In today’s market, retaining current deposit clients is crucial for maintaining stability, trust, and effective operations. However, retaining customers is difficult due to increased competition, evolving customer expectations, and a lack of differentiation among financial services providers, with the emergence of online banking platforms and mobile apps with self-service options that don’t require an in-person appointment or the completion of lengthy paperwork. While this convenience greatly benefits consumers, it limits opportunities for the financial institution to intervene to prevent attrition or the loss of deposits.
As technology enables customers to move funds, close accounts easily, and perform transactions effortlessly, it becomes even more imperative for financial institutions to find innovative ways to engage with customers and prevent attrition. Fortunately, the solution lies right before us — embedded in analyzing transaction history and leveraging the valuable insights they provide into consumer behavior.
The hidden story in bank transactions
There is a quote that is often associated with Mark Twain: “History doesn’t repeat itself, but it rhymes.” This same ideology can also be applied to consumer behavior in banking, particularly in terms of observing transaction history, account balances, and engagements. To find out the probability of attrition, it is essential to have a deep understanding of consumer behavior. This involves conducting individualized analyses, examining each customer’s unique account usage patterns, and being attentive to deviations from expected behavior. Monitoring variables such as account balances, deposits, transactions, engagement levels, and more allows for identifying behavioral patterns and the underlying motivations behind account activities. By incorporating relevant third-party data into the analysis, the financial institution can validate or eliminate hypotheses, resulting in stronger “next best action” strategies and well-informed account plans.
4 reasons financial services firms need to invest in predictive analytics now
With the increasing availability of transaction data and advancements in data analytics, financial services companies have an unprecedented opportunity to leverage this data in several ways, all focusing on the same goal of minimizing attrition risks and driving additional deposits. Here are a few reasons financial services firms should focus efforts on predictive analytics centered on banking transaction history.
1. Minimize reactive measures that have limited success
More often than not, reactive measures prove ineffective and inefficient. Yet many financial institutions are focusing on identifying when deposits or accounts close and understanding why it happened. By reaching out, financial institutions can prevent additional account closings or withdrawals. It is also a better experience than a customer thinking their actions went unnoticed. Still, it is rather unlikely that the financial services firm will successfully regain the deposits or reopen the account.
2. Detect red flags early
Early detection of red flags is a crucial benefit of transaction analysis and can help uncover early warning signs that indicate potential customer dissatisfaction or fraudulent behavior. By monitoring transactional activities and promptly addressing any concerns or issues, financial services firms demonstrate their commitment to customer satisfaction and attentiveness. This proactive approach enhances the banking experience and increases the likelihood of retaining deposit clients.
3. Target upselling and marketing opportunities
Transaction data analysis can provide valuable insights into customer behavior and preferences. By understanding customers’ transaction patterns, financial services companies can arm themselves with data points such as which customers may benefit from additional financial products or services, or there might be opportunities to gather additional deposits.
For example, if a customer consistently makes frequent large deposits, it may indicate a propensity for savings or investing. Understanding this may allow the financial services company to offer tailored financial productions and services that align with the customer’s goals. This targeted approach increases the chances of gathering additional funds from existing customers.
4. Enhance customer experience and financial well-being of your customer base
Financial services companies can offer insights and recommendations to help customers manage their finances more effectively by analyzing spending habits and financial trends. For instance, if a customer shows a pattern of overspending, the bank may provide budgeting tools or suggest financial planning services. This holistic approach fosters trust, loyalty, and a sense of partnership between the bank and its customers, reducing the likelihood of attrition.
Predict and prevent customer attrition with data insights made possible by predictive analytics
Transaction data serves as an invaluable asset for financial institutions, providing insights into customer behavior, predicting attrition, and understanding deposit motivations. Leveraging advanced analytics empowers financial services providers to proactively identify red flags, enhance the customer experience, and offer personalized services. This proactive approach not only increases satisfaction and loyalty but also yields cost savings and operational efficiencies.
Ultimately, financial services companies that prioritize transaction data analysis are better equipped to keep deposit customers satisfied, mitigating the need for reactive measures after customers have already left or withdrawn substantial funds. In a highly competitive industry, it’s through the use of advanced analytics and AI that financial institutions can unlock the hidden stories within their transaction data and use those insights to increase retention and grow deposits, be proactive, optimize product offers, improve customer satisfaction, and enhance overall profitability.