Join us for the Bank Innovators Council’s Lab Day in San Jose, CA on Monday, April 28 — the day before Finovate Spring.
Beyond the Arc is happy to co-sponsor this hands-on workshop designed for bankers looking to develop new strategies and leverage technology to increase marketing effectiveness and improve customer experience.
Register for Bank Innovators Lab Day and get 20% off – Discount code: ARC20
Innovators Lab Day will provide bank innovators with the insight, resources, and partners they need to innovate and implement new ideas. For more information, please visit the BIC website.
What will Innovators Lab Day be like?
Collaborate with bankers, technology experts, and entrepreneurs to engage in group strategy sessions to:
- Scope key problems in today’s competitive banking environment. What strategies and tactics are in use today? What’s not working these days and why? What differs across customer segments? What should you pay special attention to at Finovate Spring?
- Explore new ways of solving these problems using research findings and some of the most innovative technology ideas presented at FinovateSpring.
- Better understand how new technology solutions can address these problems for bankers, and inform entrepreneurs on ideas to make their solutions more relevant to banks.
Since its creation in 2011, the Consumer Financial Protection Bureau has been busy establishing its jurisdiction and authority over financial services providers. In 2013, the agency continued to expand its impact, assessing almost $2.8 billion in fines and restitution. It continued to step up its oversight as well, with initiatives in two new areas – debt collection and wire transfers. This has almost tripled the number of companies on its radar. Bank, credit unions, and financial services companies of all types are learning to navigate in these new regulatory waters.
For the past two years, the CFPB has been publishing the consumer complaints it receives in a public database in an effort to increase transparency. This data has become a rich source of direct customer feedback which companies can use to measure how they compare to competitors, and more importantly, to identify their customers’ biggest pain points and take appropriate action. Companies that don’t identify and address customer issues put themselves at serious risk. Beyond the Arc has analyzed the 2013 CFPB complaint data to uncover insights that may help financial institutions improve the customer experience and avoid billions of dollars in potential penalties.
Key insights by category
- Mortgages – Over the course of the year, mortgage complaints saw an almost 50% decrease in 2013, from 5,909 complaints in January to just 2,846 in December.
- Credit reporting – Although the top 3 credit reporting companies all had similar complaint levels, Equifax had the highest number responses disputed by customers, pointing to a possible problem with their complaint resolution process.
- Bank account and servicing – “Problems caused by my funds being low” represented a disproportionately large share of complaints resulting in monetary relief to the customer. With the CFPB focused on overdraft policies, banks need to investigate and address the root causes of these complaints.
- Credit cards – When scaled by the number of cards in circulation, TD Bank has the highest number of credit card complaints – a fact that is surely not lost on the CFPB.
- Debt collection – Debt collection is the fastest growing product in the database, and will soon overtake mortgage complaints in monthly volume.
- Consumer loans – Some northeastern states have a disproportionately high number of consumer loan complaints per capita. Santander (formerly Sovereign) Bank accounts for a large share of the complaints in this area.
- Student loans – Sallie Mae and Discover Financial could have potentially avoided regulatory problems by analyzing the CFPB database to identify issues with loan repayment.
- Money transfers – Although it accounts for the lowest number of complaints, money transfer complaints increased in 2013.
It is in both companies’ and customers’ best interests to make sure that a customer’s complaint does not go unheard. We think that rarely, if ever, will customers file a complaint with the CFPB without first trying to resolve the issue with the institution. As we’ve highlighted here and shown in our upcoming comprehensive 2014 CFPB report, analysis of the complaint database can help companies identify customer experience problems.
Companies have access to internal customer feedback data, survey data, social media data, call center transcripts, and other data sources rich in customer experience insights. They just need the analytical tools and processes to unlock this hidden value. By developing proactive customer listening and analytics capabilities, companies have the ability to prevent complaints before they are filed.
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In 2014, banking will be about Big Data. Financial institutions are investing more into their customers, and their organizations. New understanding of both structured customer data and unstructured data, is changing business strategy at some of the largest banks. To keep pace with evolving consumer preferences such as mobile banking, financial institutions are making data-driven decisions to deliver more effective, targeted marketing and services. Big Data is also emerging as an effective tool for banks to fight fraud. In a recent report, Bankers as Buyers, the William Mills Agency presents research and insights on data science technology solutions that U.S bankers will buy in 2014.
“Managing Big Data is a big challenge. It is no surprise that financial institutions are investing heavily in data analytics technology to leverage their information and use it to enhance all facets of their business.”
– Steven J. Ramirez, CEO, Beyond the Arc, Inc.
