What is personalization in banking?

Whether you’re streaming Netflix in North America, finding a bike share on AliPay in Asia, ordering from Amazon in Europe or splitting the bill with Rappi in Latin America, your welcome screens likely look different from anyone else’s—even if they’re in your own household. 

That’s because what you’re seeing is a digital reflection of you based on your data: your profile, your browsing history, your purchase history. What you click, what you don’t. And increasingly, we expect that same kind of tailored experience in all kinds of industries, even in banking.

But how can a financial institution truly create personalization that reflects the individual end user—across channels, products, services and devices? And how can you achieve that at scale? It takes recursive learning, a single view of the customer and a sequence of interventions that align with a customer’s behavior. 

The good news is FIs have been targeting customer segments and using data to tailor offers to them for decades. And until recently, it’s been enough: It’s helped banks differentiate their brands, deepen customer engagement and gain a competitive advantage. But now, this advantage is beginning to erode as more tech-savvy banking competitors and fintechs put more sophisticated personalization at the center of what they do—and do it at scale. To keep up, your financial institution has to become just as savvy.

The first step is to understand what personalization is and what it’s not. Only then can your team take the actions necessary to compete (and win) against high-tech disruptors. So, what does banking personalization really mean? 

You might think banking personalization focuses mostly on marketing. But that’s table stakes today. The real potential of personalization starts with transforming all of your customer interactions using data and analytics; it’s how you can anticipate the customer’s needs, create trust and build deeper relationships. 

That’s because personalization in banking is not always about selling—it's about providing service, information and advice...before the consumer even knows they need it. That’s how you can be there for them in the moments that matter. FIs that can anticipate a service or customer need are better positioned to deliver on those personal experiences in that crucial moment. It’s a trust and revenue builder when you can get it right, end to end. To do that means developing strong cross-channel offerings, cross-enterprise collaboration, a single view of the customer and a new technology ecosystem.

It’s difficult when many financial institutions are burdened with disconnected, siloed data and legacy back- and front-end technology systems—those make it impossible to deliver a personalized experience, which really means a connected experience.  

If you don’t know, for instance, that a customer phoned your call center this morning to ask about auto loan options—you can’t close the loop later, like when they log into your app. You can’t message them with helpful loan information or, say, their digital credit score to help them understand their financial picture. You can’t serve them information about your money management feature or savings account options when they log into your online banking portal the next day. Or give them a call the next week to see how or why their financial needs are changing. 

Related: Banking personalization for a digital-first world. Get the free white paper.

Fraud detection is another example of meeting a customer in the moment with a personalized service. Say your customer withdraws the maximum from an ATM two days in a row. Or attempts a transaction from outside of the country or from a place they’ve never shopped before. With the right platform unifying your data, customer behaviors and operational data—and integrated with your digital banking and marketing platform—your customer could get an SMS alert or notification in their app in real time to verify the transaction. They’ll feel like you know them and are looking out for them; it’s a simple way to show that you’re diligent in protecting them...all through the power of personalization.

To create more powerful personalization, FIs need a new approach. It means evaluating and unifying your customer data and touchpoints across channels—branch, call center, self-service and digital banking—to create more customized, relevant end-to-end experiences for customers. 

Frequently, fragmented databases are one of the barriers to better personalization. This kind of disjointed data can’t create a 360-degree customer profile. Legacy technology, complex systems and siloed data mean you can’t easily measure customer responses or recommend the next-best actions. That means customers end up getting the same product offers and messages, regardless of their very different financial needs, which can create a poor customer experience and weaken brand affinity. 

True personalization is the deep understanding of each customer’s unique needs and orchestrating a set of tailored experiences across digital and human channels. In short, it’s delivering the right product at the right time in the right channel. It’s how you build trust, loyalty and sales while reducing your customer churn rates. See how Capital City Bank continued to deliver consistent and personalized service to their customers amidst the pandemic by implementing the ITM.

By using personalization to create experiences tailored to your customer’s unique financial needs, you can differentiate yourself from your competitors and: 

• Retain existing customers through added value perception and brand strength. 
• Better understand customer needs by collecting and aggregating information from a segment of customers. 
• Improve customer satisfaction, a primary driver of loyalty. Offering tailored products or services lets them know that your financial institution knows them. 
  
• Increase the ‘stickiness’ of your brand with your consumers since they’ll view these services as difficult to replace at another bank.

According to a recent blog by everfi, The Commonwealth Bank of Australia and The Royal Bank of Scotland are mapping the consumer financial journey to identify their users’ “next best action.” They’re turning to their customer data and technology to help them predict what their customers will need in the immediate future and tailor their products to the users’ need and life stage. Indeed, FIs that used this model increased sales by 30 to 40 percent.

