Dominance of Personalization
By Fred Brothers, Executive Vice President, Strategic Innovation
In this month’s article, I’m going to discuss an emerging trend – the dominance of personalization. First, let’s set a common deﬁnition of personalization: Personalization uses information about an individual’s behavior, preferences and demographics to create an offer that is unique to that person (vs. customization, which takes an existing offer and customizes it to meet the person’s preferences). Personalization tactics are used by companies as part of their marketing strategies to establish emotional connections with consumers. Companies are eager for their brands to build emotional connections because consumers who are connected to a brand are stickier, less price sensitive and likely to spend more.
Last year, FIS’ Strategic Thought Leadership team conducted a study with more than 3,000 ﬁnancial institution customers that looked at three types of loyalty associated with ﬁnancial institutions:
- Functional – Your product is perceived to function well and your customers would recommend it.
- Transactional – Your customers are willing to buy more from you.
- Emotional – Your customers feel a personal connection to you.
Although 45 percent of ﬁnancial institutions’ customers are loyal in at least one way, only 6 percent are emotionally loyal to their FI.
Applying personalization tactics to retail banking can boost connections between ﬁnancial institutions and consumers, but FIs are just beginning to employ personalization.
Lessons in Personalization from Other Industries
Today, technology and the Internet are facilitating personalization on a massive scale. For example, my grocery store sends me relevant coupons for speciﬁc things I buy regardless of what its vendors want to push this week. My loyalty card enables my grocer to collect more information about me every time I shop for food there, learn more about my habits over time and personalize the coupons it sends to me. My grocer has been able to thwart competitive threats during the economic downturn not because it’s the cheapest place to shop but because it understands and caters to its customers’ appetites – one customer at a time.
One advantage that Internet retailers hold over brick-and-mortar retailers is they can easily track their customers’ histories. Many of them cut their teeth in the catalog business, which allowed them to establish large databases on customers’ histories and characteristics and, in turn, use the information to determine things such as what pagination of the catalog produced the best return on an individualized basis. While those techniques seem crude in the current world of data analytics and sophisticated algorithms, they formed the basis of improving revenues through personalization in relatively impersonal online and mail-order channels.
Fast-forward a few decades to today’s Internet retailers, which have ﬁne-tuned the art of cross-sell using algorithms that show pictures of additional products the customer might want to consider before they leave the site, along with messages such as, “Other people who viewed this product purchased XYZ.” Amazon.com allows customers to reﬁne product preferences by marking purchases as “gifts.” So if I buy my niece a book on wedding planning, I won’t be barraged by ads for bridesmaid dresses. Forrester Research conducted a study on personalization for e-commerce and found that 62 percent of purchasers of recommended products found recommendations helpful.1 Consumers like suggestive selling – especially when they have the freedom to ignore it. Internet retailers will continue to employ personalization because: 1) it’s cost efﬁcient and 2) it works.
The Internet and social media have elevated consumers’ expectations of individualized personalization beyond anything previously possible. Think about what Google does these days. Unless you disable its function for collecting your history, Google quickly learns what your favorite sites are. If you’re an Amazon.com shopper, related Amazon listings will start populating the highest rankings of your searches. Some people ﬁnd this annoying, but I don’t. I do a LOT of shopping on Amazon because their selection is incredible and their prices are aggressive. If I buy something I’m searching for on Google, I’m very likely to buy it from Amazon. When Google “connects the dots” (between my search and my preferred vendor) and serves me a more relevant search result that saves me a few steps and a little time in buying what I want, I’m pleased and pleasantly surprised.
Google wants you to make it your home page so it can own a lot of your time and resources and learn even more about you. Google can expand your people network through Google Circles, connect you to promotional YouTube videos, offer media and devices for sale, provide chat through your Gmail account, keep your calendar, support creating and sharing your documents, give you the news from whatever county you select in the format of your choice, help you shop for back-to-school items, and so forth. Just think about how much information that is.
Many young people don’t care that “Big Brother Google” is watching them. They expect it and, in some cases, view the connectivity as a beneﬁt (e.g., my Google search/Amazon buying example above).
Pinterest is part of a new breed of social networking sites called “curated Web sites,” which could crack the code on monetizing social networking through highly personalized interfaces. Pinterest users – mostly women – “pin” images from their own ﬁles or from Web sites via a “bookmarklet” to their boards, which are organized by topics such as cooking, travel and shopping (Figure 1). (Gentlemint is the “male” version of Pinterest.) Pinterest’s interface – by deﬁnition, pinning things of interest to one’s board – tells everyone, including potential advertisers, what people are interested in doing and buying.
Retailers, including multichannel retailers such as Nordstrom and pure-play retailers such as Etsy, participate along with consumers and pin product shots to boards, provide some engaging content and insert links to their Web sites. “Soft sell” is encouraged. People can “follow” certain boards, “like” boards and so forth.
