How Banks Can Use Customer Data to Emerge From COVID-19: Staying Ahead of the Competition

The COVID-19 pandemic has had a significant impact on companies globally and is likely to reshape some economies and industries for years to come. Banks are among those hardest hit by the crisis – with first-quarter profits down 95% in some instances, and institutions putting billions of pounds aside to cover defaults. As some sectors start to show signs of returning to life as we move towards the ‘new normal’, banks must seize the opportunity to accelerate out of this crisis and emerge more profitable and well-balanced organizations by maximizing the value of their customer data.

It’s not only the day-to-day operational impact of the crisis that banks have had to cope with. Other challenges experienced include increases in loan defaults, fraud and cyber-attacks, reduced revenue due to lower fee income and compressed margins, intense market volatility, and a strain on processes resulting from the surge in demand for new government-backed loans.

Reacting quickly and maximizing the value of customer data to inform decision-making is fundamental to success. In a recent article, McKinsey highlights rapidly recovering revenue as the first of four strategic focus areas for companies who want to return stronger post-crisis. The acceleration of digital, technology and analytics is a key enabler of this.

5 ways to ensure you quickly recover post-crisis and move ahead of the competition by utilizing customer data

1. Take a data-driven approach to portfolio assessment

The effect of the coronavirus on some sectors may be short-lived, but for others, there will be long-term implications. Many are already experiencing a huge reduction in business activity, while others are flourishing. As a result, you will need to reconsider your institution’s exposure across impacted sectors and make an informed judgment on how to adjust your strategy from both a risk and opportunity perspective.

A combination of customer data sources will be needed to achieve this. Pay close attention to some of the themes that have emerged from this period, such as the correlations between company performance and ESG rating. By connecting internal and external data at an organization-level, you can not only gain a bottom-up view of market penetration but also granular insights enabling action to be taken at an individual, client, or prospect-level.

2. Do not lose focus on strong performing clients

Over the coming months, there will be a continued focus on struggling organizations that require financial support (and rightly so). But don’t ignore strong performing clients; maintaining and growing these relationships will be critical to balance losses experienced elsewhere. Keeping on top of any risk of attrition will also be paramount to avoid any unnecessary loss of revenue. To establish a holistic understanding of customers and their needs, banks should enrich internal data with information from external sources and make the most of the customer data available through Open Banking.

You should also begin identifying prospects who are thriving despite the crisis. For example, identifying organizations that have a similar profile or are part of the same supply chain network as your strongest performing clients. Some competitors may struggle to maintain service levels given operational challenges resulting from coronavirus, so their clients may be more likely to consider switching banking providers at this time.

3. Quickly identify the best new business to win

As activity starts returning to normal, new businesses will emerge. Some of these will be newly registered companies; others will be old companies with new business models. There will also be the re-birth of companies that would otherwise have been successful but were too badly hit by the crisis to avoid insolvency. Quickly identifying the companies which stand the best chance of success in the ‘new normal’ environment will help banks secure sustainable new revenue and stay ahead of the competition.

Data and analytics can provide a significant differentiator, both in terms of speed of response and ability to target the most valuable opportunities. For example, this might be an analysis to identify companies in specific sectors that exhibit certain growth patterns or links to venture capitalist investment. It could also be observing where directors with good track records have failing businesses because of coronavirus and are setting up new companies.

4. Provide your sales and relationship teams with the insights they need, in the channels they use

Sales and relationship teams are under incredible pressure to manage high volumes of client conversations. This is likely to continue over the coming months. Providing them with all the information they need at their fingertips and enhancing their decision-making will ensure they are as productive as possible, provide the best client experience and help accelerate revenue growth.

This should include a holistic view of their clients, prompts for new prospects or product cross-sell opportunities, and early warnings for potential attrition. Seamless integration of these insights into the channels they use today, such as a CRM system, will be essential to ensure effective adoption.

5. Invest now to stay ahead of the curve

You may be tempted to wait until the coronavirus has passed before investing in data and analytics programs or allocating resources to growth initiatives. But, in doing so you risk falling behind your competitors – in particular challenger banks, who are likely to be more agile and aggressive in their response.

Investing in such capabilities now ensures you are in a position to move ahead of competitors as normal business activity resumes. It also provides an opportunity to set the foundations for more fundamental changes to operations which requires robust underlying data and analytics capability, such as the digitization of customer servicing.

Such data-driven efficiency programs are likely to be more prevalent in the post-coronavirus world, as companies move to mitigate the risk of manual processes, consumers become more accustomed to digital servicing and Big Tech firms continue their push into the financial services sector. Banks can’t afford to be left behind.

In summary, there is still some way to go before business activity returns to any level of normality and banks will continue to deal with the immediate pressures on their business associated with the coronavirus. But you should not lose sight of the longer-term opportunities and must invest to ensure your teams are well equipped to quickly respond to changes in the market and stay ahead of the competition. Data will be the key ingredient to enable you to do this efficiently and effectively, and the foundations need to be laid now.