A Segment of One

Personalized banking services help financial institutions deliver for clients

Banks are currently experiencing a high level of competition in the financial services industry. In the past, individuals primarily chose a bank located nearby for the convenience of quick access to their funds. However, this dynamic has shifted significantly in recent times. Nowadays, physical visits to a bank branch are becoming less frequent, as people can easily handle tasks like check deposits and mortgage applications online. In fact, some banks may not even have physical branches due to the rise of fintech.

What customers are seeking from their banking experience is a personalized approach. They expect their bank to understand their unique needs and financial situation. Essentially, they want to feel like they are being treated as an individual, rather than just a part of a larger group. While banks are certainly willing to provide this level of personalization, they often struggle to figure out how to begin doing so.

Earning Trust

Similar to other financial partnerships, personalized banking hinges on the foundation of trust. The customer must have confidence that the institution is dedicated to safeguarding their sensitive data and prioritizing their long-term financial well-being.

“Those are the crown jewels of an organization, their customers’ information,” Jeff Lanza, who retired after 20 years as an FBI special agent and provides talks on cybersecurity and identity for organizations nationwide, told BOSS. “If you’re not doing everything you can to protect that, you’re failing at job No. 1.”

Earning and maintaining their trust extends beyond mere data security diligence. Emmanuel Daniel, author of “The Great Transition: The Personalization of Finance is Here,” emphasizes that it isn’t necessarily even about offering personalized banking products. It’s about being an integral part of a customer’s financial journey.

“The personalization I am talking about is the user-side definition, which is that I, the customer, get to decide what the product should be in the first place,” Daniel told the “Banking Transformed” podcast. “This is something people who are on the institution side really need to start harnessing into their thinking, that personalization is not about the institution or the product.”

Human beings, with their inherent complexity, exhibit a multitude of desires and priorities that evolve over time. As they progress through various life stages, their financial objectives also undergo significant shifts. One year, they may aspire to embark on a luxurious vacation; the next, their focus may turn towards purchasing a home, followed by the pursuit of establishing a college fund for their newborn in subsequent years. To effectively navigate these diverse financial needs, individuals seek personalized banking solutions that adapt to their ever-changing circumstances.

 Sifting Through Data

To effectively reach customers across various platforms, financial institutions must establish a consistent and exceptional presence. Customers should be able to anticipate a uniform level of personalization across different touchpoints, including in-branch interactions, phone calls, mobile applications, chat services, websites, email communications, and social media interactions. Advertisements and offers should be meticulously tailored to individual preferences, while products should be adapted to specific geographical contexts. Even though U.S. Bank boasts a network of over 3,000 branches spanning numerous states, their success in providing a seamless omnichannel experience is enabled by a unified customer information database.

Thriving personalized banking institutions excel in understanding intricate details about their customers, such as their preferred dining and shopping venues. They go beyond mere knowledge of customer birthdays; they may even predict their gift preferences. Furthermore, they can gauge the interest rates that would entice customers to consider taking out loans.

Achieving this level of personalization hinges on robust APIs and adept data management. Legacy systems must be modernized, and data silos must be dismantled. While a bank may possess records of all customer card transactions, extracting actionable insights requires synthesizing this data to make predictions about future spending habits. Machine learning platforms like Instinctools’ have the capability to transform this data into comprehensive customer profiles and develop models for individuals with similar financial goals and spending behaviors. Armed with these solid models, banks can further fine-tune their offerings for each customer, delivering a highly personalized experience.

Give Them What They Want

“For every $100 billion in assets that a bank has, it can achieve as much as $300 million in revenue growth by personalizing its customer interactions,” Boston Consulting Group estimates.

Therefore, it’s very much in institutions’ interests to provide customers with personalized banking from the time they open their first account and retain them by offering the products and services they want. Figuring out what those are requires a big commitment to tech upgrades like AI-driven investing recommendations. Credit Karma, for example, captures more than 2,500 data points about a customer and uses them to make more than 8 billion predictions about purchasing behavior. From there, it can make recommendations that feel tailored specifically to that customer.

“Users equate speed, simplicity, and personalization with caring,” Lumin Digital says. “Personalized banking helps … by providing users with only those options that are suited to their needs. Big data in real-time via strategic partners enables your bank or credit union to understand, at a granular level, and anticipate your users’ needs.”

When customers believe their bank truly understands their needs and preferences, they have little incentive to take their money anywhere else.