Amazon Prime has over 200m paying subscribers. Imagine if they lost 10m customers in one year, the equivalent of 150k customers a week. Well, that’s what we’re seeing in US commercial banking.
While 2Q23 saw some improvements, over the last year US commercial banks have lost almost $1tn in deposits. A large driver is interest rate sensitivity – banks could have done more to support their customers.
When asked about Amazon’s focus, Jeff Bezos famously said “We’re customer obsessed. We start with what the customer needs and we work backwards.” Amazon focuses on understanding their customer and providing an excellent experience. They remove all barriers in the way. For example, since Amazon started Prime, the experience has moved from free-delivery to one-day-delivery, to now same-day in over 60 metro-areas (well mostly).
Imagine if your bank could do that.
Well, it can, and it’s easier than you might think. Here are some steps to take now.
1. Gather the data
The first step is to gather all the data you can about your customer, from financials to non-financials. Amazon tracks over 67 metrics in every customer search. For deposits understanding the available cash flow and balances is key. According to our analysis the average SMB has tens of thousands of data points readily available on their financial performance. By contrast banks typically make decisions on less than 10.
2. Start to see around corners
Understanding your customers’ data allows you to better predict behaviour. With every figure readily available and audited it becomes much simpler to generate and trust forecasts. The bank can identify when customers might need liquidity support or if they may be looking to move cash deposits away. Importantly, a proactive intervention can stop the event happening!
A recent McKinsey survey* said banks who pursued advanced analytics to provide a better service delivered double the growth of peers who did not. A key focus of a large US bank was ensuring the key information was at the RM’s fingertips, generating more time for RMs to focus on value-adding activities.
3. Build delightful experiences
Improving customer experience can also be fueled by data that drives analytics. Amazon was the first website to allow one-click buying in 1999 to reduce cart abandonment. Removing any pain point or barrier can lead to sizeable benefits. At a large global commercial bank, the average SMB took over 4 hours to complete a specialized finance loan application and the RM 3-4 hours of manual data entry. That’s 8 hours that can be resolved using the latest technologies to upload data.
Most banks have just started this journey. And, the first and easiest place to begin is getting the financial data. Validis allows customers to upload their financial data in seconds improving customer experience and enabling banks to start their analytic journey.
* Source, McKinsey & Company
The right technology will improve your customers’ experience.
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