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Bridging the Digital Personalization Gap in Financial Services

Personalization has always been a way of retaining good customers and generating more revenues for any viable business. At the same time, personalization hasn’t kept pace with the changing service delivery models. This is especially true in the case of financial services firms such as Banks.

There was a time when a John Doe would walk-in to a Bank branch and be greeted personally by the manager working there. Information exchanged would be more than just the immediate transaction details.

The Banker would get to know what was going on in John Doe’s life, assuming, of course, that John was a talkative, sharing kind of person. Amongst talk about the weather and jokes about the politics of the day, the Banker would get to know if John was looking for a loan to put his daughter thru college or getting a second mortgage to finance his business expansion plans.

If John wasn’t the talkative kind, a skilled Banker still could, using insider information picked up from his network of friends, and the friendly neighborhood barber / bartender, keep the conversation professional and get John to open up about his Banking needs. It would be all very respectful of course, and mindful of John’s preference for privacy. Otherwise the Banker was liable to instantly face John’s displeasure & loss of business.

With Branchless Banking becoming the norm and digital channels taking over, the distance between financial services firms and their customers has increased manifold, and firms need desperately to replenish this source of personalization.

Room for improvement

Enter regulatory requirements such as “Know your Customer” aka KYC. While the purpose of KYC clearly isn’t personalization, many Financial Services firms use this as a springboard to collect as much information as legally possible without actually breaking the law. However, personalization was never a one-time exercise, being instead all about constantly tracking the customer journey. Again, this is of the utmost importance to Financial Services firms because apart from the Customer’s Trust, there aren’t a whole lot of differentiators between firms, and Trust is inherited from generation to generation, with unfortunately not much new Trust being generated in the Digital world.

In fact, with the proliferation of digital technologies, customers are setting new expectations in terms of how the banking and financial institutions should provide personalized services. With consumers increasingly using devices to transact, and with online and mobile banking becoming the norm, today banks are under pressure to shift from a product centric approach to a customer centric one to differentiate themselves.

A survey by market researcher GfK and Personetics examining the current state of consumer perceptions of their relationships with their primary financialinstitutions, found that there was a major perception gap between banks and their customers. According to the survey, customers responded that “they think the bank has their best interests in mind,” 34 per cent of the time. Similarly, when customers were asked “If my bank makes me feel I am a number” customers agreed 20 per cent of the time. Clearly these low numbers show that there is a perception gap that banks will have to address considering we are on a cusp of change with the advent of Fin-techs and cryptocurrencies pushing the world to increasingly become even more digital, moving forward.

New Customer Expectations

There are a host of new expectations from consumers who use their mobile devices for banking. According to a survey by Federal Reserve, mobile banking users clearly prefer to access their accounts through mobile and online banking channels, using those channels at twice the frequency of phone banking or branches. They expect personalized services through these channels. In order to provide personalized services in the digital domain banks should:

Get a 360-degree view of the customer: As the GFK study notes, Banks “…have an enviable position of being in the lives of their customers on a daily basis, handling some of their most personal data, and not to mention their customers’ financial well-being in their hands”. However, there is more to a customer than just their financial transactions with their Banks. In the old-world scenario, friends & “friendly neighborhood” sources could help the Banker get up to speed. Unfortunately, the Digital equivalent of the same has the potential for violating privacy laws and using “friendly neighborhood” sources can have the Bank’s CEO facing jail time. A more nuanced approach is required, where one has to solicit customer consent for collecting additional data about them, by convincing them about the benefit of doing so. This is often referred to as getting a 360-degree view of the customer. With the right tools, and customer consent, Banks can use the data to get real-time insights and provide unique recommendations to enhance customer satisfaction and loyalty. Customer’s Trust is not won in a day.

Adopt personalized marketing: By customizing product offerings to individual customers, banks can leverage existing data to expedite applications, reducing the opportunities for customers to shop around. Again, care must be taken to fully empower the Customers to control the frequency and type of messages they receive based on their transaction history, profile and marketing preferences. For example, selling within the mobile banking app, including offering discounts, rewards, loyalty points etc. reduces the friction encountered by customers through alternative channels.

Assume the role of an advisor: By implementing solutions like robo-advisors, self-help tools for customers embedded within the Bank’s app as well as ATMs using artificial intelligence, banks can find new ways to engage with customers and deliver actionable advice.

Executing digital personalization initiative successfully

Companies that carry out digital personalization initiatives typically have a CEO or a CMO leading the effort. The challenge in leading such initiatives lies in putting together necessary expertise and the resources required to achieve a meaningful and timely result and not treating this as just another digital marketing exercise. The learning curve of any organization will be slower in the early stages of a personalization project. To get a head start in implementing such projects, many seek external guidance and support of vendors that have deep experience in the banking industry coupled with a proven track record in implementing Big Data and Data Sciences.

Today there is an urgency for banks to transform and introduce digital personalization initiative, as the stakes are high. Banks that delay digital personalization tend to risk both revenues and market share. On the other hand, those who meticulously and skillfully execute digital personalization programs stand to gain in more ways than one. They will reap various benefits including elevated levels of customer engagement, increased customer satisfaction and retention, improved cross-sell and up-sell results, reduced costs and improved profitability. Customers also stand to gain, as they will have more tools and convenience to effectively manage their financial lives. In today’s age becoming a digitally competent bank that is committed to personalizing customer experience is no more an option, but a necessity. With the right partner with deep experience in the digital domain, banks should be able to provide the experience the customer expects.

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