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Finding Meaning in Householding Data

From lockdown restrictions to remaining at least six feet apart from other people to consistent mask wearing and remote working – we all know the pandemic has changed the way we live and work, but it may have also forever changed the way consumers bank. In a post COVID banking survey, Foresight Research found a hotspot of churn in the data: consumers’ intent to switch institutions (over two years) increased from 12 percent to 22 percent (extremely or very likely).

The fact that consumers like to shop for the best deals isn’t new, but the rise in digital banking has enabled consumers to promiscuously shop for the best banking deals that will help reduce cost or increase interest on items like money market accounts, CDs, personal loans and more. The onus is now on banks to fight through the vain promises of competitors and seismic industry shifts by re-evaluating their business to remain competitive for their customers and prospects, notably Gen Z and Millennials, the two groups most likely to leave their financial institutions, according to the survey.

Unlocking the right mix of customer data, combined with actionable intelligence can yield big profits for banks. While there isn’t a clear standard around how banks should manage data, the best place to start, is typically under one roof – with householding data (grouping customer accounts to identify decision units or households). Bank executives may not know where to start, because even if this data is available, it is limited. However, if bankers can gain a better understanding of households, they can then more accurately determine if they are profitable as well as which products and/or services to cross-sell for mutual savings and benefits.

No time like the present.

“The family – that dear octopus from whose tentacles we never quite escape, nor, in our inmost hearts, ever quite wish to.” – Dodie Smith, novelist and playwright

Pew Research Center reported that the pandemic pushed millions of Americans, especially young adults, to move in with family members. The majority of 18- to 29-year-olds are living with their parents since U.S. coronavirus cases began spreading early last year, even surpassing the previous peak during the Great Depression era. In July, 52 percent of young adults resided with one or both of their parents.

As the pandemic rages on, its effects will likely linger for years to come, which includes the current trend of young adults living with their parents. This is an excellent example of the importance of household data – this is where banks can find and begin building relationships with large groups of generations (Gen Z and Millennials) that can impact the survival and viability of their future.

With proper information and alignment, banks can develop more sophisticated marketing practices to reach family members holistically and personally, and in turn create a repeatable process for sales enablement and profitable growth. For example, instead of sending an exclusive, low interest rate credit offer to mom and something very similar to dad who have a joint savings account worth $60k, a much better approach would combine a personal loan offering for mom and dad and their 25-year old twin sons to upgrade their 1,200 square feet abode for more space and comfort. After all, they are likely sharing resources, and maybe even dividing household bills.

Receiving a relevant offer for the household can increase a bank’s stickiness within the family. And, the creep factor that once existed from consumers concerned about businesses knowing too much information about them keeps waning. In fact, consumers have become accustomed to exchanging their personal information for relevant offers, and many even expect it from a relationship as sensitive as their bank. A survey from Infogroup found that 44 percent of consumers are willing to switch to brands that better personalize marketing communications.

Getting started

The questions most relevant to bankers in 2021 are:

  • How do we help our customers and businesses through the health care crisis to grow regardless of the economic environment?
  • How do we optimize capital & liquidity to prepare our balance sheet for success and expansion during the potential recession?
  • How do we evolve our current delivery channels to an adaptive omnichannel with humanity?

If a banker doesn’t have an answer to any of these questions, they are not close to developing a strategy to get one version of the truth for their customers, which includes:

  • Integrating and curating holistic and accurate client information from all data sources.
  • Adding intelligence to the information to identify opportunities that benefit clients and shareholders.
  • Creating an environment to realize opportunities through execution and accountability.

Just as householding data can reveal profitability, it can also uncover gaps such as underbanked or underserved segments within an institution. Knowing both ends of the spectrum can position institutions to better serve their customer base, letting the data play a huge part in the decision-making process, rather than making assumptions at a time when banks literally can’t afford to.

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