How Financial Services Can Utilize Customer Behavior

Digital finance companies are bent on disrupting the financial services (FinServ) status quo. Traditional institutions have long been the de facto choice for banking due to a lack of viable alternatives. Now, however, finance apps like Robinhood, Venmo, and Branch have begun encroaching on territory long held by the likes of Goldman Sachs and JP Morgan Chase. For the first time, customers looking to make direct payments, invest in the stock market, or receive a payday loan can do so through one of many FinServ apps on the market.

This direct competition has revealed weaknesses in the elder statesmen of the FinServ industry. Traditional banks are often bloated, unwieldy, and unable to pivot strategy as quickly as more niche and agile startups. By comparison, it’s estimated that transactions performed via peer-to-peer payment apps like Cash App will surpass $1 trillion in 2023. Traditional banks hold the advantage through sheer size and stature for now, but trends suggest that consumers prefer a more self-driven and digital means of managing finances. This bodes poorly for the future of any institutions unwilling or unable to keep up.

Traditional banks do have an advantage over their latest competitors: the sheer volume of customer behavioral data they have at their disposal. A traditional financial institution taking full advantage of a unified analytics program like Amplitude could take over the lead from newcomers by combining data-driven behavioral insights with decades of historical data—records new companies haven’t been around long enough to compile. In the looming conflict over digital banking apps, behavioral data is the key to devising progressive strategies that put FinServ institutions on the offensive and startups and digital juggernauts on their heels.

Devise a Scalable, Unified Solution

Traditional FinServ institutions have vast amounts of data at their disposal, but bringing it together under one roof can prove elusive. Several banks have responded to competition in the FinServ space by acquiring would-be competitors and subsuming their data and technology. Instead of competing through innovation, banks have used their considerable influence and budget to purchase existing digital platforms. For example, Bank of America recently acquired medical payment company Axia as a means of expanding the scope of its digital offerings.

The power of analytics grows in step with the volume of data collected—so long as that data is gathered under a single analytics platform. Unfortunately, a FinServ institution on an acquisition tear could wind up with valuable data sets stuck in separate silos and systems. A payday loan app and a stock trading app serve different demographics of customers. Separately, the behavioral data from each only speaks to a narrow segment of your desired user base. Pooling their collective behavioral data together under a single umbrella allows product managers to harness their true value in strategy evaluation, ideation, and experimentation.

Given the importance of data unification, product managers would be wise to choose an analytics platform capable of handling their data. Amplitude’s Digital Optimization System is scalable, allowing banks on an acquisition mission to assimilate data while bypassing the growing pains often accompanying expansion. Product managers can pull behavioral data or test predictions in real-time instead of requesting information from disparate departments or teams. This immediate access to consumer data facilitates nimbler strategizing and implementation, helping to close the gap between FinServ institutions and their more agile competitors.

Any company balancing multiple products and platforms will need an analytics platform capable of multi-source data collection and analysis. Amplitude is built with unification in mind, allowing you to easily add data sources and even integrate with the likes of Salesforce, Zendesk, and more. Additionally, Amplitude allows product managers to pull data from both mobile and browser-based customers, ensuring that evaluations, experiments, and predictions performed within the platform are informed by and addressing your total customer base.

Discover What Your Customers Are Already Telling You

The unification of behavioral data within a single platform allows FinServ institutions to play to their greatest strength: customer volume. While new companies have slowly chipped away at their hegemony, the FDIC still estimates that 95% of U.S. households still bank with traditional institutions. A startup must grow or purchase data whereas historically brick-and-mortar FinServ companies have potentially decades of data at their immediate disposal.

The behavioral data of thousands of customers grants product managers insight into:

Customer churn

Your mobile banking app download rate is terrific, but customer usage drops off a cliff within the first two weeks. What gives?

Tracking the customer journey helps reveal which events cause friction for your customer base. If usage dips during sign-up, it might be worth taking a look at the type and volume of personal information you’re requesting, your messaging, or even your UI. Wells Fargo studied customer behaviors ahead of the redesign of their mobile banking app, promoting buttons for high-frequency interactions to the home screen instead of burying them beneath layers of menus and submenus.

Customer preferences

Teams toil over creating a killer product, but how customers will interact with a product, in theory, is often much different than how they wind up using it. Zelle was introduced by a pantheon of top banks to compete against the likes of Venmo, but over time it’s become clear that customers use each app in fundamentally different ways. Perhaps because of its links to big banks, customers prefer to use Zelle for bill payment and more substantial transactions compared to Venmo, whose typical peer-to-peer transactional amount hovers around $74. Discovering the nature of how customers use the features built for them can create the foundation for future user experience improvements.

Valuable insights of certain customer segments can get buried under the data of millions of other customers. Amplitude Recommend empowers product managers to organize customers into cohorts based on their shared behaviors for a better sense of how a certain segment is interacting with your product. If a FinServ institution wants to find out whether power users are engaging with a new mobile check deposit function, they can create a cohort consisting exclusively of their most avid users and evaluate what percentage of the group actively uses the feature.

New opportunities

Studying the behaviors of your varied customer segments may just reveal the opportunity or need for new products or features altogether. Take, for instance, the previously mentioned fact that Zelle users favor the app for personal bill payment. Would an analysis of commercial clients reveal a similar opportunity in the commercial realm? JP Morgan Chase seems to think so, as indicated by the recent announcement of their business-to-bank Digital Bill Pay Feature. The addition of new features or the invention of new products creates more behavioral data, beginning a loop of analysis, development, and evaluation to fuel continuous growth.

Build and Test Strategies With Data-Driven Predictions

Banks have an edge on competitors in another major way: historical data. Banks have dominated FinServ throughout the computer age, which means the financial history of millions of customers could be calculated against user behavior. Amazon uses behavioral data and purchase history to power its recommendations—a system responsible for 35% of their total revenue. If Netflix can predict what customers want next with only a few years of data, the sky’s the limit for FinServ institutions.

Predictions use historical data, behavioral data, computer learning, and statistical modeling to give a sense of how likely a customer is to perform a certain action in the future. If an analysis of behavioral data identifies issues with the onboarding workflow, a product manager could test the likelihood that a newly designed flow would boost conversions.

Knowing the likelihood of a particular outcome lets FinServ product managers test their behavior-informed strategies before committing changes that affect potentially millions of customers. Amplitude Experiment lets product managers A/B test changes to verify predicted results by testing them on smaller, targeted user segments. Between data-driven predictions and segmented experimentation, Amplitude removes the guesswork and “gut instinct” that gums up product strategy.

It’s these prediction-based, experiment-validated product strategies that will push traditional FinServ institutions to the forefront of the digital finance race. Instead of reacting to changes in the market, banks can influence the changes themselves. Banks can create data-guided products and features that anticipate future customer needs. With enough data to eclipse that of startups and enough funding to go toe-to-toe with tech companies, traditional companies are well-positioned to compete with FinServ disruptors.

Use Customer Insights to Develop Strategies that Drive Outcomes

The future of finance is more personal, more hands-on, and increasingly digital. Startups have been faster out of the block, and tech companies are geared for innovation, but it will take them years to get the depth (and breadth) of behavioral data that FinServ institutions have. Now’s the time to develop THE FinServ product offering customers want to use—utilizing the insights they’ve long been giving you.

Dive deeper into the challenges facing FinServ institutions, industry trends, and keys to success in our Q4 ebook, “The Financial Services Survival Guide.” Click here to download your copy.