The power of personalization in finance

July 25, 2023

In today's digital age, where consumers are inundated with countless options and information, personalization has emerged as a key differentiator in the finance industry. As expectations continue to evolve, financial institutions must adapt to the changing landscape and harness the power of data, insight and personalization to create tailored experiences that meet the unique needs and preferences of individual customers. By leveraging data, advanced analytics and technology, banks and credit unions can revolutionize the way they engage with customers, foster loyalty and drive business growth. More than ever, financial services firms must leverage the transformative potential of personalization and understand the strategies that industry players can adopt to deliver personalized experiences.

Personalization gap in finance

Despite the opportunity to build personalized experiences, the vast majority of financial institutions are still falling woefully short of consumer expectations with personalization maturity lacking across the entire customer journey. The good news is that the industry is well positioned to deliver memorable experiences and unique interactions by leveraging both internal capabilities and external partners.

The key is to structure the collection and use of existing data in a way that can improve the customer experience and drive increased engagement, starting with high-impact use cases that are meaningful to the consumer but not too complex to execute. These quick-wins can provide the foundation for increased investment and commitment to creating differentiated experiences across all channels.

The foundation of personalization is the ability to use data and analytics to drive all engagement with the consumer. This requires making personalization an overarching priority, creating a strategy and operational capabilities to facilitate personalization at scale. As with digital transformation, top management must make a deliberate decision to commit to personalized customer experiences across the organization.

The benefits of personalization

Personalization allows financial institutions to offer tailored solutions and recommendations that address customers' specific financial goals and challenges thereby enhancing customer experiences. By understanding customers' needs, preferences and life stages, financial institutions can proactively anticipate their requirements and offer relevant products and services. This not only enhances the overall customer experience but also strengthens the customer's perception of the institution as a trusted advisor.

More than ever, consumers have choices of financial services providers and can easily diversify their financial relationships across multiple providers. This weakens both engagement and loyalty. By delivering more personalized experiences, financial institutions will create stronger emotional connections with customers, leading to increased engagement and loyalty. Loyalty will be based on how often a consumer relies on their financial institution’s digital app for insight and advice.

When customers feel understood and valued, they are more likely to remain loyal to the financial institution and even become advocates, recommending it to friends and family. By fostering long-term relationships through personalization, financial institutions can generate sustainable revenue growth.

Acquiring new customers has never been more challenging. Most organizations are instead focusing on generating organic growth through cross-selling and up-selling. Personalization enables financial institutions to identify additional products or services that customers may need based on their financial behaviors and life events. 

By offering personalized recommendations at the right time, institutions can effectively cross-sell and upsell, driving revenue growth while providing customers with solutions that truly align with their financial goals. With heightened levels of personalization, the customer often feels a level of partnership and empathy with their financial institution as opposed to feeling that they are being sold.

Strategies for implementing personalization

Building a personalization strategy in banking goes beyond simply using a customer’s name in marketing communication. The foundation of an effective personalization strategy lies in gathering and analyzing customer data. Banks need to collect not only demographic information but also transactional data to gain a comprehensive understanding of who their customers are. 

Unveiling customer insights: By examining spending patterns, account balances and financial goals, banks can uncover valuable insights into customers' needs, preferences and behaviors. This data forms the basis for creating tailored experiences that resonate with individual customers.

Data collection should encompass both structured and unstructured data sources. Structured data includes customer profiles, account information and transaction records while unstructured data includes social media interactions, customer feedback and other textual data. By amalgamating both types of data, banks can gain a holistic view of their customers, enabling more accurate personalization.

Leveraging technology for personalization: Once data is collected, banks can leverage advanced analytics tools and technologies to derive meaningful insights. Artificial intelligence (AI) and machine learning (ML) technologies can analyze vast amounts of data in real-time, enabling institutions to deliver personalized experiences at scale. AI-powered chatbots and virtual assistants can provide tailored financial advice while ML algorithms can predict customers' future needs and proactively suggest relevant products and services.

By analyzing historical data, banks can identify patterns and trends, which can then be used to make data-driven predictions about future customer behavior. This enables banks to deliver personalized recommendations and offers at the right time, fostering a sense of value and relevance for customers.

Understanding channel preferences: Personalization must extend beyond understanding customer data – it also involves tailoring communication channels to customers' preferences. Different customers have distinct communication preferences, and banks must accommodate these preferences to create a seamless and personalized experience. Some customers may prefer traditional channels like phone calls or in-person meetings, while others may favor digital channels such as mobile apps, chatbots or social media platforms.

