Leveraging business intelligence to better service your community bank customers

As banking becomes more commoditized, differentiation becomes ever more critical. Regional and community banks can separate from the pack and create competitive advantage by leveraging available data combined with the right analytical tools and skill sets. The question becomes, how to begin?

Business intelligence defined

First let’s define the well-used term, business intelligence (BI), placing it into a meaningful context for community bankers. According to Investopedia, BI refers to the procedural and technical infrastructure that collects, stores, and analyzes the data produced by an organization’s activities.

Refining that definition for community banks, one could simply say BI provides the ability to identify and analyze data to make accurate and carefully considered business decisions.

Mining the gold mine

Right now, many banks are sitting on a gold mine of untapped capital: customer data.

The power of data at a strategic level can yield transformative growth and revolutionize many aspects of a community bank. Unfortunately, data-driven strategies have remained largely unattainable to all but the biggest banks in the industry. For regional and community banks, it can be a challenge even knowing where to start.

Bankers need to think of the outcomes they desire from data-driven BI strategies. They should define what success looks like, articulating the specifics around such strategic goals as:

• Increasing deposits
• Improving efficiencies
• Reducing fraud

Understanding what you have and asking the right questions

Next, bankers need to understand the depth and sources of data available to them, either from internal systems with information on existing customers, or from external sources such as demographic data on likely prospects.

Additional intelligence can be gleaned from customer surveys and through careful analysis of your best customers. These sources can also help feed the external data sources with accurate profile information.

Once outcomes and customer analysis are complete, bankers need to ask – and answer – the questions that will drive the desired outcome (e.g., is our goal to increase core deposits?). BI must be driven by a fact-based analysis to arrive at fact-based decision-making in your financial institution.

Turning data into meaningful action

Those who begin building out their data strategy may stumble into obstacles. Because each customer leaves a massive trail of valuable behavioral data, challenges arise in how to effectively organize and transform this mountain of data into meaningful information. Without adequate technology and human expertise, “data wrangling” (gathering, cleaning, standardizing, updating, and connecting data from disparate sources) often becomes an obstacle to successful outcomes.

Community bankers may need to rely on their technology partners for the appropriate data mining tools, data analytics software and information analysis skill sets. Having skilled analytics staff – IT professionals with banking expertise – available on a “rental” basis can go a long way toward building BI solutions that address desired business outcomes.

Once the skilled resources are aligned, community banks must deploy the proper BI tools to help them reach their desired goals. They need to ensure their data warehouse technology is up-to-date and consider tracking activities such as customer events.

Data warehousing, on the other hand, is fundamental to BI, allowing organizations to ensure consistency. Data warehouses are programmed to apply a uniform format to all collected data, which makes it easier for bank decision-makers to analyze and share data insights with their colleagues at an enterprise level.

Events pertain to a change in state or action taken within a system. Events capture specific customer activity on a real-time basis, gathering meaningful data from deposit, loan, customer information, and card systems.

Your technology partner should help guide your organization to the right technology needed for the BI project at hand.

The bottom line

Once you identify the data solutions that help drive your bank to your desired outcomes, you must assess their fit with each other, as well as with your existing platforms. You should ask the following:

Does the business intelligence solution help modernize your operations and improve productivity and performance, reduce risk, and help drive strong ROI?

Answer this question in the affirmative and you’ve cleared one of the toughest impediments to overcoming the inertia that prevents a bank from transforming itself into a data-driven organization.

At the end of the day, know your customers

Data also allows banks to take a closer look at individual customers within each segment. Customers with seemingly identical demographics may be quite different upon closer inspection. Data empowers banks to identify and stratify their most valuable customers and determine which ones will drive long-term growth. From there, banks can create specialized services and personalized customer outreach based on data.

The appropriate BI solutions can help level the playing field for regional and community banks. By allowing an experienced fintech to perform the heavy lifting of “data wrangling,” banks can focus on developing and executing a differentiation strategy based on engaging their most valuable customers.