5 reasons to start categorizing customer spending data

Although digital transformation helps financial institutions meet customer expectations, it is not necessarily improving the user experience.

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According to Forrester, customer trust in banks fell in 2022 for the first time in four years. The secret to building – and even maintaining – a good relationship with the user is to offer services that take into account their consumption habits and needs at each stage of their lives.

Generic messages are no longer valid, you need to hyper-personalize the offer.

1. You will be able to launch financial services personalized and adapted to their needs

Complaints about banks often refer to the complexity of onboarding and the lack of customization. Users demand a fast, secure, intuitive and 100% digital registration process. The new generations have been born with technology and demand that their bank apply it in their relationship with them. If they don’t, it won’t be long before they find someone else to.

In a market where financial institutions compete with BigTech, the only option is to jump on the bandwagon of AI and Machine Learning to increase customer knowledge and be able to anticipate customers’ needs. The tools that use these technologies can take advantage of open banking to show a 360º overview of the user’s economic situation.

2. Creating customer typologies helps you establish an effective business strategy

Due to spend analysis, entities are able to create typologies of customers to launch hyper-personalized products and services to increase turnover. The operation is simple: through APIs integrated into the bank’s digital platform, all customer accounts are connected in the same place and both the user and the entity will be able to know their financial health in real time.

This is very positive for both. On the one hand, customers have a powerful tool to manage their personal finances. By seeing all the transactions in one place, they are able to obtain a 100% reliable picture of the situation and make the best economic decision.

Discover the real benefits of offering a PFM service to your customers here

3. Issue useful messages for your users and at the right time to generate engagement

On the other hand, the bank has the necessary information to issue warnings in the event of an overdraft risk, end of subscriptions or unusual cash withdrawals. With spend categorization they can also uncover new up selling and cross selling opportunities.

For example, if the user has a child care expense but does not have life insurance, the door is opened to launch a personalized offer at the right time.

As a consequence of the great development and increase in the financial offer in recent years, trying to increase the volume of business in a saturated market is increasingly complicated. For this reason, it is necessary to strengthen campaigns by improving our communications. Avoiding generic messages and the constant bombardment of information is vital to retain users.

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4. Trigger ROI by analyzing spending patterns 

Expenditure categorization offers a multitude of advantages to financial institutions. We have already seen an example, but financial insights are also a powerful tool for reliable credit scoring without the possibility of documentary fraud. By analyzing bank transactional data, it is possible to know the user’s risk profile and offer fairer loans.

Due to categorization we can obtain precise information about credit history, income, debts, risk behaviors (such as sports betting) and expenses. As it is transactional data, it is no longer necessary to carry out long documentary verification processes, with the significant cost reduction that it implies.

Digital transformation initiatives must be perfectly planned to achieve an increase in business volume. Currently, the most profitable position for banks is to be allies of their customers. Offering advice in these economic uncertain times favors the creation of lasting relationships based on trust.

5. Increase customer satisfaction by offering a personal finance manager

When your users, thanks to your digital platform and your alerts, achieve their financial goals, they are much more likely to continue using your bank’s services in the long term and to recommend your brand to family and friends. Helping them avoid financial problems and improve their situation can also reduce defaulting rate and associated credit risks.

To avoid the high costs and the investment of time and human resources involved in implementing an expense categorization tool internally, many entities are committed to collaborate with FinTech startups that have the technology and knowledge necessary to implement innovative developments in weeks.

Ensuring an optimal user experience that increases engagement with your App and generates up selling and cross selling opportunities is easier than ever. You will be able to help your customers make informed economic decisions that improve their financial situation in the long term and differentiate you from the competition.

You can now contribute to a financially inclusive society that promotes the economic well-being of the population. Find out how with the COCO{Categorization} tool.

We are at your disposal to answer any questions that may arise. Do not hesitate to contact us, we will be happy to help you improve your turnover!

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