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How can banks operate in a data-driven world?

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One key challenge traditional banks face is that much of their critical data, such as what customers are spending their money on, is locked up in legacy systems that are difficult to access. With mainframe banking systems, this typically means running a batch process either daily, weekly or (worse case) monthly to extract the data in bulk (usually in the middle of the night when fewer people are using their bank accounts).

While that process is clunky and can place a lot of strain on a bank’s operational systems (given that it means lifting huge amounts of data in one hit), it largely worked in a pre-digital banking age where speed was not as important. Now, as customers increasingly expect real-time experiences such as personalized offers based on where they are shopping at that moment in time, one-day-old data will have already gone stale.

With the right technology, banks can aggregate a range of data in real time to provide relevant financial products and services to customers at the point when they actually need them. Take a car purchase, for instance. The customer’s bank app could pull together device data for their location (at their local car showroom), income and spending data to assess affordability (perhaps that Ferrari is a bit out of reach), credit data to assess worthiness (will they actually pay the money back), identity data to be sure it is your customer, customer data to check if there are any red flags (are they a vulnerable customer?) and other relevant data to price the offer. By accessing all of that information in real time, banks can create personalized offers instantly - not 24 hours later when the opportunity has passed.

Challenger banks have been one step ahead on how they are using data compared to traditional banks, such as offering personalized products that reward customer behavior (for example, receiving enhanced interest rates if a customer’s balance is above a certain threshold for the whole month) and personalized or location-based rewards or cashback. Yet the financial services industry is still behind other industries when it comes to using data and turning it into better outcomes and benefits for customers. However, banks are at an advantage here - they already have vast quantities of customer data flowing in every day outlining how and where their customers are spending their money. The challenge is simply how to best unlock that data.

In the UK, Chase has launched their neobank on the 10x platform, enabling them to offer some compelling customer propositions. This includes a cashback offer where, depending on the merchant, they will give you a different amount of cashback straight into your current account, immediately, in real time.

This article is an extract from our whitepaper "The Power of Data". To read on, please download the full whitepaper via the button below.

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