As
‘fake news’, misinformation and mistrust pervade
financial markets, banks are tasked with developing
a deeper understanding of what makes business
decision makers tick. What will the typical SME
business customer look like by 2025? Is
institutional banking set to experience a radical
overhaul in how CFOs and corporate treasurers prefer
to deal and interact with their bank?
Banks themselves are grappling with a crippling
identity crisis evidenced by a new modus operandi of
‘shrinking to greatness’, in contrast to vertical
integration and broader scale conglomerate banking
models incorporating wealth and advice of the past
decade. An effective way of approaching the
challenge is leveraging readily available
demographic data in order to develop a better
understanding of how behavioural trends are driving
customer expectations ever higher.
Robust & Rigorous Research Methodology
East & Partners captures a wealth of valuable
demographic information as part of the group’s
global primary business banking research programs.
Over 80,000 direct interviews are conducted with
CFOs, corporate treasurers and business owners each
year coupled with significant investment of
resources into building, framing and qualifying
robust and
reliable representative samples.
Several programs incorporate screening to fill
research program samples with a customer subset, for
example businesses with a defined import or export
function for Trade Finance and Business Foreign
Exchange (FX) programs.
In
addition to capturing valuable customer
characteristics, this process enables calculation of
market size and engagement through the use of
rejection rates as a proxy, an especially important
undertaking for opaque markets that are difficult to
assess in terms of the ‘size of the pie’ each
provider secures such as Equipment Finance or Trade.
Trade Finance Market Size Example
The
latest
Australian Bureau of Statistics
(ABS) data confirms the total number of exporters in
2016/17 remained steady at 51,992, ticking higher by
one percent year-on-year. The value of export goods
increased to A$291 billion, representing an increase
of almost 20 percent. The increase was mainly
attributed to large goods exporters with trade
volumes greater than A$100 million, predominantly
based in the mining and resources sectors.
Importantly trade in services data is not included
and quantifying the number of importers in the
economy is also not available from official data
sources.
East & Partners Trade Finance research captures
businesses trade profile to determine the number of
enterprises with a defined export only, import only
or both export and import function. Scaling up the
data reveals fascinating insights into the scale of
export participation among small businesses.
This further analysis confirms only one in three
SMEs currently have a defined trade finance need
(A$5 – 20 million turnover), falling to less than
five percent for Microbusinesses (A$1 – 5 million
turnover). Seven out of ten middle market
enterprises trade internationally while the
institutional segment reaches a consensus level of
cross border trade. Interestingly growth in the
number of internationally trading enterprises has
been confined to the SME and Corporate segments as
Microbusinesses remain heavily domestic market
focused.
The Age of
Alternative Data
Alternative data is
the term applied to any and all information beyond
traditional sources, regardless of how idiosyncratic
or unorthodox their form takes. Enhanced data
collection brought about by the rising adoption of
Internet of Things (IoT) coupled with advances in
Big Data and machine learning allows deeper insight
to become more accessible, both for corporates and
banks. The expansion of IoT has exponentially
increased the scale and scope of data generation.
Satellite photos of
how full shopping centre car parks are can be
analysed to determine retail demand while real time
algorithms run over fitness trackers and receipts
harvest insights on shopping trends and product
marketing. From consumer behaviour to container
ships traversing the world’s oceans, every element
is recorded and ripe for analysis to better
understand emerging trends and outliers.
The alternative data
movement is gathering pace as evidenced by
substantial institutional equity backing by banking
majors such as Goldman Sachs and JPMorgan while
Bloomberg recently announced that it would promote
alternative datasets through its terminal.
Corporates no longer
simply have databases of customer details but
untapped gold mines of valuable consumer insights by
packaging ‘exhaust data’ to third parties. Privacy
concerns remain a pressing concern, requiring
anonymity and security in data collection and
storage.
"Every company is now
a data company.
There’s no
transaction that doesn’t leave a trace”
- Quandl Chief
Data Officer Abraham Thomas.
The growth of
alternative data has coincided with innovation in
data collection and technology to process massive
swathes of statistics into applicable strategic
insights.
Conclusion
Demographic data
provides valuable insight into the evolving nature
of key business decision makers who in many cases
are fulfilling an expanding role – CFOs are
increasingly overlapping with CIO and CTO functions
in greater regularity. It is for this reason banks
are encouraged to ‘think outside the box’ by
incorporating disparate datasets but also get back
to basics to define the true characteristics of
their customer base and where they can add value.
Are Accounts Payables
and Accounts Receivables teams shrinking to the
point where they need more input and support from
their bank? What industries are showing the most
appetite for growth? Is the responsibility for
certain functions, such as payments, starting to
shift?
Reanalysis of existing customer information can
yield extraordinary insight but also provide a
reliable forward estimate of what the typical
business banking customer will look
like in the not too distant future. Speak to East &
Partners today to find out how you can harness the
voice of the customer to learn how to know your
customer better than they know themselves. |