Third-Party Data in Retail Banking
Build customer retention and growth.
You are struggling to retain clients. Your products and services are becoming less attractive to your customers as your competitors make focused and relevant offers that steal market share.
You need to know more about your customers. You understand their financial lives well, but that doesn't seem to be enough anymore.
New non-financial companies are designing innovative new products and services. Your customers are using more financial companies because they value the way competitors are meeting their financial needs.
Our Advice
Critical Insight
You have lots of customer data, but it isn’t providing the insight you need about your customers. You require more non-financial data to understand your customers’ lives beyond their finances.
You haven’t used third-party data before and you are unsure about what it is and where to get it. You need to understand what data is available and how to utilize it to better understand your customers and to acquire new ones.
You have started using third-party data but are struggling to organize and derive value from it. How do you store so much data and access it and combine it with your first-party data?
Impact and Result
Understand what data is available. Having a good understanding of third-party data is essential before your bank begins its journey.
Introduce customer data platforms to establish governance and control of customer data. Sophisticated platforms exist to host and organize customer data and to help drive insights needed to create new customer-centric products and services.
Understand how third-party data is evolving and how to prepare for AI’s impact. New regulations are reshaping third-party data at the same time AI capabilities are revolutionizing data-based insights.
Third-Party Data in Retail Banking
Build customer retention and growth.
Analyst Perspective
Third-party data is essential to retail banking success.
|
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. 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. As competition for financial services customers continues to increase from other banks, neo-banks and non-financial companies are offering innovative financial products and services that are created based on the unique, non-financial data those companies have. The current market dynamics have resulted in banks increasingly using third-party data sources who provide location data, website histories, social media data, psychographic data, and other third-party data. According to Statista, the amount of information created, copied, captured, and consumed worldwide will be 120 zettabytes in 2023 (Netwrix, 2023). Third-party data helps banks to better understand their existing customer’s lives and to build profiles of new customers that the bank can target with new products and services with specific, relevant, and personalized offers. Success with third-party data is becoming essential for continued growth and relevance to retail banks. David Tomljenovic, MBA, LL.M, CIM |
Executive Summary
|
Your Challenge |
Common Obstacles |
Info-Tech’s Approach |
|---|---|---|
|
You are struggling to retain clients. Your products and services are becoming less attractive to your customers as your competitors make focused and relevant offers that steal market share. You need to know more about your customers. Even though you understand your customer’s financial lives well, that doesn’t seem to be enough anymore. New, non-financial companies are designing innovative new products and services. Your customers are increasing the number of financial companies they use because they value the way competitors are meeting their financial needs. |
You have lots of customer data, but it isn’t providing the insight you need about your customers. You require more non-financial data to understand all of your customer’s life, not just their financial life. You haven’t used third-party data before, and you are unsure about what it is and where to get it. You need to understand what data is available and how to use it to better understand your customers and to acquire new ones. You have started using third-party data but are struggling to organize and derive value from it. There is so much data; you struggle with how to store it, access it, and combine it with your first-party data. |
Explain what third-party data is to understand what type of data is available. Having a good understanding of third-party data is essential before your bank begins its journey. Introduce customer data platforms (CDP) to establish governance and control of customer data. Sophisticated platforms exist to host and organize customer data and to help drive insights needed to create new customer-centric products or services. Understand how third-party data is evolving and prepare for artificial intelligence (AI)’s impact. New regulations are reshaping third-party data at the same time AI capabilities are revolutionizing data-based insights. |
Info-Tech Insight
There are massive amounts of third-party data available on your customers, but new regulations are dramatically reshaping the market. Your bank must understand what data is available and where to purchase it. With so much data, governance and management must also be addressed. CDPs help to connect your first-party data to your third-party data to create the 360 view you need of your customer. There are a lot of new challenges for your bank but mastering third-party data is essential for your continued customer retention and growth.
Customers expect their bank to deliver customized products and services
|
Personalization is essential within retail banking 72% Consumers who view personalization as “highly important” within financial services. |
Product and service modernization is critical 80% The percentage of financial institutions who believe their business is at risk due to emerging product/service innovations. |
Source: Zeotap, 2021
Info-Tech Insight
The use of third-party data is a critical enabler of product, service, and customer journey modernization and personalization within banking/financial services.
Third-party data is essential to modern banking
But what exactly is it?
Third-party data must integrate with all levels of data that can exist in bank.
- Zero-party data is information directly collected from customers such as survey responses.
- First-party data is account and transactional data that exists within a bank as part of providing banking services.
- Second-party data is acquired from partners who have their own first-party data about a customer.
- Third-party data is collected by companies who track customer data but have no direct relationship with the customer.
Third-party data comes from external sources and allow banks to improve and optimize their data models, improve decision making, deliver personalized products/services, and enable better forecasting.
Third-party data plays a critical role in supplementing zero- and first-party data. Zero-/first-party data and third-party data support and create value when combined. Zero-/first-party data is detailed and accurate but limited in scope. Third-party data is broad in scope but can be less specific, personal, and accurate. Combining the two tiers of data provide a broader and more accurate picture of the customer’s entire life, not just their financial affairs.
