Business Intelligence and analytics tools have been identified as the best defence mechanism financial services organisations can employ in their bid to compete with the new wave of non-traditional competitors that are entering the market, such as Google Wallet and Paypal.
Speaking at FST Media’s Business Intelligence conference, Kendra Vant, Westpac NZ’s Executive Manager for Customer Analytics and Data Strategy, says differentiation is increasingly becoming the answer to competition posed by the likes of Google, Facebook and Silicon Valley start-ups like Square, as they push into offering financial services products and solutions.
These organisations already enjoy a number of advantages, such as a relative lack of regulation and a large, highly engaged existing audience. With the major banks offering similar products and services, it is proving difficult to develop deep customer engagement through traditional means. There is the risk for erosion amongst traditional banking customers, but Vant claimed banks can leverage customer data to offer a product that the competition cannot.
“I believe to create a defensible differentiation; one that will withstand someone else going out into the market with a massive switch campaign, is to move beyond banking products and look at what you have that others don’t,” Vant says. “We have enormous amounts of information about our customers. If we harness that properly we can differentiate on experience.”
Vant points to other industries struggling under similar challenges. Print media, as well as the music and movie industries have been resisting changes to traditional business models, to their detriment. The plight of newspaper and magazine publishers to monetise an increasingly digital audience demonstrates the impact that new digital entrants can have on an unprepared industry. In the entertainment space, the failed attempt of the Australian Federation Against Copyright Theft (AFACT), acting on behalf of the film industry, to mandate behaviour on digital content providers also highlights that the traditional players cannot rely on regulation to protect their interests.
There are opportunities for the likes of Google and Facebook in the financial services space, Vant says, and banks need to be ready for it. “As the world changes, we need to change too or we risk becoming as obsolete as print publishing and the record industry,” she said. “Data is increasingly a product in itself and insightful analytics are going to become increasingly important to running a business that is going to become increasingly low margin.”
Jason Catania, Executive Manager for Business Intelligence at Suncorp, agrees with the value of using customer data. He pointed out that the customers now – especially the younger generations – are less worried about personalisation from a privacy perspective, and the simple matter of tailoring the website to greet a customer by name can have a measurable impact on engagement.
He also suggested the successful use of data can open opportunities for product innovation. As an example in the insurance space, analytics could open the door to greater mobility with customer products. Catania hypothesised the benefits of allowing customers to instantly purchase short-term insurance for a single bungie jump priced based on the customer’s risk profile.
“We’re going to be data companies vs. product companies.” Catania said. “There’s going to be big opportunities and some very non traditional products now that everyone has devices and IDs out there. If you don’t react you’ll lose 20, 30 per cent of the market share overnight. The likes of Google does analytics across billions of rows, and this is their strength, but you can use the same concepts in your own business.”