ARTICLE

The need for personalisation in Banking

The need for personalisation in Banking

Customers today have come to expect a level of personalisation while interacting with everyday brands. Technology companies like Amazon, Netflix, and Facebook have recognised the opportunity personalisation can offer organisations and have advanced their service offering through personalised experiences in order to meet constantly evolving customer expectations.

When you apply the same lens to the financial industry a consumer’s experiences with a banks digital channels, technology, products and services can influence their decision on which financial institutions to bank with. Customers are no longer satisfied with being treated as a number, instead personalised, tailored customer journeys have replaced the outdated approach to banking.

 The four key drivers for personalisation

  1. Behavioural & Financial Insights. Identifying and addressing the financial needs and behaviours across various customer segments allows for a level of relevance of information not otherwise experienced. For instance, Baby Boomers may have needs around retirement savings and income through investments, whereas a Gen Z may be looking for first buyer home loans, transactional accounting and pay anywhere options specific to their lifestyle needs.

  2. Customer retention. When the barriers to switching financial institutions is low and differentiation across the financial products on offer is minimal in comparison, a hyper-personalised user experiences can not only support retention, but also be an attractant to consumers with other financial institutions.

  3. Open Banking. Making financial product data as well as customer transaction data easily accessible across institutions, creates minimal competitive differentiation across financial products. This provides banks the opportunity to leverage open banking data to customise products, pricing and services for customers in order to retain or grow their customer base.

  4. Financial inclusion. This is still an area of concern for ~ 12% of the Australian population. According to Financial Resilience Australia, more than three million Australian adults are financially excluded, unable to access the basic financial products and services they need, when they need them. This increases their likelihood of experiencing financial hardship and poverty. Hyper-personalisation can offer people access to services and benefits that they may not otherwise know about or know how to access.

The Covid-19 pandemic itself has negatively impacted on the finances of households and businesses. For those negatively affected, their financial well-being and needs continue to change with cash flow management, budgeting and savings. Leveraging data to customise offers, enable financial knowhow and well-being is one way financial institutions can support their customers.

 

It’s imperative for banks to understand their customer data, the behaviour across segments and demographics, to identify the customer needs and support their financial well-being.

 

A recent Deloitte Report has stressed the relevance of Hyper-personalisation within Digital Banking. As per the report, Hyper-personalisation can be defined as using real-time data to generate insights by using behavioural science and data science to deliver services, products and pricing that are context-specific and relevant to customers’ manifest and latent needs (i.e. those needs which, due to a lack of information or availability of a product or service, cannot be satisfied).

Personalisation enables financial institutions to sustain and grow their customer base, cross-sell products, and proactively support financial inclusion to create better customer experiences.

So how do you achieve personalisation?

Financial Institution’s are sitting on a mine of valuable customer data and insights. While some of the financial decisions are not as simple as filling out a form and clicking a button, the banks and financial institutions can help guide customers to make better decisions. It all comes down to education and building the trust with the customer.

With an increase in digital adoption, the relationship between the customer and financial institution has changed.

According to survey data conducted by Mozo 75% of Australians are now using a digital platform - either internet banking or a mobile app - to do their everyday banking. Highlighting the importance of creating a personalised omni-channel experience. Banks and financial institutions can leverage personalisation by;

  • Creating a single view of customer across various product systems to enable personalisation. Bringing together customer data in a single system and apply banking analytics.
  • Banks can create a segmented view based on customer data specifically for targeted product offers and campaigns. For example, if banks are looking at offering student loans, they can leverage their customer data to identify the customer segment based on attributes such as age, transaction patterns, etc. Product pricing can be customised if analytics is applied on the segment data and customer specific view.
  • Understanding demographics and behavioural data to provide insights to enable customer acquisition within specific segments. For example, a very low digital adoption within certain demographics may be an indication of issues around ease of use or lack of knowledge. To address this, banks can offer onboarding or information pages targeted at those segments. The segment specific insights can further assist in devising strategies with elements of personalisation to penetrate that segment.

  • Leveraging Fintech partnerships to create personalised offerings if it’s a gap in bank’s digital capabilities. There is proliferation of Fintech companies targeting a wide range of customer pain points across areas such as payments, financial well-being and basic banking services. A bank may choose to leverage these capabilities through a partnership ecosystem and serve the specific needs of their customers and segments.   
           

Conclusion

Customers are demanding personalised experiences at an increasing rate, and the barriers to switch financial institutions have reduced significantly with advancement in technologies. Creating differentiation, sustaining and growing the customer base as well offering support as financial needs change, requires financial institutions to go beyond basic personalisation to hyper personalisation. Driving insights by leveraging data and analytics to support segmentation and audience targeting banks can look at to drive in hyper-personalisation.

 

 

Article published July, 2021
References:
FIAP
deloitte-uk-hp-the-future-of-retail-banking.pdf
Hyper-personalisation: the key to banking’s past – and its future (finextra.com)
How Personalized Customer Experiences Can Benefit Banks (everfi.com)
What Does Personalization in Banking Really Mean? (bcg.com)
How to create a single view of the customer with banking software (scnsoft.com)
Mozo: Neobank Report 2020: Digital banking in a new decade

We thought you might also be interested in

shutterstock_443536393
Digital Banking

Does your Digital Banking strategy tick all the boxes?

It’s time to change your perspective – it’s no longer ‘digital banking’. It’s ‘banking in a digital world’...

 

Read More

shutterstock_691685071
Digital Banking

Banking's competitive landscape - what can smaller banks do to thrive?

With competition emanating not only from fintechs but also leading technology...

 

Read More

shutterstock_454761571
Financial Wellbeing

Financial Wellbeing - beyond 2021 

The business models and risk management thresholds of financial institutions must be adapted to reflect the broader economic changes that have emerged since COVID-19...

 

Read more

 

Be the first to receive insights like this to your inbox. Join our monthly Insights Update here.