*This article was published in Bank Director magazine’s second quarter 2024 issue.
The emergence of digital technologies and the increased interconnectedness of financial services means banks have access to an unprecedented breadth and depth of data.
Community banks should explore how they can leverage data to improve customer service, streamline operations and reduce risk.
Data Evolution in Banking
Traditionally, community banks relied heavily on structured data derived from customers’ transactions. These data points served as the bedrock for decision-making, enabling banks to assess account activity, track key performance indicators and comply with regulations. While transactional data still holds immense value, the data landscape has expanded exponentially.
The advent of digital banking introduced an array of new data sources to consider. This diversification of data sources presents an opportunity for banks to gain deeper insights into customer preferences, behaviors and overall financial well-being.
Data Strategy Benefits
A well-structured data strategy can transform your institution’s decision-making processes and enhance customer relationships. Here’s how a formal data strategy can help:
- Enhanced customer insights. Integrate, analyze and derive actionable insights from various sources to gain a comprehensive view of customers’ financial needs and tailor products and services accordingly.
- Improved risk management. The ability to analyze transactional data alongside emerging sources like social media allows banks to better assess credit risk and identify early warning signals for potential issues. This can enable better and more effective risk management and compliance with regulatory requirements.
- Personalized customer experiences. A formalized data strategy empowers you to personalize customer experiences, offering tailored product recommendations and customer service based on individual preferences and behaviors.
- Competitive advantage. The ability to aggregate and present data effectively can be a significant competitive advantage for community banks. It allows them to stay agile, adapt to changing customer expectations and respond swiftly to market trends.
- Operational efficiency. Banks can use data analytics to streamline internal processes and reduce costs, more effectively allocating resources.
Develop Your Data Strategy
Now that the importance of a data strategy is clear, here are some recommendations:
- Assess your existing data infrastructure. Verify that your bank has the necessary tools and technologies in place to collect, store and analyze data effectively.
- Define clear objectives and establish specific goals. Establish specific goals for your data strategy. Are you looking to increase cross-selling opportunities, enhance risk management, improve customer satisfaction or find niche opportunities? Clearly defined objectives will guide your data initiatives.
- Data governance and security. Implement strong data governance practices to maintain data accuracy and security. Verify that your data is used ethically and is in compliance with regulatory requirements.
- Invest in analytics experience. It’s essential to hire or train data analytics professionals, since they play a crucial role in turning raw data into actionable insights.
- Collaborate across departments. Data should not be siloed; it should flow across various functions, from marketing and sales to risk management and compliance. Encourage cross-departmental collaboration.
- Implement iteratively. Don’t expect a perfect data strategy overnight. Implement your strategy iteratively, which allows for continuous refinement and improvement as the bank gains more experience and insights.
- Monitor key metrics. Develop a dashboard of key performance indicators to track the return on investment of your data strategy. This will help measure progress and make data-driven adjustments.
Embracing data as a strategic asset allows community banks to stay competitive and provide exceptional customer experiences. Assessing your institution’s data infrastructure, setting objectives and fostering collaboration can help your bank gain deeper customer insights, improve internal efficiencies and secure your institution’s relevance.
The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CLA) to the reader. For more information, visit CLAconnect.com. CLA is an independent network member of CLA Global. See CLAglobal.com/disclaimer. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.
