Banks harnessing big data to analyse customers' shopping habits

Retailers and banks teaming up to exploit customer data and build profiles of choices, says FICO

Banks are teaming-up with retailers to target customers by analysing the customer data they collect more closely, according to Andrew Jennings, chief analytics officer at fraudulent data specialist FICO.

The company provides predictive analytics to financial institutions such as Metro Bank and retailers such as Wal-Mart, to help them prevent fraud and better evaluate risk.

Jennings told Computing that financial institutions are starting to behave more like retailers.

"In a mature market, such as the US, UK or Canada, where credit is a mature industry and people have a wallet full of credit cards, it is naïve for a bank to believe that the way it is going to grow revenues is simply by issuing more credit cards.

"The issue for a bank is not to increase the amount of credit cards, but to ask, ‘How do we get the user to use our card?'. This is analogous to a retailer that asks, ‘How do I get [my customer] into my store to buy that TV?'," he said.

Jennings said that banks and retailers now enjoyed a "symbiotic relationship" and that banks were keen to exploit the use of analytics for purposes other than tracking down fraud.

"Banks have been asking FICO, ‘How can you process the data to help us build loyalty with that customer? So that if a customer is to buy an item, we can do something to make that purchase happen on our credit card, rather than on a competitor's credit card," he said.

In other words, said Jennings, a bank can't make a customer spend £1,000 that they were not planning to spend. However, if the customer is planning to buy a new TV for £1,000, for example, then there might be ways to encourage the customer to use that bank's credit card, or to take out a loan.

According to Jennings, the type of data available to banks has far more depth than retailers' data, but banks are not yet adept at exploiting it.

"The data is broader than a retailer would get, so it can go very deep and build meaningful profiles of customers. They can then ask, ‘Six months ago, this individual was shopping at John Lewis and now they're shopping in Primark. What does that tell me?'

"Banks are not very good at this, but the competitive environment is driving them towards [being good at it]. That's what we're seeing today," he said.

Jennings added that banks would ensure that they have an arrangement with merchants in which they are the merchant acquirer for the card.

"The bank can create incentives for the customers that it issues cards to, to go to a retailer so that the retailer is paid. It will tell the retailer, ‘if I can drive more traffic to you, I get it on my cards'.

"For someone that has been analysed and found to do a lot of DIY shopping, the incentive to the card holder might be that, if they spend more than £200 at B&Q in the next month, then a £20 credit will appear on their next credit card statement, for example," he added.

• The interview took place as news broke that retail giant M&S is planning to enter the banking market. As more and more supermarkets enter areas such as banking, insurance, and even healthcare and law, data-sharing and customer profiling will inevitably become a more competitive - and legally challenging - area.