Competing With Data & Analytics
Many companies operate within a customer relationship data chain: That is, one company has the know-how — and the incentive — to help its customers understand their own customers better.
That’s certainly the case with banks that issue and manage credit cards. A new case study by MIT Sloan Management Review, “A Data-Driven Approach to Customer Relationships,” details how the South African bank Nedbank is using its rich access to a trove of transactional data from credit card use — from the time of transactions and size of purchases to retailer locations and even specific details like the age, gender, race, marital status, and income bracket of some users — to help merchants make strategic decisions to better serve those customers.
Among the highlights of the case study:
The bank realized that data it was already collecting was valuable — and not being used. The bank had accumulated a massive amount of data on debit and credit card transactions. Critically, the bank bet that this data could provide deep insights and be extremely valuable to the bank’s merchant clients in understanding their own businesses — and that it could, in fact, be better than the market data those merchants were already purchasing on the open market. That was because the bank had the ability to augment the payment data with Nedbank’s demographic data.
Nedbank had a strong incentive to develop a new data analytics tool for competitive differentiation. “Nedbank was operating in a difficult market,” writes MIT Sloan Management Review executive editor David Kiron. South Africa had a sluggish economy and a projected economic growth of only 0.1% in 2016. Nedbank issues debit and credit cards, offers point-of-sale card devices for merchants, and processes payments (termed “acquiring”) for merchants. Although the bank had a 20% share of South Africa’s acquiring market, a strategic review within the bank concluded that to sustain that business, the bank would have to enhance its value-added services. “It’s profitable, but [profit is maintained] through volume growth rather than margin growth,” says Sydney Gericke, head of Nedbank’s Card and Payments business. Translation: The bank knew that it had to keep its current customers and add new ones too.