Banking on Personalization

 Modern customers want firms to give a seamless contextual experience or personalization in a quick and consistent manner, from Netflix's streaming suggestions to Amazon's suggested purchasing lists. According to research, 90% of customers find personalization appealing, and 80% are more inclined to connect with a firm that provides tailored experiences. Customer data analysis is increasingly being used by brands across industries to better understand customer behavior and provide a tailored experience that is critical for engagement and loyalty. The banking industry is no different.

The advent of technological behemoths into the industry has altered the game's rules. Nova Credit, for example, utilizes social signals and percentile grading among comparable borrower groups for calculating credit scores. Affirm, a fintech business simplifies the purchasing cycle by allowing impulse buy mechanisms, delayed payment models, and single-click purchase choices on e-commerce platforms. Venmo, Square Cash, and Google Wallet have all used creative personalization tactics in the digital wallet sector. There are other firms like Robinhood that allow investors to trade for free in return for their personal information. Traditional banks must enhance their personalization efforts to boost client loyalty and revenue growth in the face of severe competition from 'fintech.'

According to the Boston Consulting Group, for every $100 billion in assets, banks may generate $300 million in revenue growth through successful personalization. Is it true that traditional banks have fully realized the possibilities of personalization, or are there still gaps in implementation? 

For this era of technology-powered service, the traditional strategy of segmenting customers based on demographics is scarcely enough. Banks have begun their digital transformation journeys in response to clients' expectations of on-demand availability. However, complete transformation to meet customer demands and a continually changing market situation is both costly and time-consuming. As a result, the majority of conventional banks have failed to meet their goals. According to research, 94% of financial institutions have yet to put in place effective customization strategies. If a few key elements are examined, the abundance of customer data currently accessible to them may be efficiently exploited to construct an effective outreach program:

Unified view of the customer:

In today's banks, customer data is dispersed across several siloed systems. Banks cannot make logical deductions about a customer's behavior without a comprehensive picture of their account, spending patterns, expenditures, and more. Banks must first work to combine data and information for each client from several departments and divisions. This comprehensive view of a customer is a must for a successful customization strategy that includes both conventional and digital channels.

Advanced analytics for usable insights:

After achieving an enterprise-wide perspective of a client, the next step is to efficiently utilize that data. Predictive analytics on data collected during client interactions is an excellent technique to do so. To promote client interaction, the Bank of Ireland uses both online and offline data. Tagging and tracking methods are also used to improve the personalization of communications and omnichannel branch experiences. As a result, the bank has seen a 278% rise in applications submitted through digital methods.

AI and ML Powered Smart Insights:

Artificial Intelligence (AI) and Machine Learning (ML) can assist banks in better defining client behavior and identifying methods to incentivize it. Self-learning models may be utilized to provide a contextual experience, increase client loyalty, and finally find revenue-generating possibilities. HSBC uses artificial intelligence to forecast how clients will utilize their credit card points. This information is then utilized to provide a highly tailored purchasing experience for each card user, including highly targeted suggestions and offers. Customers' social media and internet actions are also scrutinized by Bank Zachodini in Poland. Each client is profiled and examined against a set of social criteria, after which the bank launches a well-defined outreach campaign that includes appropriate offers and services. The program's efficacy has increased by 15 times, and replies have more than doubled.

Greater control and self-service:

Customers today expect more control over their relationship with their bank. Allowing customers to control their multi-channel interactions is a crucial component of breaking down silos. It's also a good idea to provide clients the option of mixing and matching product features like configurable insurance coverage and hyper-personalized risk profiles. For example, Direct Assurance's You Drive program links a smart device to a customer's car, which captures driving data and generates a score that affects the premium — the lower the premium, the higher the score.

Real-Time Engagement:

Customers want information whenever and wherever they need it in this on-demand world. To enhance their connection, banks must use geographic data analytics to provide real-time suggestions and other information. Capital One in the United States, for example, utilizes user location data to deliver mobile banking app notifications for customers who buy at partner businesses. This is assisting them in increasing card adoption at certain stores and within specific spending categories.

Greater Transparency:

Customers today are concerned about the ethics and transparency of every company with which they interact. Banks have a high level of customer trust and must employ customized tactics to increase pricing transparency for both their own and rivals' goods. Customers will be able to make better and faster judgments as a result of this, and their faith in the establishment will be reinforced.

Maximum Security:
To ensure optimum data safety and compliance, banks must invest in creating new technology while they refine their personalization initiatives. Banks across the globe are already experimenting with several novels and successful security measures, such as employing fingerprints for identification and monitoring heartbeats as unique IDs, and this trend will only grow in the future.

The flexibility necessary to provide tailored offers for each customer may be lacking in legacy core banking technologies. As a result, banks must first examine their current capabilities before investing in technology and partners that may help them accomplish their goals swiftly and cost-effectively while avoiding disruption. As the rivalry heats up, banks must concentrate on enhancing the trust they currently have. This necessitates a long-term strategy, strong leadership engagement, and substantial technological and cultural changes. Banks may position themselves as orchestrators of an ecosystem that is tailored to fulfill every client demand with unique solutions with the right strategy and technology.