Money creates a chain reaction; the more you have, the more you can earn. But it can have an exponentially adverse effect if you don’t have it. This holds true for data as well. Vast amounts of information improve banks’ ability to support customers, but financial institutions must know how to use it.

Today’s banking customer is in serious need of guidance from banks, whether it’s about spending, saving, borrowing, planning or all of the above. After all, two in three Americans today struggle with their finances.

In addition, their loyalty shifts easily, considering that neobanks are more accessible with instantaneous onboarding processes. Modern banks are challenged to familiarize themselves with their customers, dig deeper into the reasoning behind their financial decisions and enhance their fidelity.

Yet, without knowing what data to look for and how to understand their customer’s individual needs, blanket approaches and loosely categorized consumer profiles leave customers excluded from adequate financial support and the same financial position, if not worse.

For a consumer to share their life with you, they first need to understand the real benefit of doing so.

Let’s look at how modern banks can use data and build trust to improve consumer financial health.

Key pain points for modern banks

Banks must recognize that past financial history and characteristics of those categorized as similar represent merely preliminary reflections of the customer at hand.

Say a young woman took an interest in a $1,000 coat. Algorithms told you that women her age bought this, and your system began to push notifications for BNPL. However, what happens if the woman loses her job? What if she can’t make her BNPL payment?

BNPL can be a convenient way to make large purchases with attractive interest rates, but in an emergency, she might resort to making payments with a credit card. This would extend the life of that BNPL debt while adding additional interest on top. Even if she finds a new job, she might have put herself through more financial struggles, which negates the benefit of BNPL.

It’s all about the whole picture. Open banking provides fintech banks with information from their customers’ primary accounts to inform you where they shop, how much they spend on certain products, whether they have a car and insights into their family. However, staying on top of the latest data protection regulations means you have to constantly readjust operations.

Modern banks need to ensure they are in compliance with privacy and security regulations to make their customer data safe. Under the consumer data rights legislation and the Gramm-Leach-Bliley Act (GLBA), banks must strictly use data for reasons agreed upon with the person’s consent. They need to ensure consumers understand how their bank uses their personal information with third parties.

Here are three steps modern banks can follow to tackle their pain points with data.

Data to determine financial aptitude



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