Data Mining for Banks. The New Normal?

George Hollister

Banks and other financial institutions have long stored customer data in huge data repositories—it’s a necessity for those organizations to do business. Banks also have had a long history of using that data for marketing purposes. In the 1980’s and 90’s, bank MCIF (Marketing Customer Information Files) were implemented by many financial organizations.

Those systems, precursors to today’s CRM systems, brought together the various customer account oriented data—systems that supported checking account processing, loans, credit cards, mortgages, etc., were usually different applications running on different computers, in different data centers. MCIFs brought that disparate data together in a single system. The implementation of an MCIF was frequently the first time that a bank began to get a look at its total customer relationship.

With the advent of the householded customer database held in an MCIF—everything nicely tied together with a name and address or phone number—banks began to append external demographic data, positioning themselves to do more customer analytics, customer profiling, meaningful customer segmentation, and to institute the beginnings of more formal data mining capabilities. Many of those original MCIF systems are still supporting marketing efforts in a variety of financial institutions today.

Larger organizations have moved on to more sophisticated campaign management and marketing automation tools and are more refined in their use of those tools. Increasingly, transaction data is used in conjunction with household aggregated data to help make marketing decisions and the data repositories have grown to hold terabytes worth of data. With databases this vast, traditional analytic techniques are no longer effective. Advanced data mining—automated analysis of large data sets to find patterns and trends that might otherwise go undiscovered—is critical to making sense of this burgeoning data asset.

The marketing environment has also changed dramatically—and continues to do so—resulting in more and different types of data available, seemingly on a daily basis. The number and variety of communicationchannels has virtually exploded, time spans have collapsed, and the customer has been put in charge of how and when she wants to interact with her financial institution. This has led to an explosion in the quantity and type of information available to the institution—much of it unstructured and difficult to link together.

The new challenge for bank marketing databases—the “new normal”—is to effectively bring together the vast repository of “traditional” marketing data with the new digital information from web analytics, from social media interactions, and from whatever new channel will be launched tomorrow. Customer data integration (CDI) processes need to change to store, manage and link, where possible, this new digitally generated content. With the rich set of online and offline data that will result, banks and other financial institutions will be able to further leverage today’s advanced data mining applications to get closer to the real knowledge hidden in the existing customer data.

With that knowledge, those institutions will be much better equipped to leverage multi-channel campaign management or marketing automation tools to converse with their customers at the time and through the channels the customers choose, with a message that resonates with each individual customer. Improved CDI processes and the data mining that they enable are no longer luxuries for financial services institutions of any size—they are quickly becoming table stakes in the data-intense world we now inhabit.

I’m curious what you are doing to leverage both your traditional customer knowledge and the new digital data assets in the new normal of database marketing…

About the Author:

George Hollister is the Financial Services Practice Leader at SIGMA Marketing Group, a marketing analytics agency.  Connect with George on LinkedIn or follow him on Twitter.

Tagged as: bank data mining, Bank Marketing, Financial Services Marketing