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Why Cyder for Financial Institutions?
November 7th 2023 | Author: Jeff Kostermans
McKinsey’s recent article, on the Future of Banks provides insight into a very likely scenario for Financial Institutions (FI’s) where they continue to evolve and become more than just providers of financial products. By offering services either directly or through partners, they will make the lives of their customers easier - and in the process lock in retention and more wallet share of the customer.
The trend we are already seeing is that FI’s are morphing into Commerce Marketplace Specialists (CMS) that offer more than mere personalization, simplicity, and affordability. According to McKinsey,
“This business model has enormous economic upside. Any bank that successfully transitions into a CMS can multiply revenues by ten, with higher profit margins for higher-value services.”
In this synopsis of the article, we outline how Cyder is a key component to this new revenue stream for FI’s and why offering Cyder to your customers is the logical first step in the transformation journey. McKinsey’s financial industry experts recognized the urgency for FI’s to quickly transform into providers of convenience and deeper value through data. In the article, they stated:
“We do believe that the banks that successfully manage the coming transition will use tech and data to embed themselves deeper into customers’ lives with real-time services that were unimaginable just a few short years ago. The opportunity is great for those who move fast into this new future.”
Well-recognized FI’s are already in the process of building these platforms. For instance, Capital One quickly amassed over 10 million members with their competitive price shopping app. Royal Bank of Canada offers helpful services to its consumer and business customers. Within two years, it reached 3.2 million Canadians with various value propositions—and prompted tens of thousands to become new RBC banking clients. There is no doubt data sharing partnerships will continue to grow - and the most effective and valuable ones will leverage not just 3rd party data but also permission-based zero-party data.
But what about smaller FIs with limited resources? Enter Cyder.
Cyder is the world’s first permission-based solution enabling FI’s to collect real-time actionable data while at the same time giving customers the ability to selectively share their data. Regardless of the expanded services offered through CMS platforms in the future - the key to the growth and profitability of them is the quality and immediacy of the data acted on. McKinsey states:
“It’s possible that, over the next decade, customer data will become the new oil—highly regulated, jealously guarded by institutions that capture it, and a key source of business value.”
Some contend that customer data will be commoditized, which may be the case for 3rd party data that is typically too general, outdated, and sold on the open market. However, zero-party data, or data shared directly by the customer with the FI, is specific, real-time, and exclusive to the FI. Browsing data generates an ongoing stream of intent data vs other channels of zero-party data collected at a time like with a survey. When browsing data is collected on a permission basis via Cyder, it is ethically sourced with no privacy concerns. This gives FI’s an undeniably valuable first-mover advantage in upselling financial products and boosting retention. For this reason, browsing data related to financial product intent is not likely to be shared with others by the FI.
With Cyder, FI’s can enable customers to block the tracking and resale of their browsing activity by third parties and determine which categories of browsing data they are willing to release and get compensated for. Over time, as the FI offers the CMS platforms that McKinsey mentions in the article, it can easily ask and enable its customers to opt-in to those platforms. Sharing real-time data that supports the FI’s CMS strategy naturally makes those strategies more successful and opens up additional revenue streams. This is echoed by McKinsey’s claim that:
“CMSs will have more access to their customers and much more data about those customers than traditional banks have ever had. Because they will become primary touchpoints for a wide range of transactions, they can build an unbeatable edge in collecting and analyzing big data.”
Think of zero-party data as the oil and Cyder as the permission-based conduit and controller through which that data flows. Cyder enables the trusted FI to be the steward of its customers’ data and can reward its customers in the process with personalization, timely offers, and even incentives.
It’s clear that safeguarding and acting on your customer’s valuable zero-party browsing data is essential to boosting upsells and retention. With Cyder, the process of making this happen simultaneously enables you to optimize your CMS strategy. McKinsey outlines some insights into making that strategy a reality below.
The successful bank of the future will be defined as a network of platforms. Few banks will capture all of the ten platform opportunities described in this article in their regions, but many will participate in multiple platforms. Given the platforms’ enormous value creation scale, getting even one right can unlock tremendous value for shareholders and broader stakeholders alike. But success will come to only those banks willing to move beyond their traditional operating models. Banks should be prepared to evolve through multiple stages on their way to becoming a platform network.
This vision of the coming shakeout may seem daunting. But the challenges are manageable taken one step at a time. The first and most important step is to commit to adapting as soon as possible. Banks and nonbanks that begin to transform themselves now will have a huge advantage over competitors that become paralyzed with indecision and confusion.
The good news is that there’s still enough time for most financial institutions to transform their business models. Additionally, the capital markets are likely to be very supportive in valuing those transformations over the next five to ten years.
For incumbent, universal banks, the key steps will look something like the following:
Decide which arenas and business models to focus on, based on your strengths.
For challengers looking to exploit a tech edge as a way of entering banking, the first step is to analyze which arenas offer maximum advantage based on that edge and which platform-based business model makes the most sense. These organizations will have the advantage of not being tied to the old standards and practices of traditional financial services.
In summary, McKinsey says it best. “The future of banking will be contested in five cross-industry competitive arenas. In the next decade, revenues for all these arenas could grow by as much as three to 30 times.”
If you are responsible for driving transformational revenue to your FI, we encourage you to read McKinsey’s article in full here. The time is now to start with the easiest and most important first step of securing your customer’s valuable zero-party browsing data as this will ensure optimal success of your CMS strategy while simultaneously boosting and and protecting customer wallet share. If you agree with McKinsey that your customer’s data is the new oil, we also encourage you to have a quick chat with a Cyder privacy expert and view a demo.
November 7th 2023 | Author: Jeff Kostermans
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