Why financial institutions need to embrace personalization
Financial institutions that embrace personalization will outcompete their fellow FIs—will yours be one of them?
Banks and credit unions were once branch-heavy, product-centric organizations with legacy technologies and cultures—but not anymore. The pandemic has fundamentally changedthe way banking interactions happen; now it’s all about personalizing the experience and becoming a more customer-centric organization.
More than half of bankers say a customer-centric business model is “very important,” yet only 17 percent are “very prepared” for it. This year, there has been an increased priority around personalization as banks focus on improving the customer experience and removing friction from the customer journey.
According to BCG, those who can personalize at scale will likely benefit from lower rates of customer churn, higher sales leading to an annual revenue uplift of 10 percent, and as much as $300 million in revenue growth for every $100 billion in assets that a bank has. Let the race to personalized banking begin; first movers that embrace it over the next five years can expect to drive material competitive advantage – will you be one of them?
How to get personalization right
Effective personalization requires financial institutions to be able to harness their data, then make it actionable. Tier-one institutions typically have data science teams that are solely dedicated to organizing data points and delivering actionable insights. Community institutions, on the other hand, often lack those resources and are usually found trying to do this themselves.
Regardless of the asset size, institutions are largely crunching and interpreting numbers on their own, trying to personalize banking experiences when they could be looking to strategic partnerships to drive these efforts at scale.
Leaning on the expertise and innovations from fintechs to elevate banking experiences and personalize offerings to meet the specific needs of their customers offers a much more strategic way to approach personalization. Such relationships can help make data more meaningful and quickly fill a need.
In our case, it’s removing the hassle of managing paper receipts for customers and businesses, while providing the institution with SKU-level, contextual data gleaned from these receipts to offer financial advice and insights based on their spending habits and behaviors. This allows the institution to provide greater value back to the customer, helping them proactively work toward financial wellness.
Why personalization must matter to your FI
Successful financial institutions apply analytics to identify niches of prudent growth opportunities and pursue these segments with personalized offerings, building stronger relationships while simultaneously helping their customers optimize their finances.
This could come in the form of leveraging advanced analytics to deliver tailored customer conversations across different channels. Customers who receive personalized banking offers in multiple channels are more than three times as likely to accept it, compared to those receiving offers via a single channel.
Institutions that are innovating at a higher rate will likely have a better shot at attracting customers, as 71 percent of them noted they would increase usage of their mobile banking app if their bank offered more innovative services. This doesn’t mean innovation for innovation’s sake, but rather strategic, tailored products and services. Personalization requires a tremendous effort from the financial institution, but partnerships with fintechs can provide a significant lift.
Those who effectively transform their data into actionable insights can benefit from stronger banking relationships, a lower rate of customer churn, higher sales, and deeper customer engagement. Customers want to know their bank or credit union understands their unique financial needs and can offer a solution specifically for them. First movers have started personalizing these efforts; it’s time others follow suit if they want to remain competitive.