(Source: “Bankers as Buyers”, Jan 2014)
- Customer Experience – Beyond the Arc CEO, Steven Ramirez, highlighted advantages for banks that deploy Big Data strategies: “Banks can now drill down to transactions by individual ATM. A high number of rejected transactions may indicate a problem with the specific ATM, a problem that would not have surfaced without a customer complaint with less granular information.” He added that leveraging social media can further help banks enhance their customer experience by allowing them to better target customers on a one-to-one, personalized basis.
- Marketing – Mobile banking will bring massive change, as it allows greater convenience for customers, and delivers real-time customer data insights to banks. The report notes that by keeping customers engaged longer, banks can deepen relationships and increase potential for cross-sell and up-sell.
- Fraud – Predictive maintenance is fast becoming a new growth area for Big Data. Banks can now gain insight into ATM problems and other glitches to identify emerging issues and strengthen their fraud prevention efforts. Using predictive analytics, banks can rapidly recognize fraudulent transactions or patterns, and react quickly to mitigate risk. In fact, studies estimate that bank spending on risk management will grow from $470 million in 2014 to $730 million in 2016 as tools mature across the financial industry.
Read the full Bankers as Buyers report >
Event: Predictive Analytics Word, Toronto 2014
Presentation: “Data, Data Everywhere: Leveraging Predictive Analytics to Unlock Consumer Concerns and Eliminate Dissatisfaction”
Case Studies: Capital One/Bank of America
Speaker: Steven Ramirez, CEO, Beyond the Arc
Date: Thursday, May 15, 2014, 11:20 a.m. – 12:05 p.m.
Register online >
Learn what customers really want. Meet and exceed those expectations. Bring your customers back for more. But how? Start by ensuring your business is taking action to ensure your customer experience is pain-free.
As more and more consumers are using public platforms to share their negative experiences, companies need to have an unprecedented level of attentiveness to customer concerns. To compete effectively, it’s critical to identify issues early on and work to increase customer satisfaction. One powerful tool is predictive analytics to help your company gain actionable insights from valuable sources of customer feedback such as social media and the Consumer Financial Protection Bureau (CFPB) complaint database.
Don’t miss this year’s Predictive Analytics World in Toronto, where industry leaders and experts will share what it takes to leverage big data in a productive, forward-thinking way. Using case studies from Beyond the Arc’s analysis of open data from Capital One and Bank of America, Steve Ramirez with highlight how predictive analytics can help you analyze customer data, simplify how you can evaluate customer feedback, and respond to necessary service changes to keep your business profitable.
Join us on May 15 in Toronto — Register online today >
In today’s business world with big talk about Big Data, more and more companies are looking into data science and advanced analytics to improve customer relationships, increase marketing impact, and enhance products and services. It’s an exciting new development as data science offers an unprecedented opportunity for businesses gain insights to operate more efficiently and optimize customer experience. But how can companies drive the most effective and profitable results from their data-focused efforts? Incorporating a Chief Data Officer (CDO) into the organization is a smart approach to help ensure actionable insights make it to the top for better executive decisions.
How to make the most of your new CDO
Giving Data a Seat in the Boardroom, a recent article by 1–to–1 Magazine highlighted the importance of capturing key insights from oceans of data and putting it to work effectively. As the article notes, many companies are challenged by having departmental silos that result in losing valuable time and resources that could otherwise be used more efficiently. Beyond the Arc’s CEO, Steven Ramirez offered a solution to bridge those silos and synchronize lines of business to work toward a common goal: “You need a person who has visibility into data [that resides in different divisions] who can ask the right questions and share the insights to inform future decisions.” It’s important to distinguish the CDO role as more than simply an IT function. As Ramirez notes, “[The CDO] is a data scientist, an interrogator of data,” – not simply a gatekeeper. The CDO should be responsible for understanding (and championing) ways to effectively leverage data for business improvements – and a key factor is having a holistic implementation that aligns analytics strategies and insights across all business units for more impactful, data-driven decision making.
Bringing the customer into the boardroom
Having a data-focused role in a company’s C-suite can increase an organization’s potential to differentiate their brand. Ramirez notes it’s an important opportunity to “bring the customer into the boardroom,” as the CDO can deliver insights that essentially put the customer face to face with the executive team. Those insights can help lines of business make meaningful improvements that matter most to customers, address unmet needs, and inform ways to exceed expectations. Strategies such as using social media text analytics to uncover emerging issues, or predictive analytics to boost marketing ROI are a just few ways businesses can truly unlock the power of their data.
To learn more about raising the level of your data science efforts, read the full article from 1–to–1 Magazine >
Sallie Mae learns a hard lesson in the importance of data analytics. If they had been paying attention, they could have seen all their customer experience problems coming.
