Why Retail Banks Must Shift from Product Adoption to Customer Connection
By David Evans, Chief Content Officer at The Financial Brand
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Executive Summary
- Banks prioritize product adoption 9 points more than other industries, yet only 28% focus on customer lifetime value — a fundamental misalignment that risks customer relationships for short-term gains.
- Sixty-six percent of banking leaders believe they understand customer sentiment, but 41% never test their engagement strategies, a dangerous overconfidence that impairs personalization efforts.
- Forty-seven percent of banking executives cite team concerns as barriers to advanced personalization — the highest of any industry — while banks are 29% less likely to achieve high-performance collaboration across departments.
- Emotional connection remains elusive. Only 36% of banks adjust messaging based on individual customer engagement patterns, missing opportunities to demonstrate authentic understanding of customer needs and preferences.
The report: 2025 Financial Services Customer Engagement Review
Source: Braze
Banks Know Data, Not Customers
Retail banking sits on a goldmine of customer information that would make other industries envious. From account balances and credit scores to transaction histories and income data, banks possess intimate financial portraits of their customers from day one. Yet this data advantage has created a false sense of security that’s undermining genuine customer understanding.
The numbers tell a striking story. While 66% of banking executives express confidence in understanding customer sentiment and preferences, 41% admit they never test their customer engagement strategies. This confidence-execution gap represents one of the most significant blind spots in modern banking. Financial institutions are making critical decisions about customer relationships based on assumptions rather than validated insights.
Consider the implications: a bank might know that a customer has $50,000 in savings and excellent credit, but completely miss that they’re frustrated with the mobile app experience or confused about investment options. Traditional financial data reveals the “what” but rarely captures the “why” behind customer behavior. Without understanding the emotional and experiential drivers of customer decisions, banks default to product-pushing rather than problem-solving.
This disconnect becomes even more problematic when examining how banks measure success. A remarkable 37% of financial services leaders name product adoption as their top customer engagement metric — 9 points above the industry average. Meanwhile, only 28% prioritize customer lifetime value, and just 29% focus on retention. This represents a fundamental misalignment between what drives sustainable growth and how banks define success.
The Technology Integration Challenge
The banking industry’s struggle with outdated technology infrastructure compounds these customer understanding challenges. While 40% of banks plan to implement messaging apps like WhatsApp in the coming year — demonstrating awareness of where customers want to engage — only 20% currently use unified platforms to orchestrate multi-channel experiences.
This fragmentation creates a customer experience nightmare. A customer might receive a loan offer via email, get reminded about a credit card payment through SMS, and see investment recommendations in their mobile app — all without any coordination or consideration of their overall financial picture or current life circumstances. Each touchpoint operates in isolation, missing opportunities to build coherent, meaningful relationships.
The personalization deficit runs deeper than technology limitations. Banks lag other industries by 6 percentage points in using real-time engagement data for targeting, with only 41% leveraging behavioral signals like clicks and views. More concerning, just 32% update customer segments in real-time as new data emerges. In an era when customers expect Netflix-level personalization in their entertainment and Amazon-style recommendations for shopping, banks are delivering mass-market messages that feel tone-deaf and irrelevant.
Breaking Down Internal Silos
Perhaps the most telling statistic from the research is that almost half of banking executives cite general concerns from other teams as barriers to delivering advanced personalization — the highest rate among all surveyed industries. This internal resistance reveals a cultural challenge that goes beyond technology or data limitations.
The problem often stems from organizational structures that prioritize product lines over customer relationships. When IT teams own customer engagement systems (as they do in 28% of banks — the highest rate across industries), marketing teams control campaign execution, and product teams drive feature development, the customer experience inevitably becomes fragmented. Each department optimizes for its own metrics rather than holistic customer outcomes.
This siloed approach manifests in customer-facing experiences that feel disjointed and impersonal. A customer seeking mortgage information might receive automated emails about credit cards, or someone who just opened a savings account could be bombarded with investment product offers before they’ve even activated online banking. These interactions damage trust and position the bank as self-interested rather than customer-focused.
