The MFI and the data challenge

Platforms who not only holds the customer data but also understands that data and applies this data to create engaging customer experiences will be the new Main Financial Institution.  

RFi Group managing director – Asia Pacific Gerald Ferguson provided this assessment at the recent Australian Retail Credit Association conference in Brisbane recently.

Based on research from RFi Group, Ferguson, said this was the new reality of open banking.

The research revealed that the drivers of MFI are become less about a core product relationship. While the MFI is still important, how customers view or identify the MFI is changing.

“Deposit products are still being held with the MFI, but for cards and mortgages, and to a lesser extent personal loans, consumers are increasingly like to go beyond the MFI,” Ferguson said.

Not surprisingly, the research revealed that the MFI relationships is strongest amongst the older demographics.

Although, generally the propensity to hold different products with the MFI is relative stable across age, although the desire to hold investment products with MFI increases slightly amongst older consumers.

Interestingly, however, revealed where institutions, who are not the MFI, can win on market share.

It comes down to product with consumers will to look at the offering of other institutions in credit and insurance.

For Ferguson, these products, particularly credit are related to lifestyle and typically appeals to the 18 – 24 and especially the 25 – 34-year-old bracket. The latter age group is the demographics who really start to take up credit products.

The multi-banked consumer

Importantly, data and the way it is used underpins the ability of products like credit and insurance to deliver on the customer experience. It also underpins an institution’s ability to understand their customer.

RFi Research also found that despite market share of mortgages for the big four sitting at around 65 per cent, only 60 per cent say they would approach their current lender first when taking out a new mortgage. Today, one-in-two loans are written by a mortgage broker.

The research also found that 40 per cent of customers have a credit card with their main bank.

The implications for banks are that the customer data that comes with these products – transaction data associated with credit cards - is being shifted to other institutions.

“The power is increasingly been taken away from the main bank as well as the ability to understand that data through those rich data sources,” Ferguson said.

“If consumers can get a better experience from using credit and insurance products from another provider, then they are happy to make that shift.

“From a customer perspective, if you are my main bank and you don’t know anything about me, then why are you my main bank?

“With open banking and open data, the idea of a multi-bank customer will be reality.”

 

 

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