When it comes to hyper-personalization, everyone already knows what banks should be doing. Customers want the Netflix effect; they want exceptionally relevant product
suggestions in real-time.
And if they somehow don’t already feel it in the air, banking leaders will have surely read about hyperpersonalization in research papers. In the words of a recent McKinsey document, “Harnessing the new powers of data-driven marketing” is an “essential step for banks”… How much clearer can you be?
But how many banks will grab the digital bull by the horns and do it? That’s the real question.
Looking forwards, a handful of strategic banks are likely to soar ahead with hyper-personalization – winning back lost customers and quickly gaining new ones. But a great many more will snooze and lose.
Hyper-personalization takes over the world
This is a no-brainer. Globally, hyper-personalization software is expected to explode from $6.7 million in 2020 to $1.6 billion in 2025. The whole world is moving in the same direction. Well... except for one industry. A shocking 94% of financial services are still not offering hyper-personalization. In the past, this may have been somewhat understandable as banks found themselves shackled by both regulators and technology alike when it comes to data-sharing.
But in the post-COVID age of open finance and embedded finance, the regulation excuse is running thin. All eyes have turned to the flailing technology – including customers. They may not care to know the reasons behind the impersonal product shelves, but they will feel the frustration of having to work twice as hard to get a product that barely suits them.
It’s bad news for most banks who won’t be able to keep up. Unhappy customers will have no hesitation switching over to hyper-personalized services, faster than you can say “open banking”.
Banks who employ outsiders into the marketing and tech teams will start seeing results
Over the past year, a quiet change has been brewing for forward-thinking banks. Headcount by headcount, SaaS by SaaS, they’ve started to employ outsiders into traditionally-insider roles. These outsiders have already gained confidence and started to make their mark. Some banks will start to look a lot more like their FinTech counterparts, and finally bite back against the competition.
These newcomers are bringing new ways of creative thinking into the mix and perceiving IT risk through a different lens. And it’s this blend of mindsets as well as machines that will help banks get over the hump of legacy technology over the coming years.
Banks who combine data and channels will generate the best customer experiences
Ask a child to draw a typical banker and prepare to be insulted. Since the disastrous 2008 crisis hit our employment levels - and the Wolf of Wall Street hit our screens - financial services have taken a reputational knock. 71% of millennials would rather go to the dentist than listen to what a bank has to say! In the blunt words of a recent Deloitte paper, “Banks are not trusted”.
But it wasn’t always like that. Bankers used to have real and regular conversations with their customers. Hyper-personalization can help bring that back. Or, as the researchers at Deloitte put it, “Emotional connection, through product design innovation, is one lever that banks should use to deliver hyperpersonalzsation to customers and to gain their trust”.
To do this successfully, the best banks must coordinate several channels working together. Firstly, the customer need is identified in the transactional data. This triggers a relevant product recommendation on a digital channel. From there, the customer can select self-service or opt to speak to someone in the bank. When customers start to see Netflix-style service, the trust will begin to come back. As an added bonus, the World Retail Banking Report recently found a whopping 76% of customers want and expect omni-channel experiences from their banks. Banks delivering on this demand should expect better feedback all-round.
Hyper-personalization as a force for good
In a recent Personetics article, “financial peace” for customers was highlighted as one of the main avenues for hyper-personalization. And the regulators are fully onboard. The FCA has hinted that it will focus deeply on financial vulnerability in 2022. Many people need support to manage their finances, and hyper-personalization is best-placed to offer that.
So, how could this work in practice? Take a long-term renter, for example. Data from the core banking system will show how much rent the customer pays each month, and where they spend their time. From there, leveraging technology, the bank could send a nudge tempting the customer with a relevant mortgage, and the kind of property they could afford in that area. This would be fantastically helpful for the customer, as well as a business boost for the bank.
Or, if you have a customer who struggles to save, by analyzing customer data, the bank can offer a personalized savings account with simple weekly direct debits or a change round-up option... The options are as unique and varied as the customer base. All this data and technology is already available, it just needs to be combined to tackle financial literacy, inclusion, and more.
Action plan: How can banks overcome the obstacles?
So how can banks start taking advantage of hyper-personalization? There are three major obstacles to overcome: old technology, product-mindsets, and dwindling customer trust levels.
To get started, banks need to set up a comprehensive data infrastructure. They need to ensure the right personalized data is captured and most importantly, they need to have the right tech in place to store and share the data across other systems. At the heart of hyper-personalization is the ability to turn different sets of data into insights and actions, so that technology needs to be in place.
Secondly, banks who want to future-proof themselves need to stop looking at their product shelf and start meeting customer needs. This means a mindset overhaul. Banks must start offering tailored products in real-time to increase financial inclusion.
This plays into the next challenge banks will need to surmount: trust. To overcome the trust problem, banks NEED to start giving customers what they need. And that starts with analyzing the data. This self-fulfilling triangle of customer data, customer focus, and customer trust is pivotal for building relevant products and services. Not to mention keeping the bank happily in the black.
This article is an extract from our e-book "Making Banking 10x Better in 2022". Download the full e-book via the button below.