors of the insurance industry are to profit mainly from the risk management capabilities of the new technology. Assessments made by big data analytics are transforming car insurance and health insurance, enabling the insurers to effectively reward safe and preventive behaviors. Such an analysis is capable of reducing costs on both the insurer and the customer side.

Ultimately, big data should lead financial services to a future where they can engage their customers through personal, local, and real-time services.

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Pushing consumers first

Consumer-oriented trade shows like CES always play a huge role in introducing or pushing new technologies, no matter how strange they may seem at first. The most recent giant show, CES Asia, was held at the end of June and didn’t fail to paint a colorful picture of futuristic consumer technology.

Putting aside pure entertainment and cutting-edge weirdness, the robots tended to show up everywhere and in such forms that promote their mainstream use. In a world depicted by the event, consumers would be surrounded by flying cars, live in a fully connected smart home that is served by automation, be it VEDAs or IoT.

So far they are just the buzzwords we know so well. What’s more interesting is that vendors have been relentlessly pushing virtual reality and augmented reality (VR and AR) solutions and have even indicated that these could be deployed by business earlier than consumers – a phenomenon that would be unique on its own.

Professional skepticism aside

VR and AR are mostly known as the technologies that require freaky-looking glasses and a lot of patience on the user side. So how come they can make business sense already?

For one, those glasses are not in the way of work as much as they would in everyday activities. Seeing models what they would look in real life gives engineers an advantage they would trade for comfort. Remote workers of all kinds can benefit from sharing the glass screens with their colleagues.

These advantages can also be translated into serious savings in operational costs: according to Forbes’ report, as much as 40% can be achieved using VR-technology in certain industries. While we don’t have an exact figure for the financial industry at hand, the number of announcements and reports that tackle the topic indicates banks and insurers have also had some early success digging the gold of the new reality.

What VR and AR Have in Stock for the Financial Services Industry?

The insurance industry is one of the early adopters of technology, mainly in simulations and training. Car crashes, breakdowns, or even the onboarding of staff can be great opportunities to use VR. According to a fresh report by KMPG, the adoption rates are expected to increase significantly as the awareness spreads and the technology becomes more sophisticated.

More interestingly, though, VR and AR presents a different kind of opportunity as well for the insurers: namely developing new products that assess the risks of the mass use of these technologies (accidents, security risks, privacy abuse, etc.) KPMG estimates the losses to be covered can reach USD 20bn.

Other financial service providers, such as banks and credit institutions, are sitting on valuable data reserves that require analysis, preferably one that is quick to make and easy to interpret. CitiBank has been experimenting with a holographic workstation for upgrading its trading services, while Wells Fargo is onto creating a virtual space, a branch substitute if you like, where clients and agents can interact, and Comarch of Poland also helps its clients in communicating in an augmented environment.  

French banking giant BNP Paribas has also announced the rollout of a VR-based app and a set of new services for its retail customers last year. It allows the clients to manage their accounts in a different way or make decisions easier but it also allows the bank to create a new type of operation.

Payment processing is another field where banks and payment services companies are motivated to introduce the new technology. Worldpay has virtual terminals for smaller and AirPIN for bigger purchases, both representing a new generation of payments that customers demand and will ultimately engage with. Payscout, on the other hand, has a virtual environment where clients are able to buy physical goods with Visa Checkout and also has a virtual space for donations.

The most talk in the financial services industry is about whether virtual spaces can substitute bank branches in the long term. With the appearance of digital-only banks and mobile banking, the question is timely and the saving potential is enormous. Financial institutions are looking for feasible solutions for sure, yet they are cautious not to turn customer sentiment into negative. By all means, consumer awareness of AR/VR and its engagement capabilities (banking in a nice, easy-to-use virtual environment versus a crappy branch not so nearby) is something to trust.  

