Insurance is all about managing risk, and so much of risk is related to location. Which areas are prone to the most risk, whether from natural factors or man-made conditions? Who lives in flood zone areas, where is crime highest, or which landfills contain toxic waste?
Numerous changes have come to the financial industry in the past few decades. Even over the past couple of years, communication and information technology have accelerated at an unprecedented speed. As a result, banking information and services are now more available than ever. As technology becomes more complicated, however, the industry becomes more complex as well.
The banking sector has changed in response to the increased availability of financial services. Today, both domestic and foreign financial entities enjoy the benefits of increased consumer accessibility. While this has grown profits and activity substantially, it’s also increased industry competition. Also, increased digital and online data have increased the risks of cyber-attack and fraud. Both factors have prompted financial regulatory entities to ramp up industry standards, forcing financial service providers to upgrade their operations. In combination, these forces and changes have made for a more complicated financial sector for banks.
Banks today not only have to face these challenges head-on, but they have to find an edge in the industry to get ahead. With a customer-centric business model, financial institutions can do both.
In today’s connected world, banks must be both market-driven and market-responsive. Banks must be able to both predict and deliver the services customers want and need. Part of this includes managing data involving customers, customer profiles and more. With proper data and customer relationship management, banks can get the edge they need to get ahead of the competition. An essential part of this management is geospatial or location-based data.
Geospatial data is an asset to the financial industry, offering banks a wealth of advantages impossible to gain from other data types. This kind of customer data for financial institutions allows banks to do everything from track their competition to estimate customer engagement. Purchasing data by location allows financial services businesses to do more with their data.
So how does a bank obtain and implement this location-based data? A quality geographic information system, or GIS, can do all this.
What is a gis and how does it impact the banking sector?
A geographic information system, more commonly referred to as a GIS, is a software program used to capture and display geographical data. These systems can use any type of information, as long as it includes location data expressed with an address or ZIP code.
GIS software can show a wealth of information on a single map, including demographic information like population, income, and financial services data. These visualizations enable financial institutions to view and analyze patterns within the data and act upon the insights provided.
Here are a few benefits location-based GIS information can provide the financial sector:
1. Identify and Track Competitor Activity
Knowledge of the competition is one of the most important weapons in a business’ arsenal. This rings particularly true when you consider locational knowledge.
Geospatial software helps banks by tracking the exact locations of both competitors and customers. Such data helps banks visualize the market penetration of their competitors and identify patterns of performance. Does a competitor do particularly well within a particular ZIP code, age range or income level? The answers to these questions are invaluable, as they provide insights into the reasons for a competitor’s existing performance.
One more thing to consider — this data isn’t stagnant. Geospatial software can track temporal data in addition to location data, tracking the dispersal of competitors and their customers over the course of months or even years. This can help banks identify patterns of movement, such as shifts in focus or concentration on a particular demographic or geographic segment. Such insights help banks predict the future behavior of their competitors, which in turn shape their long-term marketing and expansion efforts.
2. Perform Strategic Analyses
Strategic planning is a difficult enough process for financial institutions. With Geospatial data for banking and financial services, banks can get the information they need to make informed strategic planning decisions.
Geospatial information helps the strategic planning process by performing “what-if” analyses. Mostly, the program uses computational technology to examine a variety of geographic factors like infrastructure and economic growth, and how they may affect the success of a venture. This examination studies the relationships among these factors and provides an estimated projection of the results. Though still estimations, these location-based projections are developed using sophisticated algorithms and are much more comprehensive than previous methods.
These GIS-based “what-if” analyses provide more substantial and informed support for banks. This is a particularly attractive prospect when banks are considering more expensive operational decisions, such as branch closures, relocations, consolidations or mergers. Additionally, multiple variations of these “what-if” analyses allow banks to approximate the effects of different decisions or variations of a single decision. This way, the financial institution can choose the best course of action.
3. Analyze Customer Behaviors
Bank customer profiling is another key success factor in the financial services industry. This doesn’t just include demographic data anymore. Geographic and behavioral data are also part of effective financial services consumer profiling. Geospatial software makes it possible to build a complete customer data set for financial institutions.
What is bank customer profiling? Essentially, it is creating a profile of your clients based on their personal information. While demographic information, like age and income, was once all banks needed to build a decent marketing plan, the modern era requires more detail to maximize marketing efficiency. Customer behavior and geographic information are now critical to profiling a banking customer.
Including customer purchase data by location can provide banks with valuable insights for marketing efforts. For example, a regional bank without Geospatial location data may notice a trend in college-age customers making larger purchases and try to up-sell credit cards across all sites in the hopes of reaching the target demographic. A bank using a GIS, however, will be able to target their marketing efforts at locations primarily serving the target demographic, reducing their marketing costs while eliciting similar results.
4. Conduct Market Penetration Studies
Market penetration studies can be even more powerful with Geospatial software. Using location-based data, financial institutions can collect market penetration data for the financial services industry as a whole, but also place that data in geographic context. This adds a new dimension to the study that can be invaluable to marketing and expansion efforts.
