The future of retail banking: Hyper-personalisation

Background

The Covid-19 pandemic has accelerated the digitalization that has been in the making and caught up many years of development in just a couple of months. The unwillingness of customers to use branches during lockdown has increased the usage of digital channels tremendously.

Over the last decade, banking institutions have adopted many digital solutions, offering their customers round-the-clock access to banking services in online platforms and mobile apps. Now, what if customers could access even more information? What would the engagement to their banking provider be if they received insights and recommendations based on their behavior, cashflow, searches, app usage, location and demographic variables? Data analysis and the application of that data has come to define the 21st century. The world runs on it. Data has become an essential fabric of almost every industry – and financial services is no different. Mastering new data sources and AI can help banks to better understand their customers and help them to unlock financial opportunities. Here comes the new concept in retail banking, Hyper- personalisation.

Concept and Definition

Hyper-personalisation can be defined as using real-time data to generate insights by using behavioral science and data science to deliver services, products and pricing that are context-specific and relevant to customers’ manifest and needs. These insights are gathered using Artificial Intelligence to analyze data.

The factors that drive financial exclusion are both demand-driven (influenced by customers’ choices) and supply-driven (influenced by banks’ offering). The beauty of hyper-personalisation is that it can be deployed to address both.

Applying behavioural science to real-time processing of big data can provide a more comprehensive understanding of consumers’ behaviour and show the differences between their stated vs their observed behaviour. Behavioural science enables banks to understand, and anticipate customer needs through a consciousness of customers’ motivations, perceptions, personality traits, values and goals.

Banks are particularly suited to adopting hyper-personalisation, as they enjoy both large customer bases, and a high amount of data per customer.

Three building blocks are needed to apply hyper-personalisation: data analytics, behavioural science, and ethnographic research. Taken together they are key in answering the “what”, “how”, and “why” of customers’ behaviour. Hence, banks will need to have all three capabilities in place.

How to Hyper –personalise:

  • Customer Journey Map – identify the financial journey and customer’s likely next step
  • Behavioural Banking – identify patterns of behaviour and create a dynamic persona
  • Automated Recommendation – Artificial intelligence gives the actions to be taken

Importance

  • Hyper-personalisation helps bank to stay ahead of the curve as they get to know the customer better and then channel those insights and trends into highly-customized digital experience that contribute to activity and trust.
  • while customers now expect a certain level of customization, hyper-personalized experiences in personal finance can lead to increased satisfaction and engagement, fraud-prevention, better decision-making and a feeling of human understanding from their bank.
  • Hyper-personalisation tools also eliminate the problem of choice overload. This helps to solve a common problem in the banking sector, where there are many product variants customers can choose from, and the products themselves might not be crystal clear. Some customers may feel overwhelmed with such a wide range of options. Personalization tools provide them only with the options they actually are looking for.
  • Banks will also play an active corporate social responsibility role by reducing the risk of financial exclusion.
  • Providing customers, the flexibility to create their perfect product will increase customer satisfaction.
  • Personalization across customer strategy, user experience, content and products offer banks a viable growth strategy with unique competitive advantages.  
  • Successful execution of hyper-personalization adds value to the current service offering with improved onboarding processes, increased activity from consumers and strengthening of customer loyalty.

Practices in the banking sector

  • The Bank of Ireland uses data as part of its customer experience program to help boost engagement. The firm follows the examples of tech giants in tracking and tagging messages to personalise them and offer tailored in-branch experiences. Bank of Ireland merges both online and offline data, creating singular, comprehensive reviews of customer information. The result is a 278% increase in the number of applications the bank receives from digital channels.
  • The US firm, Capital One, works with the Foursquare analytics platform to better serve its customer base. Foursquare provides a geolocation solution sending out real-time mobile notifications to clients. Capital One works with several partner retailers, where customers can purchase products. By prompting customers when they are near these partners, Capital One enhances the opportunity of upsells, targeting again, the right people at the right time.
  • HSBC is an advocate of AI and uses it to predict how customers might like to redeem credit card points, offering rewards more effectively. The objective is to provide customers with more valuable rewards while competition continues to grow.
  • Royal Bank of Canada, recently launched NOMI Find & Save, an innovative program that grows customer savings using intelligent, automated, cashflow-based algorithms that act on a customer’s behalf. The proposition targets a growing segment of customers that are embracing automated solutions and expressing delight with the experience.
  • Bank Zachodni WBK in Poland has rolled out its Neo Intelligence project to learn more about customers by analyzing their social networks and observing their online community activity. They’ve assigned social roles, such as leader or follower, to bank customers to grasp their motivations and target them with relevant offers and services. The project both supports customer acquisition and helps strengthen the bank’s relationship with its most valuable clients.
  • Outside of banking, Direct Assurance has an insurance programme known as ‘YouDrive’. A device in the customer’s car records their journey, generating a score for each trip. Various metrics are feeding the score, but overall a higher score equates to a lower insurance premium. Customers benefit from a premium that is personal to them, rather than being part of a generic product.

By Menna Mahmoud -Researcher at Egyptian Banking Institute

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