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When above all that a new regulation appears on the market, many sales leaders tend to think that it is only another nuisance they have to comply with. In other cases, they might think it is none of their business after all. However, a significant part of the regulations are created as a reaction to changing demand, and no sales leader can ignore these changes.

For example, the freshest version of the European Payment Services Directive, or PSD2, in effect since January 2018, reacts to the demand of financial services customers who want to take advantage of the single market by using even more and more secure services. They expect the service providers to increase transparency and give the control of user data into the users’ hand.

The most important consequence of implementing PSD2 was that it cleared the way to the so-called Account Information Services Providers (AISPs) and Payment Information Service Providers (PISPs). These service providers connect the financial institutions and the clients as a third party and develop new solutions for the financial industry, mostly by offering an easy overview for the clients of their existing assets and credits at the different accounts in different institutions.

One of the primary goals of PSD2 is that these third parties that are handling sensitive data and offering services on the market anyway, were kept accountable and under stronger control. Already in January, many fintech startups registered as AISP or PISP, according to the directive. The most well-known aggregators are probably Consents Online and API-developer Truelayer but the list is growing almost by the day.

The new regulation also stimulates market competition among current and new players. Thanks to the new services, pricing structures, conditions lists, and the client management of different financial institutions are becoming more transparent. This is a call to action for the incumbents. Not only should they passively provide data or access to their systems but also develop innovative solutions.

What Does the Client Want?

Shortly after the publication of the directive, between February and June 2016, Accenture conducted a survey with the participation of 800 clients using online banking or payment services. The survey provides an important insight into the initial reactions of clients to the directive.

The analysis highlights three major factors: trusted brands are better accepted as AISPs, the different approach to the management of banking data and other personal data, and the fact that the age and the number of accounts are strongly correlated to the likeliness of trusting the new services.

Putting it simply:

• The clients expect mostly (65%) traditional banks as AISPs, and the trust in these institutions serves as a base for sharing other account information, but 40% would also trust well-known online retailers.
• However easily people share their personal data on different forums, they consider financial data more sensitive and, therefore, 70% would not trust them to a third party outside of the banking environment.
• The attitude towards AISPs is defined by several other factors as well. Interestingly, the more accounts someone has in different places, so there should be a motivation to use aggregators, the less likely they would try one. Attitudes are also characterized by age: 52% of those between 55-64 said they would not trust a third party, while only 15% of those between 18-24 years said the same.

How Should Banks Keep Up In This Competition?

As shown above, banks should not only the threat but also the opportunity in PSD2 as their established brands and the sense of trust that comes with it could be a perfect base for the implementation of new services.

The banks that go beyond passive data transfer to third parties and make an effort to develop new solutions within the redefined framework will be the winners of this game.

Such a new solution could be, for example, a functionality built in a mobile application that could map the client’s financial situation with the input of only one account number, suggest products, and create an opportunity for further planning. This could provide useful data not only for the client but also for the bank: how the client uses his or her assets at other institutions, what services does he or she use and how often.

How Does PSD2 Relate to the Sales Reps’ Job?

In creating the currently applied sales strategies, one fact played a major role: namely, that a particular financial service provider could only work based on their own data and some unconfirmed information shared by the client when providing assessment and personal financial management services.

However, digitalization, mobile devices, and other consumer services motivate clients to want to manage their financials in an easier, more transparent way. Addressing this new demand is a range of new technology companies entering the market every day.

In this environment, in-house retail banking sales reps have a huge opportunity literally at hand. Terminals and mobile devices are already in use at many financial institutions, and the applications installed on these devices are helping sales reps and clients to assess the current financial situation, the accessible services, and future planning.  

If these (mobile) applications have integrated aggregator functions, they can support the rep in every sales situation. When the client gives the green light to access his or her data (bank account numbers, the institution can see what financial assets he or she possesses, or what loans or other outstanding debts does the client have, and can even find data regarding other pieces of assets, such as real estate.

