Make money with data

Cyrus Daruwala, managing director, IDC Financial Insights

According to Cyrus Daruwala (photo left), managing director, IDC Financial Insights, each banking customer generates a truckload of data. How to convert that data into meaningful information that can help a bank better serve the customer’s financial needs and in turn generate revenue for the financial institution is where the real quandary lies today.

The convergence of data and analytics will drive a shift change in how financial institutions compete and differentiate themselves.

Toos Daruvala, a director in McKinsey’s New York office, wrote that “Every single major decision to drive revenue, to control costs, or to mitigate risks can be infused with data and analytics. [This] will be a differentiator for some period of time.”

What to do with the right data? For banks, McKinsey lists three main benefits of having granular access to data:

  • To capture a greater share of market segments and deeper penetration (wallet share) of existing customers
  • To increase the effectiveness of cross-selling, enhancing the ratio of products per customer as well as “customer stickiness”
  • To enhance the customer experience, based on a targeted approach to customer relationships, including greater focus on the direct sales force and aligned and enhanced high-function remote channels

In this exclusive interview with Fintech Innovation, Daruwala offers several practical instances where data already exists within the data stores of financial institutions and it is a matter of applying the right context to gleam insight about the customer.

Productizing data – challenge and opportunity

IDC predicts that by 2019, 40% of IT projects will create new digital services and revenue streams that monetize data. The analyst recommends that CIOs “focus on [new methods of] data monetization, productization, real-time orchestration, and service innovation,” while also looking at current systems to see where they can leverage that data for business purposes.

To prepare CIOs and their organizations for new monetization methods, IDC offers a few implementation suggestions, including:

  • Build a cohesive organization-wide strategy for data productization. 
  • Put an innovation team in place that’s comprised of IT and business employees that review current and potential systems/applications that could be monetized. 
  • Create information architecture to include internal and external data sources to enable instantaneous data analysis and market intelligence. 
  • Establish a strong governance with full stakeholder involvement and a full range of automated policies.

In the MIT Sloan Management Review article “How to Monetize Your Data” by authors Barbara H. Wixom and Jeanne W. Ross, it was suggested that companies can take three approaches to monetizing their data: (1) improving internal business processes and decisions, (2) wrapping information around core products and services, and (3) selling information offerings to new and existing markets.

While each approach is very different in the types of capabilities and commitments required of the organization but they also represent an important opportunity for the organization to create a defining moment for itself in the marketplace.