Big banking is watching you

Radclyffe: big data may mean better customer service, but more could be done

Online retailers have become sophisticated at observing customer behaviour, and then marketing based on the individual’s inclinations and past actions. Now, banks are starting to do it too. That could lead to some interesting scenarios, according to Charles Radclyffe, chief executive officer at business intelligence consultancy BIPB.

“If you’re the sort of person that arrives on a bank’s website straight from an online gambling page, or you immediately click the ‘buy’ button, or you load a page for personal loans and immediately slide the slider up to the maximum loan amount, you may not be a good credit risk,” said Radclyffe.

Big data is a concept that has been around for many years, and refers to the idea that organisations are having to cope with exponentially increasing quantities of information – some of which may be useful, and some of which may not. Companies like BIPB make a living from helping other organisations – such as large global banks – to decide what makes the final cut. For some, there is almost no limit to the amount of personal information that can be used to make a profit.

Some use a startlingly comprehensive use of personal information about potential customers: the  Russian bank TCS recently told Banking Technology how it combines browser information about customers when they are looking at its website –  whether they arrived via search engine, referral or marketing – with information on payment histories from the Russian Credit Bureau to score customers and make credit decisions. It even checks with employers to verify how much the potential customer earns.

For Radclyffe, such techniques are surprising not so much for the fact that they happen, but for the relative slowness of the major global banks in implementing the technology. As customer activity in retail banking shifts away from physical branch-based banking towards more mobile and online banking, banks will essentially have to become online-retailers themselves, he suggests. That could lead to more nuanced services for customers.

“Credit ratings are too binary today,” said Radclyffe. “It’s based on partial, imperfect information. You need to see what people are going out and doing. Risk models can analyse the credit rating of your Facebook friends to give you a score – and they can predict how other people like you are going to behave. At the moment, you either get a loan or you don’t – there’s no bargaining. That could change in the future, as companies offer deals that are more tailored to the individual.”

There are also more radical implications from the use of big data – including the amalgamation of banking services by aggregators, who then become the customer-facing service while the traditional bank simply plugs in at the back end.

“Why not have a moneysupermarket.com style service for banks?” he said. “Why don’t the banks just say between themselves, “We don’t need five branches along this street” and just amalgamate them. Why not have a supermarket for banks with all banks behind it? Years ago, if you wanted meat you’d go to a butcher. It’s archaic. Now you go to the supermarket, and it’s much more efficient because of the economies of scale.”

“Companies invest in pixel and cursor tracking,” he added. “They want to understand your propensity to buy.  That said, it could be taken further – few firms look at how software is used, for example. You could take these principles and apply it to internal software, to understand employees, and I’m not sure why people aren’t doing that more.”