Behavioural Analysis

Posted April 13, 2018 by Ruaraidh Thomas

The following originally appeared in "Asset Servicing Times," Issue 187 [pdf], published April 2018. Used with permission.

The power of client data to drive revenue growth is being left untapped by financial services firms because they are failing to integrate their data sources, according to a white paper from DST Systems

The financial services sector has been historically slow to adopt new business models but, in the era of the agile fintech, it is an industry that is now following the likes of retail into digitising the consumer shopping experience.

Customers are finally being served up financial products online.

The question is how can traditional banks, brokers, asset managers and insurers make the most of digital opportunities?

Many established brands are saddled with legacy IT systems and data silos that are incapable or, at best, have limited capacity to speak to each other. Even firms that have established efficient data structures often fail to fully exploit the cross- and up-selling potential of their customer data.

Add onerous compliance requirements which flow from new legislation, from MiFID II to GDPR, and it is little surprise that financial services firms are struggling to exploit opportunities to better understand customer activities and behaviours.

Winning over Millennials

Like it or not, these firms will soon need to improve their offerings or face being left behind. After all, we are seeing digital natives continuing to represent an ever-greater percentage of key customer segments and demanding a shift away from more traditional channels.

Our recently published whitepaper by DST Systems, titled Embracing Client Behavioural Analysis for Improved Business Outcomes in Asset and Wealth Management, explored this issue with respondents in the UK asset management community.

It found these firms were collecting client data in some capacity – which allowed them to engage more meaningfully with clients. However, only half of the firms surveyed had systems and processes in place to leverage that data.

“Although the research shows that financial services firms understand the need to tap into client behavioural data, execution is an enormous challenge within the sector,” says Ruaraidh Thomas, Managing Director of Applied Analytics at DST.

“Putting the required technological solution in place will prove challenging in a business environment where decision makers are currently more concerned with regulation and data privacy.”

In fact, two-thirds of people who responded to the survey predicted that revenues would be boosted by as much as 20% if they could just succeed in interrogating their customer data more effectively.

New Financial Services Ecosystem

New fintech upstarts are continuing to trouble the buy-side firms surveyed by DST; three-quarters viewed these new entrants as a real concern.

Financial products that were once the preserve of established institutions are now being redefined within a new financial services ecosystem.

Disruption is the only constant, from ‘robo-advisers’ and peer-to-peer lending platforms to the appearance of new products as a result of the Open Banking revolution.

Nevertheless, these pioneering fintech firms have by no means won the race.

As they upscale they find, just as the incumbents did in their day, that they face ever greater hurdles to jump in terms of meeting regulations and capital requirements.

Industry Incumbents Fighting Back

So, for traditional organisations, there is an opportunity to embrace technology and evolve so they too can compete in what is still a relatively steady marketplace.

This means new battle lines are being drawn.

Indeed, the DST whitepaper found that 35% of poll respondents declined to offer up any details of their activities in assessing client data from multiple sources – saying their activities were proprietary and that they did not want to inform competitors of their plans.

“Effectively pulling together sets of data from various silos or systems within a business will provide an in-depth view of customer behaviour, which will in turn improve customer engagement,” says Ruaraidh.

Putting the required technology solutions in place may remain a challenge for some, but financial services firms must continue to improve customer experiences if they are to stay one-step-ahead of their more cutting-edge competitors.

Deriving ‘measurable benefit’ from client data analysis relies on breaking down operational barriers, DST’s research found: the flow of information must be improved between internal data managers and sales and marketing teams.

As one respondent told the DST survey: “It’s all about knowing your customers and selling the right products to them.”

For those that can, harnessing client data sets could be transformative for service levels and profitability.

Thomas Ruaraidh photograph
Ruaraidh Thomas
Managing Director of Applied Analytics
EMEA and Asia

The views expressed in this publication are solely those of the author and do not necessarily reflect the position or policy of DST Systems, Inc. or its affiliates, subsidiaries, joint ventures, officers, directors, or management.

Of Interest...
  • Embracing Client Behavioural Analysis for Improved Business Outcomes
    Learn More
  • Behavioural Analytics: Data Driven Compliance
    Learn More
  • Data and Analytics
    Learn More

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