3 Big Retail Banking Challenges in 2015
The ongoing questions around the future and role of bank branches have many of the industry’s top executives and analysts exploring their options. There’s the camp that argues there’s no place for branches in the digital future and the diehards and problem solvers certain that all branches need is a little strategic evolution. The experts and commentators are at least in agreement on one fact: The future of retail banking will look a lot different.
Much of this change, however, is emerging around familiar concerns, from an individual branch’s performance to marketing and managing compliance. Many banks are now scrambling to decode the science of branch transformation, understand how data and analytics can reshape marketing and the customer experience, and uncover the best ways to mitigate risk in an increasingly mobile and digital environment that changes by the day.
Here are three of the biggest challenges the top retail banking executives are facing this year and how data and analytics fit in.
Knowing where branches will succeed
As retail banks evaluate branch location and performance, data plays an increasingly crucial role. Banks can determine whether a branch will thrive or wither based on its proximity to competitors and businesses and consumers that match their target demographics, using the data-based strategies that have dictated the locations of retailers for years. Data not only helps make certain branches more profitable, but improves staffing decisions, allowing executives to fill branches with the appropriate experts for the customers in that geographic area.
Retail banks are poring over data looking for guidance, but often without the granularity and accuracy needed to make a strong decision. At the top of their wish list is income data for a particular area, including interest, dividends, and capital gains, which can point to market opportunities and risks.
Honing marketing campaigns for the right audiences
Another major focus of retail banks is improving the veracity of their models, such as those that predict customer attrition. In addition, business lending groups want market information to help segment their portfolio and break it down by geography. Based on household or business financial data for a particular area, they can determine what products to market to that population.
Knowing not just total income, but the composition of that income, as well as other measures such as business income or mortgage expenses – and the growth rates and market totals – will offer insight into consumer and business health to reveal opportunities. The key, however, will be the veracity of the data. Marketing will only improve if decisions are made based on accurate, comprehensive data that offers context based on tailored segmentation.
Better measuring and managing risk
Regulatory compliance remains one of the biggest concerns and challenges. In particular, money laundering, and the Bank Secrecy and Patriot Act are top of mind. Consequently, banks must be able to better distinguish between a customer’s normal behavior and any unusual activity. Income analysis and other data can help banks spot and fight money-laundering schemes. The need to know your customer has never been more important.
But ensuring marketing plans are in compliance is also high on the priority list. Banks have expressed their need to more nimbly navigate the complex regulatory waters around what they’re allowed to communicate about their products and to more quickly ensure their marketing plans meet the letter of the law. Balancing regulatory compliance and targeting the right audiences will be key to retail banks’ success moving forward.
With the retail banking industry in flux, banks are seeking new ways to ensure compliance, improve marketing efforts, and establish leaner, more focused branches. As banks confront risk and the need to better understand their customers, data and analytics will be important tools for success.