In August 2013, Richard Cordray, head of the CFPB, announced that the agency was turning its gaze toward student loans. So it was no surprise when the CFPB’s student loans ombudsman Rohit Chopra posted an article on scoring student loan servicers to the agency’s website. It may have been a surprise to Sallie Mae, however, when he called the company “the worst in borrower, school, and federal personnel satisfaction.” Although the CFPB did not announce any monetary penalty, the findings will affect the company’s bottom line since it will be allotted “the fewest new loans to service in the upcoming school year.”
And the fines have been coming. The company itself has warned investors that it “expects the Federal Deposit Insurance Corp. to publicly accuse it of violating several federal laws regarding its private student loans. The Department of Education has said that it, too, was probing the company to ensure borrowers with taxpayer-backed loans were not harmed.”
UPDATE: In January 2014, we reported on the fines imposed on Sallie Mae >
The most frustrating aspect of this for Sallie Mae must be the fact that this should not have been a surprise. In fact, it need not have happened at all. If the company had been monitoring the customer experience to identify emerging pain points before they were escalated to the CFPB, it wouldn’t be in this situation and its customers would be much happier.
In August 2013, Beyond the Arc posted an article to its blog warning Sallie Mae that their student loans practices would draw the CFPB and other regulators’ watchful eyes. Beyond the Arc regularly mines the CFPB’s consumer complaint database to help identify customer experience pain points so banks and credit unions can take action before the CFPB does. In Sallie Mae’s case, the data showed there was clearly a problem that needed to be addressed. Here’s a brief recap of the analysis:
A focus on student loans
Richard Cordray did not mince words when he announced the agency’s focus on student loans last month. “It’s a big priority for us,” he said, adding that borrowers “come to our complaint line and they come by the thousands.”
That’s no exaggeration. As of August 12, 2013, the public CFPB complaint database contained 4,427 student loan complaints about private lenders. According to a mid-year report on student loans recently released by the CFPB, outstanding student loan debt is approaching $1.2 trillion. At $165 billion, private student loan debt accounts for 14% of that total. The report goes on to cite the “disproportionate use (of private student loans) by high-debt borrowers. For borrowers graduating around the time of the financial crisis with over $40,000 in student debt, 81% used private loans.”
Cordray openly expressed interest in this subset of the population: “Frankly, those are the people we should care about as much as anyone in our society… They are young people with some amount of promise and talent and they just lack the means.”
Given the evident importance of private student loans to the CFPB, it’s important that financial institutions understand the complaint data the agency uses when making regulatory and investigative decisions.
Let the data speak
To determine which lenders should potentially be concerned, we took a look at which types of student loan complaints are currently resulting in monetary relief to the customer. Out of all 4,427 student loan complaints, 258 or 6%, resulted in monetary relief. As you’ll see in the chart below, the most prevalent issue resulting in monetary relief was “Repaying your loan.” This was the most frequent issue for student loans overall.
Next, we looked into which financial services companies had the most complaints about loan repayment that resulted in monetary relief. As you’ll see in the graph below, Sallie Mae generated the most activity, accounting for 46% of all student loan complaints (the blue bar). More importantly, it represented a disproportionate percentage of complaints about loan repayment that resulted in monetary relief (the red bar). 76% of these complaints were about Sallie Mae. This should have been a red flag to the company, as it mostly likely was to regulators at the CFPB.
Further examination revealed that Discover® is also facing the same issue, albeit on a much smaller scale.
Be proactive not reactive to avoid regulatory risk
Our analysis indicated that Sallie Mae had an opportunity to improve their loan repayment process to avoid regulatory risk. As the company had access to specific complaints, they could have tried to determine the root cause of these complaints and fix the problems. They still have that opportunity, but their bottom line has already experienced a direct impact.
Other companies can learn from Sallie Mae’s example and take action well before customers lodge complaints with the CFPB. Banks and credit unions now have access to millions of customer feedback data points from multiple channels and sources. A typical bank captures not only customer profile and transactional data, but also customer emails, survey data, banker notes, escalations, and complaints. When you factor in publicly available data sources such as social media and the CFPB database, you begin to gain a very clear view of the customer experience.
The keys to avoiding the trap Sallie Mae fell into are analysis and action. Just capturing the data itself does not make it useful. You need to have established analytical and reporting processes in place in order to identify emerging pain points. Even more importantly, you must have business practices in place for taking swift and decisive action. The analytics team should be integrated with the lines of business to alert them so they can make changes. Then, the results of these changes need to be measured through continued monitoring so you can demonstrate success or improve the solution if necessary.
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Check out Beyond the Arc’s free on-demand webinar with tips on how to leverage the CFPB complaint database to improve your customer experience >