All Americans eagerly await digitally-powered hyper-personalization of financial services. At least that’s what we all keep hearing.
Using sophisticated data analytics, algorithms, and artificial intelligence, financial providers will understand consumers completely — both through mobile apps and human interactions. They will not only be able to meet our needs on the fly, with personally tailored solutions, but even anticipate them. The dream/goal is to create an the “Amazon of money,” or “Netflix for your wallet,” or “Google for finances”.
Unfortunately, it’s just not that simple. Not even when you’re Amazon, Netflix or Google.
First off, the “personalized-for-you” recommendations these digital giants make are sometimes a bit bizarre. Things often show up on an Amazon page that can leave you scratching your head.
Are financial institutions really ready to turn everything over to tech?
“There’s a huge difference between Netflix recommending a movie and my bank or credit union giving me good, safe financial advice,” says Mark Vipond, CEO at D3 Banking Technology. “People are way more sensitive about their finances than they are about their movie choices. And the impact of receiving poor financial advice is much greater.”
“We want to be seen as helpful, not trying to push an agenda. So it’s important to us to hit that sweet spot, without going too far.”
— Mark Troske, TCF Bank
A large contingent of consumers with lower deposit levels are used to going to branches, and aren’t necessarily ready for an all-digital banking experience, says Mark Troske, SVP and digital chief at TCF Bank ($24 billion in assets).
“We have a lot of data about consumers because of their transaction histories and their daily interactions with our digital channels,” Troske explains. “How are you going to give them a digital experience that isn’t pushy or ‘Big Brother’ creepy?”
The public is continually reminded of the Wells Fargo sales scandals. “We try to avoid the phrase ‘cross-selling’ at TCF,” Troske continues. “We want to be seen as helpful, not trying to push an agenda. So it’s important to us to hit that sweet spot, without going too far and necessarily becoming the Amazon of banking.”
“Some folks love digital,” he adds. “Some folks don’t.”
Next, the premise that many larger banks have already maxed-out current techniques and technology and eagerly await fresh ones isn’t quite precise. Granted, the pressure to modernize and keep up is real. But even among those who are digitally-savvy, there is still much to learn about data analytics and application, digitization, and personalization.
And, finally, they also have a foot still planted in traditional banking methods, and they aren’t ready to pull it out.
Jason Brock, Executive Director, Digital Banking, at $68.8 billion-assets Zions Bancorporation, points out that his holding company still maintains local identities in many of its markets. It values these legacy identities.
“Let’s say we focused strictly on being the best at personalization, and giving the greatest customer experience online, and ignored our bankers and the relationships that they have made through our branches,” says Brock. This would amount to giving away a plus that Zions enjoys to compete more directly with megabanks. Going exactly head to head means taking on giants with more tech and deeper pockets.
Brock says it could be argued that that’s not a sustainable strategy in the face of the billions of dollars that the big banks can spend.
“They can do that just as well — or even better than we can,” he says.
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The Data Challenge that Interferes with Personalization
Of course, the implication that personalization of service is impossible or impractical without a big wad of technology belies history and experience.
“We’ve always been out in our communities and serving consumers in a personalized manner,” says Zach Hamilton, SVP/Strategy at Synovus Financial Services, Columbus, Ga. A few years back the company, which formerly maintained some local identities, changed to a unified brand. Hamilton says local bankers had to assure the public that they would still receive personalized service.
Now the challenge is to maintain and unify an understanding of consumers across multiple channels and at every touchpoint, Hamilton explains. The level of data involved in doing this can be overwhelming, he says, and so can many of the tools used to wrangle it into something useful.
“Personalization still means the same thing, in terms of making consumers feel that we know them,” says Zions’ Brock. “But the context has changed. Data is so crucial in being able to go from traditional banker-assisted situations to more a self-service environment. But although consumers are interacting with our people less and less, we need to deliver the insights that will make their financial lives easier. If you’re not personalizing, you’re really losing the value of your brand.”
The three banks say they have a long way to go. None feel like they had progressed more than 20% of the way. Also, all felt that personalization is a moving target. There will always be more a financial institution will be able to add on, as technology improves.
