Information Advantage: The Next Phase of Competitive Advantage in Retail Banking.


Two years ago, Ecobank, one of the largest retail banks in Africa closed down 99 branches across NigeriaGhanaRwanda, and Kenya. Is having a wide branch network still a source of competitive advantage? Today, most banks offer nearly the same products and services: internet banking, mobile banking, zero-balance savings, debit cards, employee loans, e.t.c. Is product differentiation still a source of competitive advantage? What about innovation, quality of service, corporate social responsibility, customer orientation, operation efficiency, quality of staff, or bank ambiance? 

The truth, the brutal truth about competitive advantage is that it’s transient, and it’s even more ephemeral in today’s digital environment than it was decades ago. Rita Gunther Mcgrath, strategic management scholar and professor of management at Columbia Business School described it better when she observed that “it’s now rare for a company to maintain a truly lasting advantage. Competitors and customers have become too unpredictable, and industries too amorphous. The forces at work here are familiar: the digital revolution, a “flat” world, fewer barriers to entry, globalization.” 

What about sustainable competitive advantage? 

In my opinion, sustainable competitive advantage is more of an exception rather than a rule. Because, whether a competitive advantage lasts for a year or a decade, forces of competitors will react to erode it. In the book, “the end of competitive advantage“, McGrath and Gourlay argued that in today’s fast-moving competitive environment, no competitive advantage could be sustainable. They proposed the alternative idea that to win in a volatile and uncertain environments, “executives need to learn how to exploit short-lived opportunities with speed and decisiveness”.

In that case, what is the next opportunity to exploit?

Information! Big data is the overused word for it. Six years ago, PwC published a report titled Retail Banking 2020: Evolution or Revolution? In this report, PwC identified six areas that every bank preparing for success in 2020 should prioritize. These areas were;

  1. Developing a customer-centric business model
  2. Optimizing distribution
  3. Simplifying business and operating models
  4. Obtaining an information advantage
  5. Enabling innovation, and the capabilities required to foster it
  6. Proactively managing risk, regulations, and capital. 

The year 2020 is 135 days away. Is your bank ready for the upcoming revolution? In 2020, you are no longer going to compete with your fellow bankers for customers, but rather technology giants entering the retail banking space to provide personalized banking services at close to zero transaction cost. And if you do not prepare now, you’re likely to fail; because, these new players have information and the capacity to use it to offer personalized services. Why is personalization important? Simple! Every customer is different and want to be treated differently. In fact, that’s why you already hired relationship managers or treat corporate clients differently. Retail clients are now asking for special treatment too.

If your bank is ready for 2020, cheers! If not, here is how to bootstrap your preparation for 2020.

Start with priority number four on the PwC list; gain information advantage.

In my experience working at a data analytics company, obtaining information advantage enables any retail bank to develop a customer-centric business model, optimize various distribution channels, simplify business and operating models, enable innovation, and manage risk.  To prove this to you, take a look at the exhibit below which was adapted from Everest Group research report. This exhibit summarizes the major areas where data analytics is being applied in bank management. Banks are deploying advanced analytics solutions to predict customer behavior, power relevant marketing, predict fraud, manage credit risk, optimize product offerings across all distribution channels, and stress test customized or mandated operation scenarios.

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What about proven impact?

Does information advantage impact the bottom-line positively? Yes, if implemented correctly! Take a look at the next exhibit below from Mckinsey Research showing the proven impact some banks are driving from using analytics. This exhibit suggests that banks using analytics reduced inflow of non-performing loans by 25%, loan collection expenses by 10%, customer churn rate by 20%, and increased economic value added by 30% and lead conversion by 40%.

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What next?

If you hold a c-level position in any bank, my only recommendation to you is that you start a small pilot project in data analytics in your department today. If you’re a marketing executive in a bank, you may start with a customer 360-degree view dashboard. Customer 360-degree view enables you and your team to have a holistic view of each customer engagement across all channels. With this solution, I bet you will definitely not act like my bank which sends me best wishes every holiday instead of exciting offers to entice me to reactivate my dormant bank account.

If you’re ready to gain the information advantage, register now for our 90-days free analytics consulting service to get started.

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