Recently, Amazon-owned Zappos introduced PinPointing, which recommends products on its site based on the photos Pinterest members pin to their boards. From the Zappos home page, a Pinterest member can go to PinPointing to get Zappos product recommendations based on what they’ve pinned to their boards. Zappos reported recently that while users were 13 times more likely to share a purchase on Pinterest than on Twitter, the Twitter posts are currently producing signiﬁcantly more revenue for Zappos than Facebook or Pinterest.2 However, analysts report PinPointing technology is still being honed and the tool from Zappos represents just one way for monetizing Pinterest content. Pinterest could get a percentage of revenue from product sales originating on a Pinterest board, or it could generate ad revenue like Facebook.3
Personalization in the Financial Industry
Examples of personalization in the ﬁnancial industry are scarcer, but the trend is growing. Three areas that I’ll discuss include: 1) personalized products, 2) personalized rewards and 3) personalization of security for mobile payments. While the three areas may seem disconnected, they have common drivers of reﬂecting consumer needs and wants – and they depend on enabling technologies for execution.
Some ﬁnancial institutions allow customers to pick and choose the terms and conditions of their credit card based on the credit card rewards and promotional offers they seek. For example, customers can choose cards based on their credit worthiness and desired card features and beneﬁts, such as rewards, rates and credit levels associated with particular cards, to determine which card best ﬁts their ﬁnancial proﬁles and rewards appetites.
But, here’s the cool part of the personalization process offered by American Chartered Bank, which uses the FIS ePix™ solution (Figure 2). Customers can personalize their cards’ appearances by uploading images (of anything that meets guidelines) to photo-imprint the face of their cards. Every usage at the point of sale – which according to FIS research is nearly 11 times a month among credit card users – has the potential to be topic of discussion with whomever is checking out the cardholder and a reminder of the cardholder’s connection to the ﬁnancial institution.
Please visit http://www.ﬁsglobal.com/epix/index.htm to view a demo of ePix and review its features and beneﬁts.
Merchant-funded rewards are projected to top $100 billion in transaction volume by 2015.4 Where merchant-funded rewards programs such as Groupon and Living Social fall short is their lack of personalization. While the idea of introducing community members to local merchants through promotional trial is good, the execution of merchant-funded rewards has been mostly untargeted and, as a result, unproductive for many merchants.
In contrast to players with untargeted offers, ﬁnancial institutions have a huge opportunity to personalize merchant-funded rewards, thereby making them more productive. By employing individualized credit and debit card histories as the basic building blocks of personalized merchant-funded rewards programs, they can target offers very speciﬁcally.
Personalization of security for mobile payments.
According to a recent report by the Federal Reserve, the primary reason why people don’t use mobile payments is concern about the security of the technology (42 percent of nonusers gave this response). The same report cites 12 percent penetration of mobile payments. However, 25 percent of survey respondents indicated they would like to buy things at the point of sale with their mobile phones. The report acknowledges consumers’ perceptions that mobile payments are unsecure as a primary obstacle to adoption but doesn’t suggest remedies.5
There is a personalized remedy on the horizon for security fears such as losing one’s mobile wallet: Android™ 4.0 (Ice Cream Sandwich) with the Face Unlock feature. The Ice Cream Sandwich can make your smartphone more personal with an option to unlock your device through facial recognition technology.
Apple® also holds a patent for biometric-sensor handheld devices that recognize users by the image of their hands. Biometric recognition is not quite “ready for prime time” for mobile payments according to reviewers because current security thresholds are either too high or too low. For example, Face Unlock doesn’t work well in low light or if the face is angled slightly away from the camera.6 As biometrics improve, my long-term bet is that they will be used as part of a two-factor payment authentication, which will help assuage fears about security and promote mobile payment adoption.
I predict that face and voice recognition via your mobile device will ultimately replace user ID and PIN or any other form of two-factor authentication. Authenticating using “something you are” (your face and/or voice) is a lot more secure than “something you have” and “something you know.”
Some of my friends in the industry have debated this prediction, but I’m sticking by it. We will be authenticating individual transactions using our mobile device and personal biometrics within a few years (just as soon as the technology is ready and consumers get tired of too-frequent calls from their card provider asking if they made a certain purchase).
Without a doubt, personalization will have a growing impact upon ﬁnancial institutions’ relationships with their customers. At FIS, we’re working hard to ensure that you have the right technologies – and the right solutions – in place and available when you and your customers need them.
1Forrester Research, “Which Personalization Tools Work for Ecommerce – and Why,” Dec. 27, 2007
2 Bloomberg.com, Aug. 28, 2012
3 Wired.com, Aug. 30, 2012
4 David Brebner, Netbanker.com, April 17, 2012
5 Board of Governors of the Federal Reserve System, Consumers and Mobile Financial Services,” March 2012
6 Brad Molen, engadget.com, Dec. 1, 2011