The new alchemy: turning transaction data into gold.

• Author: Coffey, John J.
• Position: Database Marketing

Banks have mountains of transaction data stored in their data processing systems. This data is extremely valuable. Why is it then that many banks don't use their transaction data to market their services more profitably?

There are two reasons. First, this data is difficult to get in a form that can be used in a relational marketing database. Every time a transaction is generated, a unique record is added to a transaction history table in the core processing system. In order to use this transaction table, a relational marketing database needs the data consolidated at the account level. This is no easy feat, since, once statements are rendered--having served their purpose--they typically are purged.

In addition, not all of this data is even usable! Some transaction data is "cycle-to-date" data, which means that the data is only good through a particular day of the month and may not represent a full month's data.

Another reason that banks don't make better use of transaction data is that the vast majority of this data consists of operational transactions not marketing transactions. For example, when Mrs. Jones walks into a branch and makes five deposits to her checking account, she is not choosing to purchase anything from the bank; she merely wants to use the services available to her from what she has already purchased--in this case a checking product.

Gold in the mountain

Banks have hundreds of kinds of transactions that describe every kind of operation under the sun, but only a few of these transactions are directly linked to revenue generation (e.g., check printing fees), and fewer still are directly linked to a purchase decision (e.g. loan origination fee). In fact, there may be only a couple of dozen of these types of transactions! Does this mean that only revenue generation and purchase decision transactions are to be found in the "gold vein of marketing," and the rest of the operational transaction data is only worthless dirt and rocks?

The key to changing operational transaction data into data that can be used for marketing is to assign fees and costs to this data! This provides your CRM with variable income and variable expenses at the...