Product, service, and customer journey enhancements are critical to a bank’s success. They all rely on third-party data as part of this essential process.
There are various data tiers within banks
| 0 | 1st | 2nd | 3rd |
|---|---|---|---|
|
Zero-Party Data “Data that is shared by the consumer and includes their preferences, attitudes, and interests. Zero-party data is generated when consumers directly interact with surveys, preference centers, polls, and questionnaires.” |
First-Party Data “Information about your prospects and customers that is collected, owned, and managed by your company. It can be data that is observed through spending behaviors, or it can come from first-party cookies on your company’s website.” |
Second-Party Data “Data (aka, partner data) is information that financial services companies acquire through a partnership with another company that provides access to the partner’s first-party data. Examples of second-party data can include co-registration campaigns such as contests or sweepstakes and co-op data pools created by a partnership between a group of companies.” |
Third-Party Data “Is collected by external data providers, like Infogroup, that do not have any direct relationship with consumers whose data is being collected. The data is gathered from various platforms, apps, and websites, then aggregated and “packaged up” in data sets. Financial brands use third-party data to generate deep insights about their customers, create personalized campaigns, and employ advanced modeling techniques such as lookalike models, identity resolution, and personas.” |
Source: Bank Automation News, 2020
Third-party data is essential to first-party data
Data allows for deeper customer understanding and better products and services.
Supplementing first-party data with third-party data creates many sources of value for customers and the bank:
- Personalized products and services across all channels in the bank.
- Optimized journeys based on deeper customer understanding.
- More targeted customer segmentation through deeper, 360 understanding of customers.
- Data-driven decision making within the bank to drive revenue, profitability, and return on investment.
- Better risk management as banks are better able to understand their customer’s entire lives better, not just their financial position with the bank.
Extensive sources of third-party data provide insights about different parts of customers’ lives:
- Online including search history, social media, app usage, web traffic, and location data.
- IoT such as wearables that capture physical activity levels, location, and health data.
- Consumer including transaction information customer sentiment.
- Individual such as current employment/history, credit information, and family information.
- Event Information such as weather, satellite imagery, and event detection (e.g. flooding).
First-party data provides important insights about your customers’ financial life and wellbeing but when combined with third-party data, a much deeper 360 understanding of your customers’ entire life can be achieved.
Third-party data use is rapidly growing
Banks are recognizing the value of third-party data.
In 2018, the use of third-party data grew at a rate of 17.5%, reaching a total spend of US$19.2 billion.
17.5% Year-over-year growth of spending on third-party data from 2017 to 2018
US$19.2 billion: Total spending on third-party data in 2018
Source: Spiceworks, 2020
Info-Tech Insight
Spending on third-party data continues to accelerate as banks try to compete for customers with innovative products, services, and customer journeys.
Third-party data comes from a variety of online sources
It is no longer just about cookies!
Website cookies have been the primary source of third-party data. Up to 2023, one of the main sources of third-party data were cookies that were placed onto users’ web browsers. The ”cookies” captured a broad array of data such as websites visited, clicks, products/services viewed, purchases, preferences, IP address, computer type, browser type, computer specifications, etc.
Web scraping. Another major source of third-party data is from web scraping. Using a simple python script, the information from webpages can be collected, structured, and recorded in a database.
Search information. Search engines capture the queries that users make on their services. It can be very useful to understand a consumer’s interests, intent to purchase, past searches, pages visited, etc.
Social media. Social media services capture extensive information about their users. The pages they follow, who their social networks consist of, their interests, their posts, likes, comments, etc. These are all powerful tools to help understand users more deeply; this information is very valuable to companies trying to market and service customers.
There are many sources of third-party data that provide a valuable source of basic information about individuals. They also provide complex demographic, behavioral, and psychographic data.
Multiple data sources are available to banks
|
First-party data |
Second-party data |
Third-party data |
Zero-party data |
|
|---|---|---|---|---|
|
Relationship to customer |
Direct relationship with the customer |
Indirect customer relationship |
Indirect customer relationship |
Direct relationship with the customer |
|
Level of consent |
Collected with consent |
Collected with consent |
Unknown if it’s collected with consent (depends on the data provider) |
Collected with consent |
|
Type of data |
Individual data |
Individual data |
Aggregate data |
Individual data |
|
Data accuracy |
High accuracy and reliability |
High accuracy and reliability |
Low accuracy and reliability |
High accuracy and reliability |
|
Ownership/data sharing |
Not shared |
Shared only with trusted partners |
Shared with many companies |
Not shared |
|
Examples of types of data |
Examples: |
Examples: |
Examples: |
Examples: |
Source: Treasure Data Blog, 2023
About Info-Tech
Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.
We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.
What Is a Blueprint?
A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your IT problems.
Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.
Talk to an Analyst
Our analyst calls are focused on helping our members use the research we produce, and our experts will guide you to successful project completion.
Book an Analyst Call on This Topic
You can start as early as tomorrow morning. Our analysts will explain the process during your first call.
Get Advice From a Subject Matter Expert
Each call will focus on explaining the material and helping you to plan your project, interpret and analyze the results of each project step, and set the direction for your next project step.
Unlock Sample Research