Personalization: Moving From Optional to Necessity in Banking

As digital bank offerings increasingly become the norm, they will be seen as the primary means for growth rather than just a convenient service. To deliver on this vision, understanding the detailed needs and preferences of your customers will be a key element.

Banks have invested millions in digital channels and the expectations for return are quickly shifting beyond improved customer experience and reduced distribution costs to increased growth.

In many ways, this transition already has begun. Several banks — both at a national and regional level — are introducing digital bank offerings as their primary form of expansion into new markets.

A byproduct of these new digital offerings, from fintech firms and incumbents alike, is an increase in consumer choices and lower switching costs. According to PwC’s 2018 Digital Banking Consumer Survey, the number of financial institutions that consumers use increased by 10% (from 3.1 to 3.4) between 2016 and 2018. As financial products are easier to access and obtain — think near real-time account opening and loan approvals — personalized services that can directly help form tighter bank-consumer relationships will grow in importance for customer retention.

Understanding Personas

By understanding the unique customer persona, banks can move beyond a one-size-fits-all approach to initiate more direct and personal conversations. For example, today’s consumers exhibit more goal-oriented tendencies than ever before.

According to digital banking research, Millennials in particular focus on debt reduction and saving for a down payment for a house, while Gen-Xers tend to focus on retirement and emergency fund creation. These steps may come at a different pace and vary by age for every individual, but by segmenting customers by digital propensity, financial goals, price sensitivity, or importance of non-rate experience features, banks can initiate more customer-specific marketing and servicing plans around growth, retention, and cross-sell.

Technologies such as artificial intelligence and data analysis have enabled banking organizations to move beyond segmentation, discovering individual customer preferences and identifying the next financial activity in order to create a tighter customer-bank bond and improve retention. This is the level of personalization consumers are beginning to expect due to the relationships they have with Amazon, Google, Facebook and other non-financial firms.

Getting Started

Developing a sound digital enablement approach requires systematically working through a series of steps. The first step is to identify the customer segment you wish to target. This selection process can be based on any criteria, but is best if the selection criteria is relatively narrow in scope.

After determining the target audience, you then want to formulate your business objectives and determine your desired outcomes. Next, identify who will be using the data-driven insights you’ll generate (for example, tellers and call center staff), and determine which channel(s) will be used to reach the targeted segment. Finally, implement a pilot and refine and expand your approach based on the pilot results.

Moving toward digital enablement is challenging, especially in an industry that’s bound to legacy technology and product silos, and can be slow to change. There could be a clash of cultures as the manual practices of the past give way to digital approaches that empower front-line personnel. But the status quo is not an option. Financial services firms that embrace digital enablement are far more likely than less tech-savvy competitors to grow and thrive, even in the midst of disruption.

Building Engagement

Digital enablement is particularly important considering the trend of declining engagement. Consumers interact less frequently with their primary banks and generally engage for low-value activities such as basic day-to-day account balance monitoring. As banks increasingly require growth contributions from digital channels with account opening and deposit growth, a better understanding of the target customer is a factor to engage rather than transact.

Understanding not only transactions, but also financial needs, goals and behaviors helps to provide financial solutions that are both relevant and timely. This knowledge also enables engagement across channels.

Personalized Enlightenment Across Channels

Most importantly, we must realize that specific knowledge of consumer needs across bank products and channels is an expectation rather than an exception. As interactions become increasingly digital, this knowledge can provide the groundwork for a successful in-branch interaction if and when a customer needs additional financial products.

Despite the growth in mobile bank use — it is the only channel that experienced growth in usage from 2012 to 2018 according to PwC research — 65% of consumers still feel it is important for a bank to have a local branch presence. The ability to transition the specific individual knowledge from a digital to retail channel will be a key factor in future growth prospects, especially in an environment where customers are increasingly switching freely between channels.

The question becomes, will you be prepared when a consumer makes a choice of financial institutions based on the personalized service and products it provides? Small and midsize banks still have opportunities to win, but many customers are already firming up their opinions on who is in this for the long haul — and who isn’t. They’re rewarding the banks that listen, and ignoring the ones that don’t.

Get The Latest on Personalization Strategies

The Power of Personalization in Banking 2018 report, sponsored by Pegasystems, provides insight into the progress financial institutions are making around personalization and contextual engagement. The report includes the results of a survey of more than 200 financial services organizations worldwide. The report includes 82 pages of analysis and 36 charts.

Subscribers to The Digital Banking Report and those wishing to purchase the complete report can access it immediately by clicking here.

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