Fiserv Heads Downmarket to Sell Data Analytics to Small Banks — and Meets Banno

Financial software provider Fiserv is looking to community banks and the small businesses they serve for its next revenue opportunity. Other vendors, such as Banno, are fishing the same waters.

Both companies seek to increase revenue for FIs using data analytics, or “big data.”

George Noga, SVP/managing director of Fiserv revenue enhancement solutions, says banks are still pivoting from relying on overdraft fees and need new ways to grow revenue from customers.

“Free checking was funded through overdrafts,” Noga said. “Banks are still asking, ‘Is this still the business model that is going to work for us?’” They need to move on to other opportunities, according to Noga.

Many smaller banks want to sell themselves on customer service, on the premise that they know their community and their customers, according to Noga. All too often, however, these banks are sitting on top of unstructured data, and are unable to meet the demands of today’s tech-savvy customers. When Fiserv works with small banks and splices and dices the bank’s customer data, it may be the first time the bank has gotten an insightful look at its small business customer base.

In other words, big data still eludes smaller banks.

Fiserv’s revenue enhancement group has a straightforward  road map for community banks to increase revenue from small businesses:

1) Identify small business customers and segment them. Fiserv has 14 categories of small businesses.

2) Locate other potential customers in the bank’s footprint and identify their needs.

3) Bundle products and services to offer banks for small business customers.

Fiserv targets banks with assets in the range of $500 million to $5 billion to $10 billion dollars. The upper end of this scale is into the territory of regional banks, but nearly all the banks operate with Fiserv cores.

BANNO’S PLAY

Another vendor operating in this territory is Banno, based in Cedar Falls, Iowa. Banno’s new Kernel product, launched as a beta at Finovate in May 2013, uses analysis of customer data to present targeted offers to users within the online banking environment. This is just the tip of the iceberg of what can be done, said Banno CEO Wade Arnold, who believes big data is capable of  nothing less than replacing the rich experiences formerly offered in the branch.

The greatest challenge to the 360-degree customer view that is required to bring the relationship back to banking is the use of customer relationship management software, or CRM, Arnold said. A CRM system allows banks to store Twitter handles for customers, for example, and therefore to continue the bank’s relationship with the customer over social media channels. CRM also ties together customer touches to areas of the bank that may be otherwise siloed, such as bill pay and mortgages.

Arnold pointed to a stark divide in CRM usage between large and small banks. At banks with $1 billion or more of assets, CRM usage is better than 90%. But when a bank has less than $1 billion of assets, CRM usage drops below 30%, he said.

Big data has been made possible because of falling prices for disk space and inexpensive or free open-source software, such as Hadoop, which replaces costly analytics software offered by the likes of IBM and Oracle, Arnold said. Usage logs that previously were thrown away because analyzing them was too expensive can now be examined to yield important data. Nevertheless, small banks tend to lack the expertise to perform these functions. This looks like a sweet spot for Banno – CRM and data analytics for small banks without the internal IT staff to perform these functions.

And, now, for Fiserv, too.