Geographic information system technology is not only changing the way consumers eat and shop but also revolutionizing how they conduct banking. SmartBrief recently sat down Simon Thompson, director of commercial solutions for Esri, to discuss how banks are starting to leverage GIS data to enhance products and services for “the connected customer.”
How is location information revolutionizing the consumer banking sector?
Everybody has a different definition of what “big data” is … But if you make the assumption that 80% of all data is spatial, then what we are talking about is bigger data. If you look at the information that banks want to process, it is almost 100% location-driven. It’s all those shopping transactions and searches, all those social media interactions and Tweets. Banks are asking where do my customers live, what do they want and what can I do to find them and serve them better?
How is all this “Bigger Data” being put to use?
The banks we work with are using anonymous information to drive things like network optimization. They are trying to determine what their bank looks like from a customer perspective. Not just “where are our ATMs” but also “where are our merchant services and what are the driving trends in consumer behavior”. From there it links to patterns of spend, cash collection and cash management. Do we have the right levels of penetration across all these markets across all our lines of business? It is about having a pervasive presence so customers have the sense that they can get access to services in a convenient way.
How does this optimization effort by banks mesh with retailers?
It meshes with retail when banks look for partners in locating their ATMs. They no longer just want ATMs in convenience stores, but they want an ATM in Macy’s or near some other specific store. It is a High Street model. We’re seeing tie-ups happening between attractive brands and banks. It is mutually beneficial. For the retailer, if the ATM is convenient, then customers are likely to buy something else using cash either in that store or near buy. For the bank, it generates more transactions for those ATMs and security issues are generally reduced because the ATMs are located inside rather than on the street.
What else are banks doing with location information to optimize their operations?
Up until three years ago, most of the credit card companies had limited interest in location because they knew they could just blast out marketing materials and over time people would come in and get their card. This isn’t the case now – the economic has changed and so has the consumer and their expectations. We are finding now that there are massive drivers to improve credit card services and consumer applications. Banks need to market differently and to different consumers so they are finding they don’t have to target or carpet-bomb an entire MSA (metropolitan statistical area). They can pick individual geographic areas. They can pick customers and their specific point of interaction in many different ways. Consumer technology is making this much easier and location technology and spatial analysis is making it much easier for banks to find their ideal customer.
What are banks doing to enhance the mobile banking experience?
Banks are really looking to seize on two angles of the servicing the “connected customer.” With so many different types of phones, banks are looking to develop apps that work across all platforms to capture and acquire insight from all the information that comes linked to the transaction. For them, it is about information content management and delivery.
The other angle is customer service, getting closer to the customer, delivering them what they want. Banks realize they can significantly differentiate themselves by offering a very different customer experience. Opt-in programs, like what AmEx has done with foursquare, are being rolled out within the banks own apps, providing coupons, incentives, special member privileges from restaurants discounts to movies ticket and store coupons linked to partner retailers. This is driving new interest in Location Enabled Apps.
Another challenge revolves around merchants. People do not want to have to continually re-invent the technology. “Rip and replace” is not going to happen. The banks are looking to innovate on top of the existing technology while dealing with new consumer models like e-payment and wallets on our phones. They know they aren’t going to go through massive R&D activities. Banks are coming to us looking for solutions that squeeze the most out of the data they already capture with the existing transaction and security infrastructure. That way, when a new idea or a better service channel comes along they can have it up and running in 4-6 weeks.
What are banks doing to alleviate security concerns about mobile banking?
Clearly the consumerization of IT has become transformed the relationship between the bank and the customer. Banks have to understand more about where their customers conduct transactions. More and more firms are transitioning away from being disintermediated by third-party apps. What they want to do is provide secure platforms so personal information is not exchanged outside the organization. When we use our bank’s app we want to be sure we get value for our checks the same day or a merchant’s mobile payment has to be completed. There is a whole lot of authentication that must take place to achieve that including location-based authentication. Bank’s wants to handle that information in-house, to maintain privacy and security but location is also increasingly important in dealing with fraud and financial services crime. With location analysis is adds a whole new dimension what you can do with that information.
Editor’s note: This interview has been edited for clarity and length.