Mitigating Risk with Consumer Analysis in Finance

A large part in creating success for you business is found through understanding your customer and targeting them accordingly in the places they frequent. Know Your Client (KYC) standards continue to increase in severity as institutions crack down on risk and look to comply with Anti-Money Laundering (AML) laws. And though the primary function of these standards is to eliminate fraud and schemes, knowing your client must begin before they enter your financial institution (FI) to help you keep costs down and reach the correct audience for your business or service.  

In order to put less strain on your FI, you need to be pulling in qualified leads from the start. If you know your client as you market and are able to target accordingly, you cut down on the chance of fraudulent or high-risk individuals entering your sales funnel. Rather than simply adhering to a KYC framework down the road, financial institutions should understand the needs and desires of their customers as they market in order to pull in those that are already aligned with their institutional goals. McKinsey remarked that, “Utilizing analytics is not only about deploying machine learning and artificial intelligence; often, basic descriptive analyses using customer and transactional data (to understand expected customer behavior, for example) can help experts save time, make better decisions, and deploy more targeted controls overall.”   

As we take a deeper look at some of the possible FI customers and target accordingly, we increase ROAS and decrease the possibilities of fraud.  

EY observed that data and analytics are leading the fight against financial risk and that getting the data right can be beneficial for many additional aspects of your business. “Analytics can also enable customer segmentation and profiling for various business purposes, including compliance and marketing. For example, customer profiles could be used by compliance teams for customer risk assessments or investigations. Business or marketing teams could use the same data to create personalized banking offers based on customer preferences.” Therefore, knowing your customer is a valuable step that FIs should be taking proactively to piece together not only data for risk assessment, but to get in front of their target audience, market accordingly, and increase their ROI.  

 Gathering Information on your audience 

There are several different data sets that you can pull from your target audience to understand them and market accordingly. You’ll undoubtedly want to understand your customers’ financial situations and spending habits but also where they spend, their psychographic information, and how they make their decisions.  

One data example of many is the MoneyMatters segments that Environics Analytics compiles through the Ipsos Canadian Financial Monitor. Pulling from 12,000 respondents and focusing on 1,111 variables, MoneyMatters offers key information on personal banking, investments, credit, and insurance.   

When building out a specific audience that will help you reach your desired target, there are certain data points that can be pulled that will lower risks in your business and help to precisely speak to those you wish to move forward in your marketing funnel. For example, you might pull the variable “V0486_M [Male – Credit Cards – Avg $ Paid [Per Mth] – Full Amount (P)]” and cross it with variable “V4799_M [Male – Credit Cards – Avg $ Spent [Per Mth] – $2,501-$5,000 (P)]” to get someone who pays off their debts in full every month. Building out an audience with specific markers like these will help your FI market to individuals that will put less strain on your institution and find the right audience for your business.

Through Insights Lab by Time + Space, we are able to gather data like the above, that specifically grabs financial attributes, and pair it with other demographic and psychographic information to give a clearer picture of who your audience is and also where they are and how to reach them. After all, knowing your clients is only one piece of the puzzle, you must also know how to capture their attention. Data pieces together the granular bits of your audience and helps direct you to delight your audience.  

The Benefits of Audience Specificity 

Not only does creating these clear targets help to lower the risk your FI takes on from marketing all the way into your KYC framework, but it puts less strain as well on your marketing budgets. When you build out a clear and defined audience using data and analytics, you are able to cast a more targeted net instead of a wider one, lowering your cost per acquisition.  

Once you have a more specified audience and you’ve lowered your chances of risk, you have even more opportunities to build trust with that audience. Understanding them may be the first step but using that understanding to build your brand will be more important in continuing to build your share of voice and market share. 

If you segment your audience based on what you see in your customer data analysis, you can tailor the messages you market to speak directly to a smaller group, which is more likely to feel personalized and resonate with your audience. This can create trust faster as they already see you as knowing their unique needs and increase your conversion rate overall.  

The Opportunity for Growth 

Knowing your clients does not only lower your risk by eliminating individuals who may be untrustworthy or false in your sales funnel, but by knowing your client, you are also able to lower cost per acquisition, build trust, and outperform your competitors.  

Specifically, during times of economic shifting, your FI can use KYC to gain traction in the market and boost your market share by increasing your share of voice. While your competitors focus on current clients, the data gathered on your target allows you to market with certainty, increasing the number of prospective clients that enter your funnel and continuing to grow your client base.  

During times of economic unrest, individuals are more likely to be conservative with their money and investments and as seen through events like the Great Depression and the 2008 Financial Recession, a sense of trust is lost in financial institutions. Therefore, it is more important than ever to build your brand, show you understand your clients, and continue to build trust with consumers and clients.