By Jason Foster, CEO and Founder, Cynozure

Energy bills are eye-watering. The value of real wage has all but stagnated. The cost of goods and services is through the roof, and talk of a recession is growing louder by the day. We are living through a hugely challenging financial time, the impact of which is being felt by consumers and business owners across the country every day. 

We’ve all heard the advice – buy a new kettle, put tin foil behind your radiator, et cetera – but when it comes to tangible, personalised support there is, at present, still far more that could be done to help people to take control of their finances during this crisis.

For banks and financial institutions, there is a sizeable opportunity to step up and use the swathes of data in their possession to provide valuable financial support to customers through times of crisis.

An opportunity to step up

As the caretakers of people’s finances, banks are in a unique position to use the insights they hold to provide tailored financial support for people looking for ways to better manage their finances. 

To do this efficiently and in the most impactful way for consumers, financial institutions must first understand and make strategic use of the data they hold. It’s fair to say that, for the most part, data has historically been underutilised by banks. Never before in history has there been a more opportune moment to change this. 

Setting the right data foundations

There is a myriad of choices available to banks when choosing a data platform that can fulfil its current and future goals. Most will have platforms and data teams in place already, but for those that don’t, there are a number of questions they should ask themselves before investing. 

These include – but are not limited to – factors including the identification of a clear set out outcomes – what needs to be achieved through investment? Is it possible to exploit existing technology rather than acquitting new tools? What technological capabilities are needed, and which should be prioritised? And are the right skills in place for the organisation to truly reap the benefits of any investment?

Investing in a data platform and team can be a big decision, and it is paramount that banks fully consider their options before taking the plunge. 

Offering practical help to those most in need

Harnessing the power of data is a critical tool for banks when it comes to supporting the most vulnerable, and there’s a raft of support options that banks can consider deploying. 

At the most basic level, sharing consolidated insights into a person’s spending habits can be extremely useful. Giving this data back to the user, categorised and analysed, empowers them with the information they need to make more informed financial decisions that are more likely to have a positive impact on their long-term financial health.

Another use case is for a bank to use its data to identify customers struggling with regular payments or bills and put support in place for them – perhaps proactively offering a payment holiday to help relieve pressure in the short term or extending a fee-free overdraft temporarily. While these aren’t by any means a long-term solution, it may prove a lifeline for someone who is finding it hard to make ends meet. 

Open banking 

Open banking is probably one of the best examples of how customer data can be used to make financial services fairer, and more inclusive and accessible for consumers. People are able to use their data for their own benefit – giving them access to more transparent, fairer products and services. 

Take borrowing as an example. Increasingly, we are seeing lenders embracing open banking technology as a way to gather better, more up-to-date information to allow them to better assess risk, affordability and vulnerability. Being able to view a potential borrower’s full, historical transaction data gives lenders insight far beyond traditional credit data, helping them to get a more comprehensive, up-to-date picture of an individual’s financial situation and ensure they aren’t lending to people who will struggle to repay. This has enormous benefits for consumers.

To date, fintechs have largely dominated the open banking space, but this needn’t be the case. Much of the financial information that fintechs use to build products and services is data that banks are likely to already be in possession of. In utilising this data to benefit their customers, banks can ensure they remain competitive and don’t lose out on market share through customers using other apps to track their finances.

Benefits to banks

The benefits to banks of using data to increase support to customers are undeniable. It allows them to meet regulatory requirements which have been stricter during the pandemic, and – to put it bluntly – it looks good for them to go above and beyond during the cost of living crisis. Doing so can have positive knock-on effects when it comes to customer retention and acquisition.

With the media scrutinising their every move, and the Competition and Markets Authority (CMA) publishing rankings to show how well banks are looking after their customers, it is no exaggeration to say that it’s a reputational risk for financial institutions to carry on as normal during this time. 

Data is the key, and banks should act now to ensure they’re making full and proper use of the customer insights they hold. This means designing, building and actioning a comprehensive data strategy that empowers them to support customers with personalised advice that will make a real positive change to their day-to-day finances.