Where is personalisation in the banking industry?
Teo Blidarus, Co-Founder & CEO at FintechOS
Experts in customer experience claim consumers need personalised products and services if they are to stay loyal and spend more money. Yet personalisation in banking seems like a faint dream, rather than a concrete reality. The steel-plated cards, ‘premium’ accounts and glossy banking apps we see so much of are not examples of personalisation—they are examples of customisation.
While these are nice to have gimmicks, they are just that—gimmicks. Not many banks have (yet) been able to do for banking what Netflix has done for entertainment, or what Amazon has done for retail, and offered customers individually tailored recommendations based on their data.
When it comes to personalisation, banks are being outgunned by the tech-savvy, and are at risk of losing out on revenue—and a lot of it. In fact, BCG estimates that for every $100 billion in assets a bank has, it can achieve as much as $300 million in revenue growth through customer personalisation. So what are banks to do?
Personalisation or customisation?
Customisation isn’t a new trend in the banking industry. As early as the 90s, banks offered consumers limited edition debit or credit cards with unique designs, loans tailored to customer groups, as well as special offers to drive customer engagement.
This trend of add-ons and deals has only continued in the age of fintech—albeit more sophistically. Banking apps now offer consumers pots for savings (which they can customise aesthetically with a chosen image), along with adding their own financial targets. Product marketplaces give customers a range of items to choose from based on a series of filters, and payments brands like Klarna give consumers more choice in how they make a purchase, adding freedom to the act of payment.
But while these are impressive innovations, none of these is truly personal to each individual user, especially when compared to the level of depth that Big Tech companies have managed to offer. Let’s take a brand like Spotify as an example—Spotify’s users are given personalised playlists daily, based on their habits. They receive notifications specifically tailored to them, as well as news about their favourite artists. Almost the entire experience within the app is unique to each individual user.
This level of personalisation is yet to appear within the banking sector—but the need to develop personalisation into the customer experience is growing. Customers are increasingly expecting it as standard. Therefore, any business which doesn’t embrace personalisation risks losing consumers. Furthermore, personalisation also presents a revenue opportunity for banks. Consumers respond better to bespoke offerings, and it creates a means to cross-sell other services customers were
previously unaware of.
Getting banks to ‘true personalisation’
According to BCG, “True personalisation is grounded in developing a deep understanding of each customer’s unique needs and orchestrating a set of tailored experiences across digital and human channels.” Additionally, it also expects personalised banking to create a competitive advantage for first movers that embrace it over the next five years. Brands like Apple, Netflix and Amazon developed their products (and became leaders in their respective markets) by harnessing tons of user data to continuously deliver new and improved services and experiences.
Banks are capable of doing this as well. In fact, financial institutions are sitting on data goldmines, but failing to put this data to use. By becoming data-driven, and putting insights at the core of everything they do, banks too can deliver individually tailored experiences—and reap the rewards this brings.
This data-first approach will require institutions to consider two important factors:
- Pushing for a cultural shift: While technology is an important piece of the puzzle, people are another crucial piece that banks need to consider. Employees need to be on- board and push for innovation, both from the top-down and the bottom-up. Banks need advocates internally who embrace both the objective of personalisation, as well as push for the tools required to develop banking products that are truly personalised.
- Utilising automation: From a technological perspective, automation is critical for any business that wants to put large amounts of data to work, as it will enable them to analyse and use data at scale. While this may sound like a task in itself, automation doesn’t necessarily require a lot of investment. Through a low code framework, data can be pulled from all siloes and enriched in the cloud, creating an evolutionary model that provides deep customer insight.
Quick implementation, huge benefits
A Netflix or Spotify level of personalisation will be the gold standard for banks—and while they won’t reach this level overnight, achieving this level of personalisation isn’t a pipe dream either. With the right technology and approach, it is possible for a financial institution to deliver a competitive and fully personalised experience to customers in a matter of months, weeks or even days depending on complexity.
By offering personalised products and services, not only will banks stay relevant and deliver on customer expectations, it will increase overall conversion, they will reduce churn and unlock new revenue opportunities. This includes a greater ability to cross-sell to consumers, or a means to identify demands for a niche product or service. And from here, it becomes a self-fulfilling prophecy—new solutions capture new data, which banks can use to create new products and so on.
Given the benefits, driving personalisation should be high up on the priority list for banks embarking on digital transformation journeys. It is time for customisation to evolve, and for banks to take a more meaningful and personalised approach. In the age of Big Tech, and in a competitive and thriving market, banks must use personalisation as their own “ace” to stay ahead of the game.