FinServ Digital Transformation: It’s All About the Data

CEOs and their leadership teams in FinServ companies—from banking to insurance to credit—are moving on to the next wave of digital transformation: data strategy and execution. While every company is at different stages of digital maturity (as are individual BUs and functions within each company), one trend is absolutely clear:

The future of FinServ digital transformation will be “make or break” based on the execution of data-driven go-to-market strategies and marketing systems

FinServ leadership teams are at a point where they need to ask some probing questions about technology strategy.  Below I have outlined a non-tech perspective on digital transformation and data that we have found useful for our senior exec clients.

1. The Good News: New Product Opportunities, Improved Workflow, Better Customer Experience

As McKinsey Digital accurately states “financial services companies have rich sets of exclusive information on their customers (key demographic details, where they live, their lifestyle preferences). When used responsibly, with respect for regulatory constraints and privacy concerns, this data can be analyzed for insights.”

Our experience is that FinServ leaders can find “customer intelligence gold” by tapping into the entire supply chain ecosystem of customer data: from digital/social media content consumption to customer transactions to downstream distributor sales and marketing (agents, advisors, etc.).  These opportunities include:

  • New Products: Most banks, insurance companies, credit card providers, etc. have demonstrated their ability to leverage customer data – profiles, purchase patterns, etc. – to identify new cross-sell and “flanker” product opportunities.  In fact, it increasingly becoming a competitive disadvantage to not have a growing, broader product line to take advantage of (and amortize) the lifetime cost of customer acquisition.
  • Greater Automation: Workflow efficiency and customer experience across the value chain have significantly improved:
    • Direct marketing and sales
    • Customer management platforms
    • Distribution management (e.g. agents, advisors)
    • Underwriting, claims processing
  • Predictive Purchasing Analytics: More data means an enhanced ability to develop artificial intelligence applications to improve customer targeting, next best product offers, underwriting, etc. Smarter, data-driven decision-making will be the norm.

2. The Bad News: New Competitors and Distributed, Fragmented Systems and the Last Mile Challenge

The proliferation of “digital apps” has some downside as well.  Among the challenges our clients are most concerned about are:

  • New FinServ Competitors: While we are still in the early innings of “FinTech” innovation, already companies are seeing cloud-based and SaaS companies like PayPal, Betterment, and even Amazon change the competitive landscape and economics.  While in 2018 only maybe 5% of a legacy FinServ company’s customer use the “next gen” software apps, these new entrants are retraining customer how to purchase and use FinServ products.  The tipping point is coming….
  • Fragmented Systems of Record: Traditional FinServ ERP and CRM systems are now being “augmented” with new SaaS software apps.  The problem: every new cloud app may streamline a workflow but also collects a vast amount of customer data in separate silos.  Bringing data together from multiple disparate systems can be a labor intensive, multi-year, multi-million dollar investment.
  • Inability to “Activate” Predictive Analytics: Even when “customer data gold” is aggregated and analyzed to create powerful predictive insights, landing that analytic insight into front-line workflow systems (e.g. marketing, web sites, CRM systems, agent/advisor systems, etc.) is a big challenge. We call this activating predictive analytics by embedding into day-to-day employee, agent/advisor, etc. workflow systems, and even customer-facing applications.

3. The Next Big Question: How Should Big FinServ Companies Integrate Their Data Ecosystem?

Digital transformation efforts are leading FinServ companies and their third-party partners to acquire and/or build many new, fragmented systems.  The next BIG challenge is bringing all this data together—or at least coordinating it—to not only create a 360° seamless customer experience, but also to enable internal data science operations to monetize its value.

We will get into managing the ecosystem of FinServ customer data through marketing data platforms in future blogs, but let me tee up two options that execs must consider:

  1. Build a totally customized data warehouse that require massive numbers of bodies, hours, years, and $$$$. This, of course, is what many software and data management vendors encourage—and it makes sense, until it doesn’t. After all, every need must be met, right? Keep in mind, this is how the Pentagon buys fighter planes.
  2. Think and act like a nextgen FinTech software startup and aim to build a scalable and extensible data lake, enhanced in an agile way based on business needs in a matter of weeks, not years. The first version might only contain 10% of what’s needed, but the next one, released in two weeks, will have 12%, and so on and so on. The most important data elements will be addressed first. And, it’ll all be built on cheap, scalable cloud storage (e.g. AWS or Azure.)

Clearly we have a bias to #2! This is how we have been building marketing data platforms for years—and it’s nice to see Agile imperatives starting to penetrate huge companies.