Why Banks Should Worry

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Consumer banking is a complex business. Between managing risk and working on razor thin margins is the fact of handling a hypercompetitive environment. But there’s bad news afoot for banks: the situation is getting worse. Why? First, you have to understand the inefficiencies in typical banks (exclude Bank of America from this analysis).

A big bank, like any big company, is typically slow moving. Slow to change, slow to adapt. But this could kill banks over the next few years. There are three big issues that will cause problems in the coming years:

1) Banks don’t understand marketing analytics. Banks are storehouses of data. Simple data mining techniques could reveal a wealth of market opportunities within their own customer base. The value of banking data lies in its behavioral aspect – they could easily develop models to detect potential defectors as well as upcoming customer needs (defensive and proactive marketing). This is actually an ironic problem, since banks have some of the best data analysts available: it is extremely difficult to create risk models, which virtually every bank has the internal skills to do. These analysts would be overqualified in developing marketing models, but of course they don’t have the time or inclination to do so. Banks need to bring in analytical marketers as key players within the marketing organization.

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The original copy of the article is found here(TheUndergroundDialectic.com).
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