Personalization is a major imperative in the financial services industry today with new and existing providers alike scrabbling to establish the compelling customer-centric banking model of the future. But what does personalization really mean? And, most importantly, what are customers looking for in a personalized banking experience?
The customer must be at the center of all personalization efforts. Historically, customers were grouped by gender, age, industry, geography, etc. In other words, customers were understood and segmented in terms of their characteristics. But characteristics such as these are too broad for truly effective personalization efforts. In order to personalize well, customers must be understood and segmented based upon their needs.
Small businesses in particular have often bemoaned the “one size fits all” approach that financial institutions have historically taken. These companies want products and services from providers who really understand their business and their needs. For example, a medium-sized business is frequently offered the same proposition as a consultant, yet their needs could not be more different. On the one hand, the business could have more sophisticated banking needs that could warrant a high propensity for loans or lines of credit and often value face-to-face interaction alongside the digital. In contrast, a small business that provides consulting services has far simpler needs and would likely have no need for large capital expenditures; indeed, they often actively avoid credit, but would value support in understanding and managing their cashflow.
The better you understand your customers – business and individual – the better insight you will have into their needs and how to segment them in meaningful ways for effective personalization. With the increasing availability of varied and detailed data and with the growing power of artificial intelligence (AI), it is arguably becoming easier to shape, test, and refine powerful, differentiated segmentation models.
Once you understand your customers and segment them based upon need, where can you personalize?
To be truly effective, personalization should be at the heart of any customer-centric strategy. It should incorporate all aspects of the proposition, incorporating product, positioning, communications, interactions, channels, and services.
From a product perspective, products should be shaped and presented as specific to the needs of a given segment. Often, this is achieved by packaging existing products, features, and services in a relevant manner for the target segment. There are models emerging now that, similar to the approach taken by the likes of Uber, aim to categorically address all elements of a customer’s pain points rather than simply provide one piece of it. This may include tying services together that include both financial and non-financial elements. Examples include an end-to-end car buying and financing service or, in the small and medium enterprise (SME) space, an integrated banking, cashflow, and accounting proposition.
One obvious place for personalization is in marketing. This includes both the offer that is being made as well as how the offer is presented. For instance, suppose a financial institution wants to push their CDs. One segment they want to target is age 50+. Another segment is composed of Millennials. These two segments differ in terms of how much money they have to invest, how familiar they are with investing, how they like to hear about offers, and how they want to conduct financial transactions. All those aspects, therefore, become areas for personalization in marketing. Careful analysis of results will enable you to refine this over time.
General communications is another place to practice personalization. Some segments will prefer paper communications. Others will prefer email. Still others will prefer to be notified via their account portal. Using the right analytics, the timing of these communications can be tailored to land at just the right time for the customer.
It is easy for a financial institution to disappear amidst the raft of propositions in the market, so customer engagement is absolutely key to differentiation at a time when attention spans are ever-shrinking. Organizations such as Apple and Netflix have been successful by integrating their products and services seamlessly into their customers’ lives. The opportunity exists for financial services providers to follow this lead. Customers always cite that they want their provider to “be there when they want them, where they want them, and how they want them.” Therefore, giving customers a range of joined-up channels through which they can interact with the financial institution and providing the capability for individuals to easily customize the look and feel, layout, and content of their personal account pages online or on their mobile device can be very powerful: customers can modify the interface they see so that what is most important to them is quick and easy to find.
Financial education is a near-universal customer need and therefore a prime spot for personalization. A financial institution can drive up customer engagement and trust by helping to educate customers in many ways. The nature of this education would be different for different segments. For example, a financial institution could offer a children’s interface that uses pictures, music, and stories to help young children learn how to manage money in an age-appropriate way. Teenagers and college-age students could be provided with practical information on budgeting through a gaming interface. Investment and insurance information can be supplied for customers via videos, webinars, live chat, infographics, and more depending on their life stage. It is all a question of providing relevant information in a format that customers can respond to: that is personalization at its finest.
In many ways, personalization is a huge undertaking. The good news is, you can start small. Begin with an area where you can reasonably make a difference in the near term. For example, you could use data and analytics to segment which customers may be at risk for defaulting on their loans. You can then target these customers with helpful advice and services. A campaign like this can deliver a quick and quantifiable win in terms of fewer loans going into arrears.
With several quick wins under your belt and the learnings you gain from the experience, you can start building out strategies and algorithms for further personalization. The more you engage in personalization, the more data you will have available to improve and enhance future personalization efforts. You have nothing to lose and everything to gain, so start small … but start today!