The banking and financial services industry is a domain where massive volumes of data are generated and handled every day. After all, banking customers create an astronomical amount of data through millions of individual transactions. Each and every activity generates a digital footprint backed by data.
All of this data falls under the umbrella term “big data,” which Investopedia defines as “large, diverse information sets that grow at ever-increasing rates.” Big data can be collected from shared comments on social media channels, through product purchases, questionnaires, and even electronic check-ins. This data then holds untapped potential for banks, credit unions, and other financial institutions that want to better understand market trends, product performance, and most importantly — their customer base. In fact, many banks and financial institutions have started using alternative data for credit scoring, deriving business insights, improving scalability, reduce defaults, increase approval rates, and combat fraud.
Here’s how big data can be used as a tool to improve customer experience.
Better Profiling to Gain a Complete View of Customers
In the financial services industry, customer segmentation has become commonplace as it enables banks and credit unions to group customers into neat categories. However, basic segmentation often lacks the granularity these financial institutions require to truly understand the wants and needs of their customers.
Banks, financial institutions, and credit unions then turn to big data to build more detailed customer profiles that take into account:
- The customer’s demographic
- Number of accounts they have
- Which products they currently have
- Offers they’ve previously decline
- Products they’ll likely purchase
- Attitude towards the bank and financial sector
- Behavioral patterns
- Service preferences
- And many more
All of these details provide a more comprehensive profile of the customer so that banks can serve them better, especially when they’ve considered the factors listed above.
Personalized Banking Solutions
The financial services industry isn’t exactly known for providing a high level of personalized service. However, those who thrive do so by offering tailor-made customer experiences that cater to the necessities of each client.
Big data can aid banks in understanding customer behavior based on the inputs received from their shopping trends, investment patterns, personal or financial backgrounds, and motivation to invest. This data plays a vital role in winning customer loyalty by providing personalized banking solutions for them. This greatly maximizes lead generation and creates a symbiotic relationship between banks and customers.
Reduce the Risks of Fraudulent Behavior
Identity theft or fraud is one of the fastest-growing types of fraud in the Philippines. In the latest Unisys Security Index, it recorded that 92% of Filipinos are concerned about identity theft.
Identifying unusual behavior and monitoring customer spending patterns is one way that banks can leverage big data to prevent identity fraud and make customers feel more secure. For instance, if a bank knows that a customer’s current location does not coincide with a person trying to withdraw money from an ATM several regions away, the bank can deny the ATM request as it’s deemed suspicious activity.
Alternative Data Credit Scoring
Big data can also be used for alternative data credit scoring. Data such as location-based information, behavioral tracking, and more can enable lenders to accurately predict borrower’s credit-worthiness. This then helps them make more informed and profitable credit decisions.
Whenever a borrower applies for a loan, he or she will need to provide his or her written consent to the lender that an alternative data credit scoring partner will collect and analyze his or her mobile network data to verify her creditworthiness.
Leverage Big Data for Credit Scoring with FinScore
FinScore is an alternative credit scoring company powered by telco data and advanced analytics. We help banks unleash a treasure trove of actionable insights using alternative data, giving them opportunities to convert more new customers and accurately manage risk. We can propel you into an exciting new age of efficiency with the use of big data.
For more information and inquiries about alternative credit scoring, contact FinScore today.