By Christopher Evans, Collinson Group
Lloyds Banking Group recently announced the creation of an in-house digital analytics team in the UK, in partnership with the Advanced Skills Institute and Google. The bank’s reason for this? “To help them prepare for future customer queries” and to enable “massive, low-cost analyses of anonymised datasets”. Simply put, Lloyds is trying to improve its digital marketing. This is the first time the search giant has embarked on a project like this with a bank, and believes it will give Lloyds an 18-month competitive advantage over its peers in data analytics.
The fervour for big data sweeping through retail bank boardrooms at a global scale is intensifying as corporate strategy prioritises a shift towards real-time intelligence. This will allow banks to identify their most profitable customers, and develop loyalty initiatives tailored to various customer segments.
For example, the recent success of card linked offers shows the impact that deploying data analytics can have in providing instant and observable value for the customer, merchant and bank. Of course, firms deliver this big data value by spinning-up cloud based servers on demand to filter terabytes of data in order to secure insight. It must be noted that the data is taken outside the more secure internal firewalls of banks’ infrastructure, which carries some risk. Financial services providers should be cognisant of this, and deploy encryption and tokenisation to ensure customer data is tamper proof.
Firms must focus on building trust with consumers that their personal data is secure, and demonstrate how they can then benefit from a more personalised loyalty service. The essence of the exchange of data for consumers is directly proportional to the value they believe they will derive in return for sharing their data, and a more personalised service is regarded as highly valuable by consumers bombarded with generic communications and offers.
According to a Collinson Group survey of retail banking executives in 2014, developing a better understanding of customer lifetime value, and improving the use of customer data and insight ranked higher than investing in digital and mobile services, and further investment in branch infrastructure. It is also important to remember that the concept of brand loyalty has also become increasingly complex in recent years, largely due to the continuous evolution of technology and growing consumer expectations.
Yet, there is one inescapable issue that the financial services have to confront—the move by European and North American authorities to curb interchange fees. These changes have begun to deprive loyalty programmes of an important source of funding which powered their rewards. As a consequence, several notable brands, particularly credit card providers, have reduced the value of their points-for-discounts reward programmes or even retired them altogether.
The future of loyalty is about so much more than simply adding a few more enhancements to pre-existing rewards programmes, or sharing offers based on customer statements. Brands must place the customer at the heart of business models. The rapidly evolving relationship between brands and consumers, the emergence of digital disrupters and developments in the regulatory environment mean that stasis is not an option.
The next five years will see companies becoming far more proactive in accumulating data, but also accounting for how they store and use it, not just with regulators but directly with consumers too. These measures will pave the way for a more transparent approach, which in turn will lead consumers to value those brands that have a proven track record with usage and security.
In a world where intelligent data usage and the permission to make use of it will separate the winners from the also-rans, striking the right balance between customer intimacy and respect for privacy will be a key competency—with loyalty initiatives remaining a vital mechanism for gathering and aggregating data in ways customers are content with.