How Third-Party Data Can Shape Customer Experiences in Financial Industry

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With the financial industry becoming increasingly data-centric, retail banks actively seek innovative ways to enrich customer profiles and elevate their service offerings. 

Integrating third-party data in retail banking marks a significant shift toward highly personalized customer service, revolutionizing operational efficiencies. 

However, leveraging valuable third-party data comes with its own hurdles, including stringent privacy regulations, concerns over data accuracy, and the technical complexities involved in integrating disparate data sources.

Info-Tech Research Group’s latest research, Third-Party Data in Retail Banking, examines the crucial role of third-party data in redefining retail banking experiences. The blueprint addresses the critical demand for advanced data strategies and provides banking IT leaders with essential guidance on effectively using external data sets to secure a competitive edge in the exponentially evolving digital finance sector.

“As banks continue their journey to offer their customers innovative and convenient products and services designed to meet their unique needs, they require a deeper understanding of not only their financial transactions within the bank but, increasingly, their non-financial lives outside of the bank,” says David Tomljenovic, principal research director at Info-Tech Research Group. “Many customers are voluntarily offering their bank more information about their non-financial lives because they have recognized the benefits that come from sharing aspects of their non-financial lives in exchange for better and more relevant products and services.”

According to the research, banks hold vast amounts of customer data but often need help to extract meaningful insights about their clients. To bridge this gap, banks increasingly turn to non-financial third-party data to comprehensively understand their customers’ needs. 

However, many banks need help organizing and deriving value from third-party data as it is challenging to integrate and align it with their first-party data. In such situations, customer data platforms (CDPs) play a crucial role by helping connect the first-party data to third-party data, thus creating a 360-degree unified customer view. 

Despite the numerous new challenges, mastering third-party data is becoming indispensable for banks aiming to enhance customer retention and competitive positioning in today’s competitive market.

“Third-party data helps banks better understand their existing customers’ lives and build profiles of new customers that the bank can target with new products and services and specific, relevant, and personalized offers,” explains Tomljenovic. Success with third-party data is becoming essential for continued growth and relevance to retail banks.”

The blueprint further explains that third-party data is crucial in supplementing zero- and first-party data, creating immense value when combined. While detailed and accurate, zero- and first-party data cover only interactions within the bank, thus limiting their scope. 

Third-party data, in contrast, extends these insights by providing broader contextual information about customers’ activities outside the bank, although it may need more detail and personalization. By integrating these different data types, retail banking IT leaders can obtain a more comprehensive and precise view of their customers beyond their financial affairs. This enriched perspective can help retail banks make informed decisions and provide superior customer service.

The report details the various data tiers within banks and their specific contents. Insights gained from this data help IT leaders in the banking industry enhance operational efficiency, foster innovation, and elevate customer experiences in an increasingly competitive financial landscape.

The consumer explicitly shares Zero-party data and includes their preferences, attitudes, and interests through direct interactions such as surveys, preference centers, polls, and questionnaires.

First-party data refers to the detailed information about prospects and customers collected, owned, and managed by the banks. This data can be gathered by observing customer spending behaviors or from first-party cookies on the bank’s website.

Second-party or partner data consists of information obtained through strategic partnerships with other firms. Examples of second-party data can include co-registration campaigns, such as contests or sweepstakes, and co-op data pools created by a collaboration between a group of companies.

Third-party data is collected from external data providers without any direct connection to the consumers whose data is collected. Financial brands leverage third-party data to gain deep insights into customer behaviors and preferences, enabling the creation of personalized marketing campaigns.

With ongoing advancements in AI and machine learning tools, banks are well equipped to enhance their capability for real-time ingestion of vast internal and external data. 

This technological evolution will empower banks to offer nearly instantaneous product and service personalization, adapting to changing market needs and conditions at any given moment. Such capabilities are set to significantly elevate customer satisfaction and drive business growth, positioning banks at the cutting edge of the digital economy.