Banks, Stop Frankenstacking!
To stay competitive in an economy increasingly dominated by big tech, banks need better ways to deepen relationships with their customers. Specifically, they need to leverage customer data to hyper-personalize experiences, ensuring the right messages reach the right customers at the right times.
Unfortunately, most banks still struggle to assemble data in a way that promotes hyper-personalization. That’s in part because, faced with aging and outdated tech infrastructure, banks have been forced to make a difficult choice.
In many industries, technologies such as customer data platforms (CDPs) can serve as centralized data hubs, providing a single source of truth across departments and functions. However, financial industry regulations as well as concerns about customer privacy make these types of centralized third-party solutions less feasible for banks.
Instead, banks must either completely overhaul their core banking systems (a lengthy and expensive endeavor) or adopt multiple point solutions to quickly patch the cracks in their data infrastructure.
The resulting “frankenstack” of disjointed hardware and software solutions might sufficiently cover some individual tasks, but in the long term it prevents the bank from delivering a consistent, personalized customer experience. In many cases, lines of business (LoBs) that use different systems may not even be aware of their shared customers.
The Fruits of the Fintech Ecosystem
Although third-party products can be part of the frankenstacking problem, they can also be the solution. A new generation of fintechs now offers lightweight, easily integratable data assembly solutions that break down silos rather than reinforcing them.
By drawing insights from data scattered across platforms and LoBs, these platforms enable banks to finally take control over their information. The best solutions sit as a layer on top of data and have capabilities that facilitate the assembly of different data sources, allowing banks to overcome the fragmentation of their data. These platforms also allow banks to develop deep insights from their newly unified data.
And with techniques like tokenization and anonymization, banks can do this without sacrificing privacy or security. Some leading-edge solutions also enable safe data sharing with external partners without the need to take data off premises or co-locate it in the same place.
By implementing interoperable solutions that unify rather than divide, banks enable more personalized and consistent customer experiences. For example, by assembling data across LoBs, banks could cross-sell credit cards to existing checking-account customers, increasing conversion rates with a new cohort of primary cardholders.
Banks as Leaders in Data Marketplaces
Banks shouldn’t hesitate when it comes to modernizing their data systems. As more data privacy laws go on the books, outdated infrastructure and siloed data will only become bigger liabilities. A disjointed tech stack is the enemy of accountability and transparency — two values customers hold increasingly dear. Seventy-nine percent of U.S. adults are concerned about how companies use the personal data they collect.
Banks that continue to frankenstack will also miss out on one of the biggest opportunities of the new decade: the rise of data marketplaces. As customers demand more control over their personal data, ecosystems will shift from opt-out models that enrich data collectors to opt-in systems that empower end users. With decentralized technologies like private cloud and blockchain, customers will engage with marketplaces where they can choose to share data with companies if and when they receive value in return.
Banks have the opportunity to place themselves at the center of these new marketplaces. By leveraging their existing trust networks and emerging technologies, like edge-of-the-cloud computing, they can become data vaults that customers rely on to deploy personal data according to customers’ own rules.
But those doors will be closed to banks that haven’t modernized their systems. All the more reason for banks to abandon their frankenstacks and start the search for better solutions today.