According to the Financial Brand, some 48 percent of customers want their FI to provide advice and product information related to what they are currently doing. Here are a few considerations to help you do that and more:

• Create a people-first experience. To do so, FIs need to map the entire customer journey, their buying behavior, preferred channel of communication, information they access before they initiate a conversation and typical questions they ask. Eighty-one percent of financial service companies say that the customer journey optimization will be very important for their marketing efforts and will provide a road map for your customer centric approach.   
• Leverage customer data. A customer can get frustrated when they are asked the same questions over and over again, whether opening an account, applying for a loan or troubleshooting something. So look for digital platforms that can unify customer data and provide instant access to it whenever customers interact with you. 
• High-tech and high-touch are welcome. More than 71 percent of banking customers are open to receiving automated messages that guide them through selecting the best account type for them, according to the Financial Brand. Self-service customer support empowers them to find the answers they need when they want, freeing up your customer service teams at the same time. Still, 36 percent of banking customers want to talk to a real person when solving issues, such as settling disputed credit card charges.  
• Rely on technology. Technology and data make it easier to deliver personalized, 1:1 communication. Leading financial institutions have found success by developing in-house technologies or implementing third party solutions like NCRs end-to-end banking software platforming that helps them unify and bridge all their customer data, which is less time consuming and more cost effective.
  

In two words: super apps. Super apps combine social, financial, services and entertainment functions in one app. They wrap a connected universe around their target audience on demand, revealing opportunities to up- and cross-sell services and improve customer stickiness in the platform. They're often fairly difficult to create because they require a large mobile customer base and need to aggregate a set of compelling and frequently used services. Super apps also need to integrate well into the lives of the customers, so people will use them regularly. 

Some of the best-known super apps are China’s WeChat and Alipay. According to KPMG, super apps like these combine everything from messaging to shopping to services, all with a single sign-on and user experience. They provide a glimpse at a truly holistic customer experience, since users can use chats to make plans, toggle to add lunch reservations, order a gift and hail a ride to and from in one connected, personalized experience.   

If you relate that kind of experience to banking, your FI would use customer data, predictive analytics, machine learning and AI to make your customer experience, offers, messages and services relevant to your users as they go about their daily lives.  

Imagine you’re that auto loan customer from earlier. Now imagine you drove past a dealership that partners with your bank. What would it feel like to get a push notification alerting you to a great rate on auto loans at that preferred dealer because you drove through a geo-fence? And when you open your app you can immediately select a live chat option to talk to your banker—who’s ready to help without a bunch of repetitive questions—because they can see in your profile that you’d recently engaged with auto-loan content. Pretty personal, right?) 

So while it may not be feasible for your IT staff, budget and resources to create an end-to-end super app, you can still offer a deeper, more innovative experience using an open banking architecture and APIs to pull additional experiences and services into your app. 

And super apps are just one mobile disruption changing how consumers value end-to-end personalization and 1:1 service. Mobile-only banks, like Monzo and Starling, are also offering connected services, from splitting the restaurant check, transfer money in real time and transact in other countries without fees. They also enable users to track spending, get fraud protection, receive push notifications when payments happen—showing the true power of personalization in all kinds of daily interactions.

Related: Gartner Market Insight: How to Manage New Trust Issues in Digital Banking.

Data analytics and machine-learning technology are key; they can use your customer data to reveal spending habits and other patterns, as well as more standard analytics like email opens, bounce rates and the like. PwC recommends prioritizing the five following steps to pave your path forward: 

1. Update your banking systems. Simplify your expensive legacy core systems that sap your agility and speed to market with new competitive features or service offerings.  

2. Build the technology to get more intelligent about your customers’ needs in real time. It means integrating massive amounts of customer data and tying it with operational data.  

3. Prepare your architecture to connect to anything, anywhere. To stay competitive, financial institutions will need to update their infrastructure to make it more agile and responsive so it can interact with data and systems that could be anywhere. 

4. Work with the cloud, which makes it easier to capture, analyze and respond to your customer data.  

5. Be API-first. Similar to online or mobile banking today, nearly all FIs will provide external APIs in the future. And banks will rely heavily on payment APIs to enable e-commerce.

Thirty-three percent of people who abandon business relationships do so because they lacked personalization. So, getting it right is a big deal—it goes a long way to improved loyalty and customer satisfaction. Yet only 38 percent of financial institutions said they’re prioritizing a customized approach to delivering products and services. 

That means there’s a huge opportunity for your FI to differentiate your experience using deeper personalization. Using your customer data, operational data, advanced analytics and an API-first platform pulling it all together, you’ll be well positioned to provide truly personalized advice, resources and products your customers will feel they can’t get anywhere else.