Banks and other financial institutions have faced significant challenges since the year 2020. While economies have experienced unprecedented pandemic-related upheavals, banks have played a key role by delivering financial assistance and by offering support to individuals and businesses, facing economic disruption. In parallel, consumer habits and needs have changed rapidly, and banking has turned digital to a truly revolutionary extent.
Now, in a world where consumers have more choices than ever, banks need to find ways to stand out from the crowd. Luckily, this is the age of big data, and banks are sitting on a goldmine of customer information. By collecting data points on everything from how customers interact with content and products to their spending habits, banks can better understand their customers’ needs and wants. This understanding can then be used to create precisely tailored customer experiences that are unlike anything else on the market.
Leveraging this data is the key to creating personalized experiences that goes beyond meeting customers’ needs, and instead exceeds them. These hyper-personalized customer experiences (CX) are the future of banking, and legacy banks need to start leveraging their customer data to the full extent in order to to stay relevant and compete against industry disruptors.
The challenge of delivering personalized customer experience for banks
A lack of trust from their customers is among the most difficult issues financial institutions face. For too long, the industry consisted primarily of monolithic institutions who mostly took actions that had a direct impact on the bottom line. The Global Financial Crisis of 2007/8, made it apparent there was a crisis in the industry when several banks were seen to have prioritized their own profits over their customers’ financial futures. Not surprisingly, this caused considerable damage to customers’ trust in banking, and thus, consumers have been hesitant to share more intimate personal information with their banks, such as phone numbers, social security information, data about social interactions, and health data.
Furthermore, legacy banks face various challenges related to the collection of data. It can be difficult for banks to synchronize information collected from different touchpoints due to usage of legacy technology.
Finally, banks need to shift their focus away from selling, and instead, think about actually meeting customers’ needs. “Nice-to-have” features may play a key role in marketing or rebranding campaigns, but research suggests that they may play a significant role in attracting new customers: a recent Deloitte survey showed that a majority (80%) of customers prioritized technical and functional value when opening an account. Banks that don’t focus their efforts on “nice-to-have” features risk losing these types of customers.
How hyper-personalization allows banks solve these challenges
A recent survey of Canadian banking customers showed that when it comes to sharing data with financial institutions, security standards were the most important factor (36%), compared to financial incentives (18%), financial products (18%), and non-financial incentives (14%). Consumers aren’t averse to sharing their data, as long as the process is secure and easy. Banks can use hyper-personalization to create personalized outreach and communications that increase the likelihood of customers sharing their data. The Italian bank Intesa Sao Paolo has experienced success in this area. Its program showed consumers how sharing data would deliver specific value and that resulted in 80% of its clients granting access to their most personal data.
As part of their efforts to eliminate silos and integrate existing data, banks can take the most simple steps. For example, the data gathered when an account is opened should form the basis of a single account profile, which can then be built upon and enlarged at each subsequent touchpoint: applying for a credit card, taking out a car loan, adding a spouse to the account, opening up an educational savings account, renewing a mortgage, or accessing retirement savings. As the account profile becomes more comprehensive, it can serve as a starting point for a hyper-personalized customer experience that truly reflects the unique requirements of the individual user.
Here are five additional ways that banks can use customer data to create hyper-personalized CX:
- Create targeted communications based on customer data
One of the most powerful things that banks can do with their customer data is to segment it and use it to create targeted communications. By segmenting customers based on their location, account type, or transaction history, banks can send messages that are relevant to each group. This allows banks to create a more personalized experience for each customer.
- Analyzing data helps understand customer behavior
Banks can also use customer data to better understand customer behavior. By analyzing customer data, banks can learn what products and services customers are interested in, when customers are most likely to use certain products, and what their overall financial goals are. This information can then be used to create tailored solutions and experiences for each customer.
- Personalize recommendations and services based on data
Another way that banks can use customer data is to provide personalized recommendations. Based on a customer's transaction history and other data, banks can not only recommend products and services that may be of interest but can also create new products that precisely meet a customer’s needs. This helps banks to cross-sell and upsell products, and it also helps customers to find the products and services that they need.
- Customer service can be improved by utilizing data
Banks can use customer data to improve customer service. With a deeper understanding of customer actions and interests, banks can better anticipate customer needs and take steps to proactively address them. This can lower customer frustration and create a more seamless customer service experience.
- Develop a loyalty program based on data
Finally, banks can use customer data to create loyalty programs. By understanding what motivates customers, banks can create loyalty programs that offer personalized rewards that meet customers’ needs on an individual level. This can help to increase customer loyalty and engagement.
Today’s banks have many options when it comes to using hyper-personalization to better meet customers’ needs. Consider Chinese neo bank WeBank – the first digital bank in that country – which launches hundreds of updates each month, most moving from ideation to delivery in less than two weeks. WeBank uses its ability to pivot and adapt to meet customers’ needs precisely and quickly. Canada’s Royal Bank took a different approach, launching a digital app, NOMI, that goes beyond mobile banking and includes a digital assistant that uses each customer’s banking activity to generate a personalized experience that includes personalized messages and communications about saving, budgeting, and financial literacy.
There is no question that legacy banks have already been well positioned in terms of their ability to gather and analyze data, it's just a matter of how they utilize the data to effectively improve customer experience. Now, with access to improved data analytics and effective CX software like Statflo, banks can deliver the hyper-personalized experiences that keep customers coming back.
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