Three Ways a Lack of Payments Data Is Hurting Your Bank
Banks sit on a
treasure trove that has nothing to do with gold bars or stacks of cash: It’s
the payments data they accumulate with every transaction.
In a recent study of financial institutions, 75% of loan executives said a significant increase in the types and amount of data they collect would benefit their organization. They know data is (or should be) in the driver’s seat when it comes to decision-making around payments and consumer experience. Without data, it’s all guesswork.
However, the survey respondents also said they aren’t currently able to collect the payments data they want, nor fully optimize the data they do collect. Additionally, they lack the in-house data science expertise or bandwidth to produce comprehensive data collection and analysis related to payments.
Here are three ways inadequate payments data and analytics can hamper a bank’s business:
- No way to measure KPIs to track progress.
Data allows businesses to measure progress on key performance indicators. A KPI compares the goals of the business against the actual, quantifiable data over a specified period.
When you’re looking at payment, an important KPI is the conversion rate, broken down by payment method,channel and other cohorts. This allows you to identify the precise source of any problems and take measures to address them. For instance, if you see a dip in conversions from a particular payment method, you can have your payments provider investigate and take measures to solve the problem or remove that method as a payment option.
Other KPIs might include chargeback and fraud rates, as well as payments funnel dropout, which pinpoints areas of friction that can be addressed to improve the payment experience.
In each scenario, having regularly refreshed payment data, along with the capability to analyze it from multiple angles, aids in establishing and monitoring KPIs. This process enhances effective, autonomous payment operations and aligns with the broader objectives and priorities of the organization.
Yet, in our research, only a few financial institutions had payment-related KPIs. That leaves the vast majority working from intuition rather than facts, and missing out on leveraging payments data for improved performance.
- Limited understanding of what customers like (and what they don’t like).
Customer data pulled from payments and customer satisfaction surveys can guide companies in creating a more helpful, streamlined and self-serve payment experience. In our study, only half of the lending institutions measured customer satisfaction related to their payments platform.
In a competitive banking environment, it pays to get a read on customer preferences and behaviors. Data gleaned from loan payment transactions can reveal which forms of payment customers are using most, and which are on the decline. It can identify where customers are dropping out of the payments funnel so you can iron out points of friction and improve self-pay success. You can also examine customer behavior data to track the impacts of particular engagement efforts, such as those designed to increase auto pay or encourage loan consolidation or refinancing.
Customer satisfaction surveys take it a step further by letting you determine if your bank is giving customers what they want. Are customers satisfied with the products and services they are receiving? Can they access their accounts and make their loan payment online without a problem? What would make this easier?
A study of 2,000 financial services customers who took a brief survey found that those who participated were more than three times as likely to open accounts and less than half as likely to defect, even a year after the survey. That means the collection of customer data not only benefits your bank at the moment but can provide ongoing value through increased customer loyalty and business.
- Inability to use advanced analytics to boost automation and gain insights.
Artificial intelligence (AI) is poised to transform banking by opening doors to improved efficiency, automation and personalization. In the study’s interviews with bank executives, they listed numerous benefits advanced analytics could deliver, including process optimization, attrition funnels, collections insights, payment process funnels and error tracking, overdraft analysis and prediction, and underwriting and credit insights.
Yet, only about 2 in 10 financial institutions (18%) are currently using data for AI/ML, and executives say lack of resources (staffing and funding) is the reason.
AI and machine learning models work best off large data sets, so having a steady stream of fresh data is critical, whether structured or unstructured. Without the data science expertise in place to consolidate and analyze that data, banks will be left on the sidelines of the AI revolution.
How to Get Data Flowing
Expanding the collection and use of data requires consolidating data in a centralized data lake, where it can be cleaned and analyzed. Next, the data has to be democratized—which means it is organized in a way that is accessible and understandable to anyone in your organization who could benefit, from the CFO and CTO down to the marketing team and customer service managers.
For banks that don’t have this expertise in-house, and don’t want to invest in building a data science team, it makes sense to outsource data collection and analysis—and even AI modeling —to a payments technology provider that has both the expertise and the experience. Ask your current payments provider if it offers those services or shop around for one that does.
The banking industry deserves a pat on the back for applying technology to the online banking experience. Now it’s time to continue that journey with the help of payments data and AI/ML. Those who learn to access and fully tap into this treasure trove will have the advantage of making more strategic decisions and improving the customer experience.
About the Author
Roger Portela is the Senior Director of Product at PayNearMe, where he leads customer-facing product development teams. With more than 25 years of payments and product experience, Roger ensures PayNearMe’s solutions lead the market by reducing consumer friction and offering the widest range of payment options and channels, all while staying focused on security and reliability, to ensure clients collect every payment, every time.