Picture this. You work for a bank and are tasked with adding email addresses to your customer database. At first the task seems straightforward and should be quick to execute. But when you start diving deeper you realize that the bank’s customer data is scattered across 7 different systems, and each system contains different (and conflicting) data points. You then begin to realize that what started out as a straightforward task may now take you months.
Unfortunately, this is the reality for many banks and companies that operate banking products.
Getting a simple view of who their customer is can sometimes be complex. I should know, as I used to consult on core banking for banks around the world. What I found was that while all banks stored their customer information somewhere, they often had it stored in five different somewheres, and none of those systems talked to each other.
The world of understanding who’s who, who’s conducting which transactions, and what should be sold to who gets a whole lot more difficult when data is scattered all over the place. Not only does this create inefficiencies for all of your internal teams, it also might worry a few of the regulators too.
However, I’ve also seen the beauty of what happens when banking data is structured correctly and everything is centralized in one place. It suddenly becomes much easier to mitigate fraud, understand your customers’ behavior and sell the right products to the right people at the right time. This has been the amazing part of building a new system from scratch.
Banking data can be broken down into three key pillars. Customers, accounts, and transactions. When each of these pillars is well-defined and integrated with each other, that’s when the magic happens. Get these wrong and even the simplest things are hard to achieve.
Let’s walk through the three pillars and how companies that operate banking products can get them right…
Pillar 1: Customers
Most banks and other companies that operate banking products store a wealth of customer data, including demographics, behavioral information, and transaction details. Problems begin to arise when all of these valuable data points are scattered and potentially even conflicting with each other.
Your job as a bank is to help improve the financial lives of your customers and without knowing the details of who they are, it’s difficult to determine what products they may need next. Not only does this detract from the customer experience but it also hinders your company’s ability to cross-sell different products to your customer base.
When your customer data isn’t centralized or easily usable by your sales and marketing teams, delivering a targeted, compelling offer that provides real value to your customer becomes infinitely more difficult.
That’s why it’s important to keep all of your customer information up-to-date and located in one single source of truth. This gives your entire team a holistic view of who your customers are and how they’re using your product. By knowing this information, you are able to better anticipate their needs and deliver a compelling offer at the right time. Whether that be a new lending product, an upgraded account, or a new savings tool.
On top of the cross-selling ability, having a holistic view of your customer data also helps with fraud mitigation and regulatory compliance. Anti-money laundering, for instance, becomes a lot more simple when you know who is moving money to who.
Pillar 2: Accounts
Accounts are, at their most basic, the specific attributes of each product that you offer to your customers. Account data includes the details of the spend limits, minimum balance requirements, interest rates, capabilities (ACH transactions, wires, etc), terms the customer agreed to, among other things. Accounts are the commitment to the customer and a definition of the product behavior.
The attributes of a checking account product are going to be different than a savings account, which are both going to be vastly different than a credit card product. Each different product that your bank or FinTech offers would be considered a different account.
Within your data system you should have a centralized place where each account type is clearly labeled and contains all of the information on the attributes associated with it.
As your banking capabilities mature you will likely add more and more products, each serving your customers’ needs slightly differently. When the number of different account structures increase, the data that keeps track of them all becomes ever more important.
Haphazardly saying your bronze-tier checking account has a minimum balance of $100, when other customers were offered the same product with a minimum balance of $50 sounds like something that should never happen. But believe me, it does.
Having your account data be comprehensive and housed in one central system makes life a lot easier for everyone at your organization, from your customer service team to your risk & compliance team. This is especially true at scale.
Pillar 3: Transactions
While the definition of transactions is easy enough — all of the activity your customers conduct with your banking products — getting all the data behind those transactions organized and manageable is far from it.
You can do everything to get your customer data organized, and properly manage account data, but transaction data is key to truly understanding how your product is used by your customers. Knowing who those customers are and which accounts the transactions are associated with is critical. Transactions on their own are not useful, we need to understand these activities in the context of customer and account.
You need to get this right. And to get it right, you need strong financial accounting concepts built into how you track transactions.
Your product’s transaction data should utilize double-entry bookkeeping with a strong internal accounts structure, giving you a holistic view of where the money came from and where it’s going. With this structure, each transaction has two corresponding sides, a debit and a credit. Then through a process known as reconciliation, you match both sides of the transaction to ensure they are always equal to each other. If you do this well, the funds magically are in balance and everything makes sense; or you can easily spot the discrepancies.
You may encounter a situation where there is an imbalance. Your credits do not equal your debits. This is then your team’s cue to start chasing down the source of the imbalance to understand where the mismatch occurred and bring it to resolution.
Without the help of double-entry bookkeeping, you may have never noticed there was a mismatch in the first place. And this is where issues can start to compound and become more serious.
Properly mitigating risk requires you to have a clear view of how money is moving into, out of, and within your product. Without structuring your transaction data with strong financial principles in mind, mistakes like co-mingling funds or fraudulent transactions become much more common. Money can begin to leak out of your banking product without you immediately catching on, or someone can be printing money, which is also a bad situation.
Data in Sync
Now that you know what the three pillars are, let’s talk about what happens when each of them is constructed correctly and seamlessly integrated with each other. Getting to this magic is key to operating as a successful bank or any company offering banking products. Not only does everything become easier, scaling becomes more efficient.
Let’s walk through an example of how it looks when the three pillars are in sync with each other.
Picture this. One of your top customers just purchased an airline ticket and an international phone plan. By tying their transaction data to their customer data you know that they are planning an extended stay out of the country. But then you look at their account data and notice the debit card product they have with your company charges international fees.
That’s when you see an opportunity to improve the financial life of your customer while effectively cross-selling them a different product. You determine that this is a great time to offer this customer your credit card product that charges no international fees. You deliver this compelling offer at the right time, to the right customer, and magic happens.
Knowing who your customers are, what they need, and how they are using their current products allows you to create a better customer experience as well as more revenue through identifying opportunities for cross-selling. It also ensures you’re able to effectively mitigate risk and maintain a healthy financial ecosystem.
When even just one of those pillars is out of sync or poorly designed, simple business practices like understanding your customers and finding avenues for growth becomes not just difficult, but nearly impossible.
Thankfully, at Synctera, we’ve had the opportunity to build everything well with modern technology and to get each of these pillars right for our customers building banking products and the sponsor bank partners that support them. It’s part of how we’re able to take on bigger problems, and often can say “yes” when others have no choice but to say “no.”
Want to learn more about our platform? Reach out to our team of experts here.