For many years, service-based companies such as banks and financial institutions have been using KYC (Know Your Customer) as a key metric representing how much information they have on their customers (within the boundaries of the business relationship). In the past, and to some extent even now, this metric has only factored in identifiers like account information. These include things like name, address, date of birth, salary, location, credit history, existing loans, etc.
But all these facts alone have never been sufficient to give a full picture of customers as individuals. As a result, the relationship between banks and their customers could be referred to as a transactional relationship. Due to the lack of a clear understanding of each customer’s needs, products and services had to be generic. Or at their best, they could only differ from one demographic to another. Additionally, communication between parties wasn’t typically proactive.
Over the past decade, digital transformation has changed the way financial institutions measure their customer understanding. Digital transformation has led to the proliferation of big data, a big chunk of which normally comes from customers’ digital footprints. Also, the recent advancements in computer processing power and artificial intelligence algorithms have set the scene for the financial services industry to move from the KYC metric to what is now referred to as the “customer 360 view.”
Beyond the business relationship
The concept of the customer 360 view goes beyond knowing the customer’s relationship with a business. Instead, it focuses on understanding customers as individuals, with various needs within their own context. By combining the customer information that financial institutions have accumulated over the years with knowledge of their overall personas (within and beyond their business), they are able to monitor current patterns. In addition, they can begin to predict customers’ future behavior and needs. This leads to the provision of personalized offerings tailored to each customer’s needs.
In a nutshell, the customer 360 view aims to build empathy with customers and understand them as individuals in order to gain a comprehensive picture of them and build a realistic risk profile.. The goal is to see the world from their eyes and serve them better, faster, smarter, and more proactively.
Building the 360 view
Building empathy with customers requires a thorough understanding of what they see, what they say and hear, what they think, and also how they feel, within and beyond the context of their experience with the businesses. And this is not easy data to collect or to analyze.
What customers see refers to all the environments they are exposed to or operating in. These might be digital environments, like social media. Or they may be physical ones, such as a High Street bank branch and the experience they are having there.
What customers actually say about their experience or about a particular service or brand is really a manifestation of what they really think about it. Also, the majority of customers are influenced by what other people say or do. They hear about complaints others make about a service, or read recommendations online.
On top of it all, how customers feel and what they do are key in order to gain an understanding of what they are trying to achieve and the obstacles they face.
The art of the possible through digital channels
Now, gathering all of this information requires a data collection and aggregation strategy and process that encompasses both physical and digital channels, as well as various sources and touchpoints. The more comprehensive this process is, the more realistic the persona will be.
In the digital world, alternative data plays a critical role. The alternative data refers to all digital footprints or real-time information that businesses collect from customers to build a realistic and granular picture of their persona. These digital footprints could be customers’ online presence, financial transactions and patterns, lifestyle data (e.g. data from fitness trackers, smart house, smart cars), psychometric data (e.g. social network, personality, and attitudes), geolocation, e-commerce transactions, and so on.
A human touch
Even after collecting all these data points from digital channels, the persona would still be incomplete. This is due to the fact that each person has some characteristics that only manifest themselves through a human-to-human relationship. And this emphasizes the importance of the physical channels, like customer service call centers or branches, where certain factors like the customer character, tone of voice, level of stress, etc. can be captured and combined with the insights generated from digital channels.
The cutting edge of data collection
Collecting data from various sources is one thing. Being able to curate and analyze them is another. The data on its own is only an asset. It is the insights generated from data that have real value. So, are just talking about a vision for the future? Or can we make this happen with the technology available to us today?
The answer is both. It is indeed a vision, or in other words, the direction of travel. At the same time, recent advancements in different technologies have enabled industries to start to see this vision even today. However, this is a gradual process and the maturity of all generated insights requires time. Technologies such as data lakes, cloud computing, machine learning, deep learning, computer vision, sentiment analysis, and the internet of things are all in a reasonable position to shape this vision. But it’s the continuous generation of new data that makes the whole process of turning data to insights a gradual and iterative one. As new data is fed in, insights can change.
The benefits and concerns surrounding the customer 360 view
You may be asking yourself why banks or financial institutions would even need all this information. What’s the benefit of having such a detailed understanding of their customers? It might even raise some concerns about the amount of information different businesses are collecting and storing.
Let’s first deal with the why. Understanding customers as individuals and knowing their persona allows banks to provide personalized relationships and services. And this is a big shift for banks. Before, they developed and offered generic products and services, then waited for customers to ask for something. Now, they can proactively reach out to their customers at the right time through the customer’s preferred channel. This is a whole new experience, not only for the financial institutions but also for their customers. This leads to a win-win result and of course, to long-term customer loyalty.
And now, let’s finish this article with the important topic of privacy, the concern mentioned earlier. In general, the main debates are around the amount of information financial institutions can collect and store about their customers, the ownership of the information, and the ethical aspects of data collection and insight generation. The introduction of Open Banking reflects the major shift in ownership of customer data from banks to the customers themselves. And this implies banks require customers’ consent in order to do whatever they want to do with their data.
The key principle here is that the outcome and result of any action on customer data must be fair, ethical, and transparent. And in the case of any unfair, unethical, or secret action with regard to customer data, banks shall be held accountable.