The buzz around data analytics has skyrocketed in recent years. Businesses, large and small, are using this powerful tool to stay competitive in their industries. It allows them to comprehend their customers’ needs and tailor experiences that drive customer engagement and boost sales. Financial institutions, however, have faced a particular struggle to fully leverage the potential of data analytics. Despite their efforts to enhance customer satisfaction and business outcomes through data, these institutions continue to stumble. This article discusses the major challenges faced by financial institutions in managing data and their struggle in meeting customer expectations.
These institutions grapple with numerous data management issues, including poor data quality, limited data gathering abilities, flawed data selection, and slow model building. This might be due to their haste to extract insights from their data without investing enough time to understand it. Financial institutions often view tech companies as mere vendors, overlooking the potential for collaboration or investment to access analytical capabilities they currently lack. This approach may lead to a wasteful investment in data analytics, as the return on investment falls short of expectations. It’s also concerning that many financial institutions fail to recognize the potential impact of IT and data processing and are misguided about the capabilities of marketing analytics.
See the graphic below to understand the specific issues banks encounter regarding data.
Source: The Customer-Engagement Imperative, Capgemini.
When it comes to handling data, many financial institutions seem unwilling to build the necessary analytics and digital capabilities to understand their customers and offer personalized services. They often undervalue the importance of analytics and skill development. About 53% of financial institutions’ boards lack tech-savvy members. There is also a notable incapacity to use data to adapt to customers and market trends. The disconnection between marketing and data science in financial institutions further complicates the issue. This is reflected in the fact that nearly 46% of marketing decisions are made without incorporating analytics.
See the image below for the specific concerns about banks’ internal technology expertise.
Source: 2022 Technology Survey
From a customer outreach perspective, the primary hindrances for banks and financial institutions are their inadequate technological capabilities and failure to identify and cater to new segments. With the increasing trend of digitization, customers are attracted to more accessible and straightforward services. However, due to their slow adoption of technology, financial institutions struggle to identify new customer segments, leading to increased customer acquisition costs. Many banks do not believe they are equipped to serve certain segments, like younger generations or large commercial enterprises.
Although customer satisfaction within the industry has seen some improvement, financial institutions are not living up to their customers’ expectations. Customers yearn for a personalized experience that is engaging and seamless across different channels. They also express dissatisfaction with their banks’ lack of financial advice, particularly during tough economic times.
Below is a graphic highlighting what customers believe they are not getting from their banks.
Source: The Customer-Engagement Imperative, Capgemini.
In conclusion, financial institutions are grappling with numerous data management issues, including gathering and selection. They are also struggling to build the necessary analytics and digital capabilities to understand their customers and provide personalized experiences. Their main challenge, however, lies in customer outreach, largely due to their lack of technology and inability to identify and serve diverse customer segments. Consequently, they are falling short of fulfilling their customers’ needs and meeting their expectations.
📚 Quoted References:
- The Power of Data Analytics for Your Business Growth
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- U.S. existing-home sales fall for the eleventh straight month in December, by Aarthi Swaminathan, January 2023.
- Marketing Data and Analytics Survey 2020: Optimism Persists as Results Fall Short of Expectations. Gartner
- 2022 Technology Survey. August 2022. BankDirector.
- U.S. Retail Banks Struggle to Differentiate, Deliver Meaningful Customer Experience as Economy Sours, J.D. Power Finds. JD Power.
- The Customer Engagement Imperative. Capgemini.
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- Retail Banking Top Trends 2023. Capgemini.
