The debate on banking’s digital transformation revolves around concepts such as the user experience, omni-channel banking, the verification of digital identity, biometrics, SNA (Social NetWork Analysis), big data and artificial intelligence. But which breakthroughs do we prioritize because they add more value or are actually strategic for the company?
To make decisions, it is essential to rely on data, and to have identified and quantified the value generators for the company. Obviously, the value associated with these generators will vary depending on the country or market segment for which they are intended, but setting them up as precisely as possible is essential for the competitiveness of the financial sector, be it banking, fintech or digital lending companies.
To understand a customer’s current value we must consider how it changes in the digital environment, since the Internet has changed consumers’ expectations. In the case of the banking, they want it to be easier to use, for it to be available through any channel or device they have at hand, anytime and anywhere, and for it to adapt better to suit their distinctive financial characteristics.
Furthermore, the digital customer is an excellent opportunity for the financial sector to save on costs, improve customer retention and foster cross-selling and up-selling. This blend of cost-saving and increased revenue is key to the sector's competitiveness.
But, what is the value of a customer for digital banking? The Backbase study, The ROI of omni-channel digital banking, gives an approximation of this calculation.
The study is based on a fictitious example, a medium-sized retail bank with approximately 650,000 users. Making a rough calculation, for this example the average revenue per customer would be $890 per year. It should be taken into account that, for banks that manage large assets, this revenue per customer can be multiplied tenfold, while the rate may be reduced for pioneering digital-channel companies.
The following table shows the factors and calculations that have been made for the approximation.
Making a more detailed approximation of the customer ROI, based on the specific products they open, shows not only the actual value, but the products that contribute the most to increasing this value.
This type of analysis reveals, for example, that improvements in the onboarding and purchasing process for mortgage products provide more value than for unsecured personal loans.
The following table shows the value calculation in further detail and based on product
The value of a digital customer for any financial institution is indisputable. It is the nuances that should be profiled: products, market segments and which improvements or implementations will bring more