The Next Era of Banking: Info-Tech Research Group Report Details How Third-Party Data Can Shape Customer Experiences
In its latest blueprint, the firm explains how integrating third-party data can reshape retail banking, offering financial institutions a strategic edge in understanding customer behaviors and preferences. Info-Tech's research outlines how banks can unlock valuable insights, personalize offerings, and drive growth in an increasingly data-centric industry by leveraging external datasets.
TORONTO, May 16, 2024 /CNW/ - With the financial industry becoming increasingly data-centric, retail banks are actively seeking innovative ways to enrich customer profiles and elevate their service offerings. The integration of third-party data in retail banking marks a significant shift toward highly personalized customer service, revolutionizing operational efficiencies. However, leveraging valuable third-party data comes with its own set of hurdles, including stringent privacy regulations, concerns over data accuracy, and the technical complexities involved in integrating disparate data sources. Info-Tech Research Group's latest research, Third-Party Data in Retail Banking, examines the crucial role of third-party data in redefining retail banking experiences. The blueprint not only addresses the critical demand for advanced data strategies but also provides banking IT leaders with essential guidance on effectively using external data sets to secure a competitive edge in the exponentially evolving digital finance sector.
"As banks continue their journey to offer their customers innovative and convenient products and services designed to meet their unique needs, they require a deeper understanding of not only their financial transactions within the bank but, increasingly, their non-financial lives outside of the bank," says David Tomljenovic, principal research director at Info-Tech Research Group. "Many customers are voluntarily offering their bank more information about their non-financial lives because they have recognized the benefits that come from sharing aspects of their non-financial lives in exchange for better and more relevant products and services."
According to Info-Tech's research, banks hold vast amounts of customer data but often fail to extract meaningful insights about their clients. To bridge this gap, banks are increasingly turning to non-financial third-party data to gain a comprehensive understanding of their customers' needs. However, many banks struggle to organize and derive value from third-party data as it is challenging to integrate and align it with their first-party data. In such situations, customer data platforms (CDPs) play a crucial role by helping connect the first-party data to third-party data, thus creating a 360-degree unified customer view. Despite the numerous new challenges involved, mastering third-party data is becoming indispensable for banks aiming to enhance customer retention and competitive positioning in today's competitive market.
"Third-party data helps banks to better understand their existing customers' lives and to build profiles of new customers that the bank can target with new products and services with specific, relevant, and personalized offers," explains Tomljenovic. "Success with third-party data is becoming essential for continued growth and relevance to retail banks."
The blueprint further explains that third-party data plays a crucial role in supplementing zero- and first-party data, creating immense value when combined. Zero- and first-party data, while detailed and accurate, cover only interactions within the bank, thus limiting their scope. Third-party data, in contrast, extends these insights by providing broader contextual information about customers' activities outside the bank, although it may lack the same level of detail and personalization. By integrating these different data types, retail banking IT leaders can obtain a more comprehensive and precise view of their customers beyond just their financial affairs. This enriched perspective can help retail banks make informed decisions and provide superior customer service.
In the Third-Party Data in Retail Banking blueprint, Info-Tech details the various data tiers within banks and their specific contents. Insights gained from this data help IT leaders in the banking industry enhance operational efficiency, foster innovation, and elevate customer experiences in an increasingly competitive financial landscape.
Zero-party data is explicitly shared by the consumer and includes their preferences, attitudes, and interests through direct interactions such as surveys, preference centers, polls, and questionnaires.
First-party data refers to the detailed information about prospects and customers collected, owned, and managed by the banks. This data can be gathered by observing customer spending behaviors or from first-party cookies on the bank's website.
Second-party data, or partner data, consists of information obtained through strategic partnerships with other firms. Examples of second-party data can include co-registration campaigns, such as contests or sweepstakes, and co-op data pools created by a collaboration between a group of companies.
Third-party data is collected from external data providers without any direct connection to the consumers whose data is collected. Financial brands leverage third-party data to gain deep insights into customer behaviors and preferences, enabling the creation of personalized marketing campaigns.
With ongoing advancements in AI and machine learning tools, banks are well equipped to enhance their capability for real-time ingestion of vast amounts of internal and external data. This technological evolution will empower banks to offer nearly instantaneous product and service personalization, adapting to changing market needs and conditions at any given moment. Such capabilities are set to significantly elevate customer satisfaction and drive business growth, positioning banks at the cutting edge of the digital economy.
For exclusive and timely commentary from David Tomljenovic, an expert in the financial services industry, and access to the complete Third-Party Data in Retail Banking blueprint, please contact [email protected].
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SOURCE Info-Tech Research Group
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