To facilitate personalized communication, banks should offer a range of channels and allow customers to choose their preferred mode of interaction. This flexibility not only enhances the customer experience but also improves engagement and satisfaction. By meeting customers on their preferred channels, banks can establish a sense of trust and convenience, leading to stronger customer relationships.

Beyond using multiple channels, financial institutions need to up their game when it comes to communicating consistently across all channels. Currently, consumers are not believing that data and insights are being deployed and used by all areas of their financial institution. This creates more ill will than goodwill. Now more than ever, financial institutions will need to collect data and deploy insights consistently to develop deeper, more connected relationships that will close the customer experience gap.

Creating dynamic customer journeys: To truly differentiate themselves, banks and credit unions must strive to deliver personalized experiences at every touchpoint. This involves tailoring customer journeys, customizing landing pages on websites and offering personalized offers and promotions. By leveraging customer data, banks can create individualized experiences that cater to specific customer needs and preferences.

For example, when a customer logs into their online banking portal, they should be greeted with personalized recommendations based on their transaction history and financial goals. This not only enhances the customer experience but also encourages customers to explore relevant products and services. Moreover, banks can leverage data to offer personalized financial advice, helping customers make informed decisions and achieve their financial objectives.

Embracing open banking and collaboration: Open Banking initiatives provide opportunities for financial institutions to gather data from external sources such as third-party financial apps and platforms. By collaborating with fintech startups and other industry players, banks and credit unions can access additional data points and offer personalized services beyond traditional banking products. This collaboration also facilitates innovation and accelerates the development of personalized solutions that cater to evolving customer needs.

Balancing privacy and personalization: While personalization offers significant benefits, it is crucial to strike a balance between customization and customer privacy. Financial institutions must ensure they have robust data protection measures in place and adhere to regulatory guidelines. Ensuring transparency in data usage is vital for building trust with customers. 

When customers feel confident that their data is secure, they are more likely to engage with personalized experiences and share additional information. Moreover, educating customers about the measures taken to protect their data can further enhance their confidence and willingness to engage in personalized experiences.

Focus on continuous improvement: Personalization is an ongoing process that requires banks to adapt and evolve their strategies to meet changing customer needs. Regularly collecting feedback from customers, analyzing their behaviors and iterating on personalization efforts are crucial for staying relevant and maintaining a competitive edge in the market.

Banks should leverage customer feedback channels such as surveys, focus groups and social listening to gather insights on customer satisfaction and preferences. By actively listening to customers, banks can identify areas for improvement and refine their personalization strategies. Regular data analysis and monitoring of customer behaviors can also uncover emerging trends and patterns, enabling banks to stay ahead of customer expectations.

Getting started

Delivering a personalized experience is no longer optional for financial institutions. But where does should you begin?

The best first step is to identify use cases with the highest impact that can be implemented with the least amount of effort. These should be initiatives that will improve the customer experience, resulting in increased sales and engagement – without massive deployment of human or financial resources. Remember, the database does not need to be perfect for a limited scale personalization execution. Rather, the initiative can be built as a test-and-learn process with measurement of results driving expansion.

Finding an external partner to help develop and deploy the personalization program will be needed at most organizations since these partners can assist in avoiding the challenges and pitfalls that could stall the program out of the starting blocks. These partners can also help accelerate the achievement of results, creating a more personalized experience, greater customer loyalty, market differentiation, increased wallet share and substantially better top and bottom lines.

Jim Marous is the co-publisher of the Financial Brand, the owner and publisher of the Digital Banking Report and the host of the top-five banking podcast, Banking Transformed. As an author and recognized industry futurist and authority on disruption in the financial services industry, Marous has spoken to audiences in over 50 countries on how individuals and organizations must respond to the digital transformation of financial services.

About the Author
Jim Marous, Top 5 Retail Banking Influencer
Jim MarousTop 5 Retail Banking Influencer

Jim Marous is the co-publisher of The Financial Brand, the owner and publisher of the Digital Banking Report and the host of one of the Top 5 banking podcasts, Banking Transformed. As an author and recognized industry futurist and authority on disruption in the financial services industry, Jim has spoken to audiences in over 50 countries on how individuals and organizations must respond to the digital transformation of financial services.

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