When layered on top of competitor data, market penetration studies with a geographic component can help banks identify underserved markets. These geographic locations and demographic segments ignored by both the bank and their competitors can then be targeted with an expansion or marketing campaign.
5. Improve Location Placement Decisions
Expanding a bank requires extensive planning. The new branch or ATM must be situated in an area with sufficient demand and profit potential. Identifying such locations requires a clear understanding of your network distribution, and paying to build in such an area requires a substantial investment. With so much money invested in the cause, having data to support an expansion can be a calming force for management during the process. Geospatial information can do just that.
Planning a business expansion means that every factor needs to be taken into account. With a GIS program, banks can analyze the potential success of a new branch or ATM location. The program does this by modeling the relevant information about a site, running it all through a sophisticated algorithm to estimate the potential success of the new location. Some of the data in this algorithm include the following:
- Customer Data and Demand: GIS services allow financial institutions to easily map their existing customer base, mapping the distribution of their current network and layering it atop information about customer profitability, demographic information and activity. The resulting map shows areas of customer distribution and the characteristics of these consumer groups. For example, it could show areas where customers predominantly speak one language more than the other. Banks can use this information to determine what language services to offer at locations placed within that region. This report can also show income information, which can be used to establish if a high-income area may benefit from a larger team of loan officers.
- Local Public Data: When looking to build a business in any capacity, banks must gather information about the region. Land and construction costs, business activity and sustainability, tax rates and infrastructure data are all relevant for financial companies. Infrastructure, in particular, can be used to predict a region’s potential for growth. All these factors contribute to residents’ quality of life and how likely subsequent generations are to remain in or relocate to the area.
- Competitor Data: Competitor data is yet another factor to consider when researching an expansion. Gaps in competitor coverage can be taken advantage of by moving a new branch into that region, while areas of high competitor activity and loyalty may not be the best place to put a new addition.
Using all this information, the GIS can identify and integrate the data into an actionable map-based analysis. Economic developers can use such maps to identify potential sites for expansion. They can support this with locally collected data to show each location meets all the necessary criteria.
For example, after running a Geospatial locational analysis, a bank considering an attractive spot for a branch may find the place is located in the middle of a competitor’s uniquely dedicated pool of clients. Alternatively, a bank considering installing an ATM on one side of town may find their customer base is mostly on the opposite side.
This information can also help national banks determine how many branches they should put within a particular region. Some markets may be unable to support more than two, while others may need several to keep the population satisfied. This strategy helps direct growth in a way that saves money and focuses on the markets with the most potential.
Such analyses not only provide bank management with peace of mind, but also prevent a lot of headaches and lost profits.
6. Optimize Delivery and Pickup Routes
Banks get money to and from ATMs using delivery vans. Often, these vehicles run along predetermined routes. Managing the movement of these vehicles, however, can be challenging, especially when outsourcing cash delivery services to a third-party provider. These routes are timed according to a strict schedule to ensure efficiency and timeliness, minimizing service disruption to customers. When things get off-schedule, ATMs might run short on cash, negatively affecting customer satisfaction and potentially harming the bank’s reputation.
A Geospatial data-based fleet management program, using location information in combination with GPS, allows for improved cash delivery procedures. With this system, banks can more tightly manage their fleets of delivery vehicles, timing deliveries and routes according to projected traffic flow. This allows banks to monitor and plan the movement of their cash vans affordably and accurately.
7. Improve Customer Service
Customer service is a particularly big issue for financial institutions in today’s banking world. In the new digital age, customers now expect their needs to be met and their questions to be answered as quickly as possible. Banks have been able to update their technology to meet the demand, but GIS technology can help them improve their customer service even more.
Location-based data and technology help banks connect with their clients more efficiently, planning and placing their banks in the best places for the most amount of customers. GIS systems can also analyze the demographics surrounding each branch, determining the needs of the local population so the department can provide appropriate services to maximize convenience.
As an example, in areas with a high Spanish-speaking population, banks can hire Spanish-speaking customer service representatives and loan officers to streamline their experience with the bank. As another example, banks located in an area with many high-wage earners and a large amount of available real estate can provide more extensive mortgage services.
In total, this location-based data can provide banks with the predictive tools to anticipate customer needs before the client realizes the need, making services readily available to serve customers more efficiently.
Implement a quality geospatial system with Navmart
With the drastic changes to the banking industry in recent years, it’s no wonder the financial industry is in search of more resources to give them an edge against competitors while keeping costs low. Now, more than ever, they’re turning to quality Geospatial software, benefiting from the numerous features and advantages such a system can afford. If your bank is looking for the system offering the best return on investment, Navmart can help.
Navmart’s GIS-based solutions can be integrated into your existing system to help your financial institution make strategic decisions, manage resources and achieve business objectives. For more information about how Navmart’s solutions can help you solve your business needs and get an edge in the competitive financial services market, contact one of our specialists today!