Customer Analytics Growing in Banks

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American Banker Research recently set out to discover the demand and usage for customer analytics throughout the banking industry.

To our surprise, most (71%) of the 170 bankers in the weighted survey do not, but within a year that might not be true.

Among those non-users, the plans to buy analytics are not impressive. Only 2% plan to buy customer analytics in the next six months, 4% in the six to 12 months and 14% in more than a year from now.

What's going on here? We've spoken with scads of banks that use customer analytics. One problem may be definitional: some of the surveyed banks may well have solutions that conduct customer analytics but go by other names, such as "marketing customer information file."

Cost was the biggest barrier, noted by 36%. Another issue is other, more pressing IT issues taking precedence - about 32% of bankers surveyed said a focus on other initiatives was the primary obstacle to using customer analytics at their institution. The third primary reason for not using customer analytics, given by 23% of these bankers, was skepticism about the ability of the software to provide business value or a return on investment.

On the other hand, 33% of bankers who do use customer analytics say they plan to increase spending on such programs by a mean of 15% in 2013. About 35% of these users are interested in adding social media content to the data they analyze.

And these bankers reported several benefits to using the software. More than a third (37%) said the software improves the impact of marketing efforts. About 28% of respondents said that an increase in wallet share was the top benefit their institution reaped from customer analytics. A smaller group, 18%, identified improved underwriting and/or a reduction in loan loss rates as the primary benefit.

As this month's cover story points out, data-savvy competitors like Amazon and American Express are sure to push banks to get better at customer analytics, it's just a matter of time.

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