The Trust Imperative
Banking’s traditional advantages — high switching costs and regulatory protection — are eroding as fintech companies and digital-native competitors offer superior experiences. Customers who tolerate clunky banking interfaces might switch their primary relationship to institutions that demonstrate genuine understanding of their needs and goals.
The research reveals that customer lifetime value and retention will likely become increasingly important as customer expectations rise. Banks that recognize this shift and begin building engagement strategies around long-term relationship value rather than short-term product adoption will capture disproportionate share in the evolving market.
Building Customer-Centric Engagement Strategies
Implementing real customer insight systems: The path forward requires banks to acknowledge the gap between assumed knowledge and actual customer understanding. Rather than relying on traditional financial metrics alone, successful institutions are implementing systematic approaches to capture and act on customer sentiment in real-time.
Leading banks are moving beyond monitoring social media sentiment and community forums (used by only 39% of institutions) toward direct feedback mechanisms and behavioral analytics. This means implementing tools that track how customers navigate digital properties, which messages resonate, and what actions indicate satisfaction or frustration. The goal is creating feedback loops that inform immediate engagement decisions rather than quarterly strategy reviews.
Critically, this requires cultural changes that prioritize testing and learning over assumed expertise. Banks must embrace the reality that customer preferences evolve rapidly and can only be understood through continuous observation and experimentation. The most successful institutions are building cultures where customer insights trump internal assumptions, and where engagement strategies are continuously refined based on real behavioral data.
Modernizing technology infrastructure: The research makes clear that channel orchestration represents a massive opportunity for competitive differentiation. While messaging apps like WhatsApp offer new ways to reach customers, their value depends entirely on integration with existing engagement systems. Banks that treat new channels as isolated experiments will miss the benefits of coordinated customer experiences.
The priority should be implementing unified customer engagement platforms that enable consistent, contextual interactions across all touchpoints. This means ensuring that a customer’s mobile app behavior informs their email content, that their branch interactions influence their digital recommendations, and that their service inquiries connect to their broader financial goals.
Real-time segmentation capabilities are equally critical. Banks must move beyond static customer categories toward dynamic profiles that reflect changing life circumstances, financial behaviors, and engagement patterns. When a customer’s spending patterns suggest they’re preparing for a major purchase, the bank’s engagement should shift accordingly — offering relevant products and advice rather than generic promotional content.
Fostering cross-departmental collaboration: Addressing the internal resistance that plagues 47% of banking organizations requires deliberate organizational design changes. Banks must create incentive structures that reward customer-centric collaboration rather than departmental optimization.
This often means establishing customer journey owners who have authority across traditional departmental boundaries. These roles ensure that customer experiences remain coherent even as different teams contribute specialized expertise. They also provide accountability for outcomes that matter to customers rather than internal efficiency metrics.
Training and communication programs are essential for helping teams understand how their work impacts customer relationships. When IT teams see how system performance affects customer satisfaction scores, or when product teams understand how feature complexity impacts customer onboarding success, collaboration becomes natural rather than forced.
Creating emotionally resonant experiences: The Braze research reveals that banks are least likely to adjust messaging based on individual customer engagement patterns — yet this represents the most customer-centric approach to emotional resonance. Rather than relying on visual content or timing tricks, banks must demonstrate authentic understanding of customer needs through personalized interactions.
This means moving beyond product features toward solving customer problems. When a customer repeatedly checks their account balance, the bank’s response shouldn’t be another promotional email — it should be proactive financial guidance or budgeting tools. When someone researches mortgage rates, the engagement should focus on home-buying education rather than rate comparisons.
Successful customer-centric banks are building engagement strategies that feel like helpful financial partnerships rather than product sales processes. They’re using data not to target customers more precisely with promotional content, but to anticipate needs and provide valuable assistance before customers even ask for help.
The transformation from product-led to customer-centric banking requires fundamental changes in metrics, technology, culture, and customer interaction approaches. Banks that make these investments will build stronger relationships, capture greater wallet share, and establish sustainable competitive advantages in an increasingly crowded financial services marketplace. The alternative — continuing to optimize for product adoption while customers seek authentic relationships — represents a path toward commoditization and margin compression that no bank can afford.