At present, all three bankers see data analytics as a major challenge to achieving personalization. They don’t lack data. What they lack is the ability to do something with it.
Zions’ Brock explains that his organization and many other banks long ago learned how to accumulate data in consistent formats in one place — “data lakes” or “data marts,” to use two terms. But much of it can’t get from storage to user.
“I liken the problem to spending a ton of time on plumbing, only to find out that you don’t have any faucets for people to drink from,” says Brock. “At this point I’m not sure many banks are leveraging the data they already have very effectively.”
TCF’s Troske thinks some institutions try to get their arms around every bit of data, instead of concentrating on categories that will truly help them with personalization.
“Look for the ‘Most Valuable Players,’ the things you really care about,” Troske advises. “If you try to boil the ocean to get everything out of your data that you could, you may never get there.”
Troske says TCF has been on a three-year push to upgrade tech to deal with issues like omnichannel and personalization. “It’s probably going to be a year or two more before we’re done, though you are never really done,” he says.
Synovus’ Hamilton thinks the greatest barrier to personalization is dilution of effort. “There has to be commitment and focus on personalization and leadership, with management saying no to other good ideas and going all-in,” says Hamilton. “You have to decide that this is going to be one of your top three initiatives’.”
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Does Personalized Advice Actually Come With Risk?
Some financial executives worry about ramping up the institution’s tech in order to provide personalized advice. Some risk managers throw a caution light on personalization. They ask questions like, “But how do we know that’s the right advice?”
“I think that’s a little comical,” says Zions’ Brock, “because banks have been giving advice forever. There’s no assurance that live bankers are giving good advice, either, so the risk of technology giving poor advice hasn’t fundamentally changed things.” That said, he adds that staff should have a clear sense of where the institution’s “guard rails” are.
Regarding the “creepy factor” — concern that consumers will be weirded out by advice rendered via technology or as the result of technology — Brock adds another dose of reality.
The creepiness risk comes at the end of the personalization process, he points out. “What banks need to do well is ensure that the advice is truly personalized right. Because then it is fit for a purpose. If it fits the person properly, then it will be perceived as sound and good,” explains Brock.
In fact, Brock continues, if consumers react badly to personalization, it means that the financial institution has alienated them because they don’t really know them as well as they should.
Brock reminds that banking institutions will be watched by regulators as well as such internal watchdogs as Audit as such efforts progress. Each will have expectations that bankers overseeing personalization must learn and accommodate.
One saving factor will be that technology will also come along that will enable institutions to build controls into personalization so inappropriate recommendations don’t reach consumers.
Even now, Troske points out, “if a consumer signs up for something that they can’t afford or that we think is too risky for them, our controls should keep that consumer from entering into a bad relationship, even if the advice function told them it was a good move.”
Hamilton adds that there is also a role for the human advisor, even as technology becomes the key factor in personalization.
“There will be a spectrum of specificity on the advice that you give, based on the amount of data and the confidence you have in what the technology recommends,” says Hamilton. If there’s a gray area, he suggests, personalized recommendations can come with a further recommendation: Talk to a bank advisor.
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Tinkering With the Tailoring to Keep Personalization Focused
Over time, says Troske, mobile devices will be a channel where consumers will be advised and prompted on what services to use for maximum benefit and minimum cost. Technology will lie close at hand, literally, and additional recommendations will pop up as consumers answer questions or make decisions.
In a sense, there is as much a marketing challenge as a tech challenge here. Troske notes that part of how TCF grew was based on its reputation as a 24/7 bank. With more technology and new ways of performing transactions, that isn’t as essential anymore.
“How do we replace the convenience factor story with a ‘channel of choice’ story?” asks Troske.
Hamilton believes that not trying to develop a personalization strategy for every consumer type at every stage will help. At TCF, “we are trying to build experiences with a target segment in mind,” says Troske. “We are not trying to be everything to every customer, because we are not going to be able to be everything to every customer. We’ve got to be laser-focused on the segments that we’re trying to appeal to most.”