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April 25, 2023

Personalized Banking Development: Being Ahead of Competitors

April 25, 2023
Read 8 min

Personalized banking services have become a crucial strategy for banks to differentiate themselves in the highly competitive financial industry. According to a report by Accenture, fintech companies have already captured one-third of the banking market, and that share is expected to continue to grow. In addition, established financial institutions such as investment and credit card companies have expanded their offerings to include banking services, providing further competition to traditional banks.

To remain competitive, banks need to offer personalized banking solutions that meet the individual need of their customers. By leveraging data and analytics, banks can gain insights into their customers’ financial goals and behaviors, and offer targeted solutions that address those needs. Today’s customers expect more than standard banking services; they demand personalized experiences that match their preferences.

Read on to learn more about personalization banking and how it can transform customer experience.

personalized banking

Understanding Personalization in Financial Services

To truly understand the potential of personalization in banking, it’s essential to examine its different types and their business benefits. Discover how personalization can help you increase customer satisfaction, gain a competitive advantage, and grow your business.

Benefits of Personalized Banking

 The benefits of personalized bank include the following:

Better customer service. Personalized banking provides customers with a more personal and engaging experience with their bank. The customer’s needs and preferences are taken into account, and the bank can provide tailored advice and appropriate support to the customer.
Higher customer satisfaction and loyalty. Customers appreciate it when their bank takes the time to understand their needs and preferences and provides them with relevant offerings. This increases customer loyalty and positive word-of-mouth recommendations.
Improved efficiency. Banking personalization can help banks automate operations and increase efficiency by reducing the time and resources required to process transactions. Monetary KPIs such as ROI will benefit tremendously from this optimization.
Enhanced security. Banks can use customer data to identify potential fraud or suspicious activity and take steps to prevent it before it happens.

Banking personalization benefits both customers and banks. Let’s look at the types of personalized banking and their practical examples.

Types of Personalized Banking

Here is a brief overview of the three types of personalized banking.

• Prescriptive personalization in banking uses customer data to make recommendations to customers. Banks use algorithms to analyze customer data, such as spending patterns and transaction history, and provide customers with personalized recommendations on banking services and products that meet their needs. These may include suggestions for savings accounts, credit cards, or loan products.

• Real-time personalization uses customer data in real time to provide tailored banking services. For example, customers can receive personalized recommendations based on their location or spending patterns. Real-time personalization in banking can also provide real-time fraud detection or alerts on unusual spending activity.

• Machine Learning personalization uses ML algorithms and recommendation engines to analyze customer data and provide personalized recommendations. Banks use historical data to predict future customer behavior and provide relevant banking personalization services. ML personalization in banking can also automate customer interactions, for example, through chatbots that respond instantly to customer queries.

Examples of Personalized Banking

One of the best-known examples is personalized financial planning, in which a financial advisor works with the client to create a customized financial plan based on the client’s goals and objectives. Another service is the development of customized investment strategies based on the client’s risk tolerance, investment preferences, and financial goals.

Banks can also create loan products that meet the specific needs of individual customers, such as customized repayment schedules or interest rates. Another common form of personalized financial services is the offering of credit card rewards tailored to customers’ spending habits and preferences.

Providing personalized banking for wealthy individuals, such as tax planning, estate planning, and asset protection, is also an option. For insurance needs, banks can offer products designed for specific purposes, such as life insurance policies customized in accordance with the customer’s age, health, and lifestyle.

Finally, banks can offer personalized customer services, such as personalized support via chatbots or other digital channels. Through these services, banks increase customer satisfaction and retention, gain a competitive advantage, and ultimately drive business growth.

4 Ways to Enable Personalized Experience in Banking

Institutions can employ several key strategies to provide a more personalized banking experience.

Customer segmentation

Banks can divide their customers into different groups based on age, income, spending habits, and financial goals. In this way, banks can better understand the individual needs and preferences of each customer group and offer personalized financial services for each segment.

For example, for students, a bank could offer low-cost student accounts with waived fees and discounts on education-related expenses. For young professionals, a bank could offer more advanced investment options and financial planning services. For retirees, the bank could focus on retirement planning and investment options that provide a stable income stream.