It doesn’t work without strong trust but also has its advantages for the client. The first step of the consultation, the assessment, will be significantly shorter, the client doesn’t have to fill out even a short form, the answers to the usual questions will automatically be extracted from the account data to the application. That flow of data can be controlled by both parties during the personal meeting. By automating that important step, the administration becomes faster.

An even bigger advantage of such a function is that it opens new horizons in personal financial management. Using the initial assessment as a starting point, an improved AISP is able to use, for example, with artificial intelligence, to use the gathered data for recognizing patterns and suggest solutions to the clients to reach their financial goals in the future while also reducing risks.

Prudent financial management has always included getting to know the client as much as possible, including exploring his or her financial situation, risk-tolerance, and other circumstances (family, health, etc.). Technology now gives an opportunity to do the same but supported by facts and data and presented in a way it is easy to overview and control for the client.

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Lost in Conversation

There are many steps in the retail banking sales process where it could be a demand for increased effectiveness. During a personal meeting, the agent might miss several opportunities to get to know the client and give them a more precise, more tailored offer.

There is, for example, one of the first steps of a personal consultation, when the agent tries to find out as much as possible about the client’s financial situation. The conversation will eventually shed light on the type of advice the client needs, considering their existing or non-existent savings (credit-focused or savings-focused), but the mid-term and long-term plans usually remain unexplored. As a consequence, financial institutions lose billions by not knowing the client enough.

With the current administration practices, documenting “hints” is accidental and depends on the preparedness of the agent. The management, on the other hand, only has limited possibilities to intervene in the process. They mostly have to rely on the onboarding and training period to get their messages through or suggest a necessary change while controlling productivity.

There is a problem with transparency, too. During the necessary data registration process, the retail banking agents don’t use systems that could allow them to share the registered information with the client (e.g., financial snapshot or sending a colorful PDF about the suggested products), and there is no possibility to make the necessary calculations together. It makes winning the trust of the “always-on” clients, and the fact that the agents only send out the quotes days or weeks later doesn’t help either.

Value for the Client

An application that was developed keeping in mind the priorities of personal sales meetings helps to complete the consultation and keep it transparent. A piece of software that serves as a central access point for the official documents, contracts, as well as the product brochures, client databases or quote calculators, will make it easier for both the consultant and client, as well as shorten the sales cycle. Such an application is a useful tool for the sales managers, too, to coordinate teamwork and to better distribute the available resources.

Because of the integration with internal legacy systems, many would think it a desktop application is the solution. But the surprising truth is that a tablet application is a way more modern sales tool, and it is also easier to implement. When using a tablet, the agent and the client sit next to each other, the client is involved in the sales process, increasing its effectiveness.

The application can easily integrate internal systems, so it can contain all the necessary information and also make it available to the client immediately or as an attachment of a follow-up email. If it’s a returning client, some of the data can be accessed from the database, so it reduces the administration. Even the calculators can be used outside of the corporate website, by accessing it directly from the application, and print a contract right on site if the client accepts the quote.

Financial Planning as an Experience

Using a mobile application in retail banking radically transforms the current processes without making them more difficult. Due to the smooth operation, the agents are happy to incorporate the tool into their workflows. The client will experience a new way of banking: during a personal meeting, sitting next to the agent, they can be active participants of the financial planning – a feature that builds trust and increases satisfaction.

By accessing the documents quickly, the agent can get from the first registration of data to the contract, and they can also complete their administration duties without paper. Meanwhile, the managers can control all steps of the process, keep the information up-to-date, and receive automatic reports. The sales agents can always see in the application what meetings they have and when do they have to follow up with a particular client.

According to SCOLVO’s industry-specific experience, the mobile sales enablement tool has dramatically increased task management, both on a team as on a personal level. The productivity of the banks has increased in general, with the help of the features accessible through the tablet and due to the modern sales tool. Further advantages that financial institutions mentioned included the seamless data flow, a proper CRM-usage, current reports, and paperless processes.

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