Banking On Hyper-Personalisation
By delivering end-to-end hyper-personalised products and services, banks can drive sustainable growth by tailoring financial products according to customer’s financial needs. There are new AI and big data applications to enable such hyper-personal digital experiences.
Topics
Not very long ago, the success of banks rested on mastering credit allocation, capital management, and operations. Not anymore. While the adoption of digital technologies and smart devices exponentially increased since the onset of the pandemic, Amazon, Google, and Netflix have spurred a desire for customised interactions.
As a result, banks are now expected to deliver personalised and consistent experiences across touchpoints and channels and provide services, products, and pricing that are context-specific and relevant to customers’ needs. In today’s experience economy, customers expect banks to know and understand even latent needs, which cannot be satisfied due to a lack of information or availability of a product or service.
That’s hyper-personalisation.
Far from being a gimmick, it is the newest trend, representing a new way of thinking that can permanently transform banking and financial services. Rapidly-evolving customer experience and real-time data processing create the hyper-personalisation imperative for banks.
It means banks can tailor executions based on individual interest’s purchase history, each with something that seems personally relevant and interesting. The customer-centric tweaks are driven by behavioural and data science to generate real-time insights.
Customers expect personalisation
Customers’ expectations have rapidly evolved over the past two years. Still, many banks have failed to match the expectations of those who want convenience and value through predictive and proactive financial experiences that serve their specific needs. Such interactions are the crux of the customer’s banking experience and hyper-personalisation.
A survey by Salesforce found that two-thirds of customers expect their financial institution to understand their unique needs and expectations, and over half (52 per cent) expect offers to always be personalised. Although improving customer experiences at scale can be challenging, technologies like AI and automation, experts say, can help bridge the gap between customer expectations and what financial services institutions can offer.
To become truly customer-led, banks will have to understand customers much better and develop skills to build an emotional connection with customers, go beyond offers and targeted marketing and create more customised, relevant end-to-end experiences for customers. And it can be done using their existing data and analytics and customer touchpoints to anticipate individual needs and build deep relationships.
According to a Deloitte report, hyper-personalisation is “an imperative, not an option,” in a digital economy. And banks are particularly suited to adopting hyper-personalisation, as they have a large customer base and a high amount of data per customer.
How to get started with hyper-personalisation
Banks need to make revolutionary changes to scale personalisation, driving it across customer engagement stages. There are some steps banks can take to adopt this approach. According to Deloitte, three building blocks are underlying hyper-personalised recommendations: data analytics, behavioural science, and ethnographic research.
Data analytics
Siloed databases make it difficult for banks to organise information and create 360-degree customer profiles. As a result, customers with different needs are sometimes offered the same products. Integrating and using structured and unstructured data in real-time is challenging for banks.
Banks will need to set up a data infrastructure to alleviate this challenge with three components: input, platform, and sharing. Banks will need to ensure that widespread means of capturing data are in place and that new data are frequently generated. This could include partnering with third parties to collect complementary data on customers. By integrating data, banks will develop algorithms to identify behavioural patterns and model customers’ propensity to buy a product and offer timely products and services.
Behavioural science
Today’s consumers suffer from choice overload. They expect interactive purchase decision support and recommendations from banks. Hyper-personalisation solves this problem by providing customers with only those options suited to their needs, just as Netflix uses evidence selection to help choose what to watch.
Applying behavioural science to the real-time processing of big data can provide a more comprehensive understanding of customers’ behaviour. Individuals have behavioural biases that can lead to poor financial decisions. One widespread example is the status quo bias, which can work against the customer’s financial interest. For example, instead of investing money, the customer keeps it, over the years, in the same low-interest savings account. Behavioural science enables the design and development of habit-shaping products and services to help customers overcome such biases.
