The way banks have competed in the past has been on the basis of assets – how many branches, products, how many countries they operate in – even how big they are. But the rules of the game have changed. These capabilities are less important today. What matters more is how banks manage information – data management is the new competitive playing field.
The bank business model of the future is heavily invested in data management, particularly data about customers. Thanks to technology there has been a big shift in technology investment from products to customers. But that investment needs focus. Improving customer experience is an essential part, but that experience has to be directed towards a goal – a deeper understanding of customers. That is the key to achieving a better relationship with them.
Understanding customers is not just about giving them the tools they need to enrich their lives through retail banking. It is important for capital markets as well. In real time markets, market data is obsolete as soon as it hits in the screen. The key is to understand and anticipate the trends that are bubbling up and will produce that market data, that stock price before it hits the screen. That means understanding what consumers (customers) think about buying cars, computers, homes, etc.
By understanding customers more deeply, we will have a better understanding of what products we should invest in and what risks we should be most concerned about. Even our economy is managed on the basis of lagging indicators.
We are living our lives and managing our businesses in our rear view mirrors.
Imagine if two or three years ago we could link into a pool of otherwise opaque mortgage backed securities and understand what the individual homeowners were thinking about their homes, their financial obligations, their ability to make ends meet. How would that have impacted our ability to manage risk? How would that have changed the course of our financial history?
And how about operations – what we can’t measure we can’t manage.
But the data we need to manage banking more effectively is often outside the bank and very unbanking like in its appearance. It is unstructured, unsecure, volatile, social (not just personal). It is not just numbers or words, but images as well. Even sounds become more important. We are creating new digital footprints across the internet leaving behind us clues about how markets will evolve.
But to capture those clues and draw insight from them we need a whole new set of tools few of which exist in most banks today.