How Financial Institutions Can Provide Amazon-Like Digital Banking Experience


Editors Note:  The following is the second installment of a two part series on data driven digital banking. Referencing various reports, this blog discusses how banks can begin unlocking the copious amounts of data available to them to provide an Amazon-like experience for their users. D3 Banking licensed the referenced reports for general distribution.

Amazon was one of the pioneers in leveraging data associated with consumer purchases online to market and cross sell additional products and services. With the growth of digital banking adoption by consumers, financial institutions now have the same type of ability as Amazon. However, the vision of an Amazon-like experience within the banking industry is only being realized by probably fewer than one tenth of all the banks and credit unions in the United States.

The reasons are numerous but key to explaining the situation is disparate solutions used by most institutions to serve their customers. These disparate digital channels (see Do You Know What Your Digital Strategy - Or Lack Of One - Costs Your Organization?) make accessing information about the customer exponentially more difficult as data is stored in different locations on different platforms. These "data jails" are made even more impenetrable by the fact that many financial institutions have outsourced control of their brand, the user's experience and associated data to third-party vendors using single sign on strategies. I always am amazed when I see financial institutions actually allow some of these providers to "brand" the financial institutions website with their logo. The logic of this escapes me as it is a clear dilution of the banks' or credit unions' brand value.

One place that it has become an accepted industry practice to surrender the user's experience and data is in the area of money movement. By outsourcing payment, P2P and even A2A, customers of financial institutions must manage multiple screens, each with a different UI. Meanwhile, since financial institutions do not control the data being input into these pages hosted on their behalf, they lose access to the data that could have a positive impact on their top and bottom lines.

A strategy that banks and credit unions have began using to regain control of the user experience and associated data related to money movement is to utilize APIs to connect with their third party providers.  Taking this approach allows financial institutions to send only the information required by the vendor to execute the desired action. In addition, the user is presented with a much more consistent, intuitive experience that can include value-added options for which the financial institution can charge a fee. For the institution, this approach offers an opportunity to discover routing options that will lower costs.

One institution I work with decided to take back control of the user experience and data for their bill payment offering. This made new data available that showed the institution its own single largest bill pay recipient. Each month it was paying five figures to the bill pay provider who was sending paper checks to the financial institutions so that its own customers could pay the mortgages held by the financial institution. 

In addition to the costs associated with surrendering data to third party outsourcers, banks and credit unions also struggle to access data hidden in the siloed, point and legacy solutions within the IT infrastructures. This limits their ability to provide the level of customer service they otherwise could with an integrated platform to analyze data in an automated and intelligent manner. Organizations that properly leverage such an approach for their digital customers can better predict and personalize their offerings to members, fostering deeper member relationships.