Ethnographic research
According to Deloitte, banks should also consider investing in their ethnographic research capability to complement data analytics and behavioral science. It offers a different lens for answering the “why” of customers’ behaviour. By using ethnographic research, banks will gather data on observed behaviour; account for the contextual variables (cultural and social circumstances) involved in customers’ behaviour, and reduce the impact of biases and beliefs about customers’ behaviour.
To adopt hyper-personalisation, apart from basic research, banks can apply routine innovation – product functionality innovation to improve the existing products and services and product design innovation to build an emotional connection with their customers. The banking domain already offers all the categories of products and services that a customer needs; routine innovation is necessary to help them improve these categories and solve their customers’ issues. Most fintechs’ products and services reflect routine innovation. It is the most economically viable approach.
The expansion of transformative new entities is constantly altering the global financial landscape. Neobanks and fintech firms, luring the digital-savvy clientele, are witnessing an influx in the Middle East region as they cater to the growing demand for personalised, accessible, and seamless banking services.
Easy to use with almost zero paperwork, customers can easily download neobank apps and sign in to their accounts. Neobanks allows customers to link their traditional bank accounts with the app for swift and seamless transactions.
Emirates NBD, Gulf International Bank, and Mashreq Bank offer neobanking services through Liv., meem, and Neo portals, respectively. Commercial Bank of Dubai partnered with NOW Money to offer customers the best of both worlds.
New applications in AI and big data
To stem this tide, banks must enhance their digital capabilities and use big data and AI to understand customers’ individuality, and meet lifestyle banking needs.
And there is help at hand. Companies are innovating on communication channels and helping financial companies optimise their existing data by integrating new sources of information to better understand customers’ needs.
For instance, Flybits, an advanced contextual engagement platform for the financial industry, helps banks better understand their customers and transform contextual data to drive personalised recommendations and advice.
BankBuddy, the UAE-based startup, enables cognitive banking by embedding functionalities such as voice IVR, multilingual bots, natural language processing, machine vision, and AI-powered recommendations. Its cognitive recommendation system helps banks understand their customer, identify their financial journey and predict the best action in that micro-moment.
Increasingly, banks are moving from a passive to a proactive relationship with customers, trying to find new ways to help them improve their financial well-being. Providing financial-data-driven personalisation and customer engagement solutions for financial institutions, Personetics’s AI-powered technology is focused on proactive engagement: analysing financial data in real-time, understanding individuals’ financial behaviours and anticipating their needs. Financial Institutions using Personetics’ AI software see an increase of up to 35 per cent in digital customer engagement and a 17 per cent increase in the adoption of personalised product recommendations and advice, according to the company website.
Another notable player enabling the banking industry to offer hyper-personal digital experiences is DataRobot. It offers a suite of financial solutions, leveraging machine learning to address a long-standing concern: cash management. With real-time machine learning models that can detect potentially fraudulent transactions before they happen, the company offers solutions to reduce fraud losses. DataRobot’s Enterprise AI platform features an Automated Time Series solution that helps financial services organisations incorporate AI into their capital market strategies and workflows with ease.
Since banks are under a lot of pressure to radically improve personalisation, even simple personalised video technology can make banking engaging for customers.
How can it be used? Banks can create a personalised video the first month after customer onboarding to explain their bank statement, or launch a personalised video to show customers how much they could earn using different functions of online banking. Case in point: American Express creates personalised videos that accompany credit card statements every month. The video helps customers learn new ways to manage their accounts, shares financial tips and tricks as well as newly available rewards, to help consumers maximise the benefits of their American Express account.
As banks shift from selling products to promoting long-term financial well-being of their customers, adopting hyper-personalisation will not only differentiate their brand and help stay ahead of the curve, but can also drive sustainable growth by helping customers apply for financial products tailored to their financial needs when they need them, multiply bank’s revenues and increase financial inclusion.
Those banks that seize the challenge and deliver true end-to-end hyper-personalised products and services will create a significant advantage over their competitors. Every few years, an industry has the opportunity to reinvent itself, and for the banking sector, that time is, perhaps, now.