Data analysis

Banks can collect and analyze customer data, such as transaction history and spending patterns, to gain insights into customer behavior and preferences. This information can be used to adjust banking services and products to individual customers, such as customized savings and investment plans.

For instance, if a customer frequently shops at a particular retailer, the bank can offer customized rewards and discounts for that retailer. Alternatively, if a customer has a high balance in their savings account, the bank could offer them a higher interest rate to encourage them to save more.

Relationship management

Banks may assign dedicated account managers to high-value customers. The relationship managers provide individualized advice and service to each customer, helping to establish long-lasting relationships between the business and its customers.

Leveraging digital channels

Digital channels, such as mobile banking apps, chatbots, and marketing campaigns, help to deliver personalization banking experiences to customers. Banks can use customer data to offer targeted product recommendations, tailored offers and rewards, and automated support through digital channels. In this way, customers can access banking services and assistance when and where they need it.

For instance, if a bank wants to promote its home loan offering to families, it can create a targeted marketing campaign that highlights the benefits of homeownership and offers customized loan options based on the customer’s income and credit score.

Enabling personalized experiences in banking requires a combination of customer segmentation, data analytics, relationship management, and personalized digital banking. Using these strategies, banks can offer unique products and services.

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5 Steps to Implement a Personalization Strategy

Introducing personalization in banking requires a clear roadmap and attention to detail. Here are five key steps banks can follow to implement an effective personalization strategy:

1. Segment customers and create customer personas. The first step is to analyze your target audience, segment it, and create customer personas based on demographic and behavioral factors. This helps understand the unique preferences of each customer group and enables banks to develop the products they need.

2. Collect and analyze customer data. By collecting and analyzing customer data, such as transaction history, spending patterns, and demographic information, you gain actionable insights into customers’ behaviors and preferences. With this information at hand, you can come up with ideas for personalized products and services.

3. Create personalized products and services. These may include customized loan products, personalized investment portfolios, and insurance solutions – whatever that may match the audience needs you identified at the previous stage.

4. Develop personalized marketing campaigns. You can use the insights gained from data analysis to create targeted marketing campaigns that resonate with each customer segment. This could include personalized offers, rewards, promotions, and more.

5. Introduce CX best practices across all departments. The key is to employ the new approach across back, middle, and back offices to make sure everyone in the organization is on the same page.

By following these steps, banks can introduce a strong and efficient personalization initiative that will bring long-lasting value.

Key Considerations for Implementing Personalized Banking Strategy

Let’s explore the key factors to consider before you start working on a personalization strategy.

Data privacy and security 

As banks collect and store large amounts of customer data, it is imperative to ensure that privacy and security measures are in place to protect sensitive information. This includes implementing strong data encryption and access controls, as well as compliance with relevant data privacy regulations.

Customer consent and transparency

Banks must obtain consent from their customers before collecting and using their data for personalization banking purposes. It is also crucial to make the use of customer data transparent and give customers control over what data they share and how it is used.

Customer experience

When developing a personalized banking strategy, the customer experience should be at the forefront. This means creating a seamless and intuitive user experience across all touchpoints, from mobile apps to in-branch interactions.

Employee training and adoption

Employees in all departments must be trained to implement a personalized banking strategy and use data to create personalized customer experiences. This includes training on data privacy and security measures as well as the effective use of data analytics tools.

Tech infrastructure

A successful personalized banking strategy requires a robust technology infrastructure to process rich customer data and enable personalized experiences across all touchpoints. This requires investments in data analytics tools, customer relationship management systems, and digital channels.

Compliance and regulatory requirements

Banks must comply with relevant privacy, security, and consumer protection regulations. It is critical to keep up with regulatory changes and adjust personalized banking strategies accordingly.

Summary

Personalized banking services are on the rise, and for good reason. Striving to improve the customer experience and meet evolving expectations, banks increasingly employ technologies and turn to AI, data analytics, and other tools. With these advances, banks have more opportunities to collect and analyze customer data, ultimately offering personalized products, services, and experiences.

Banks need to be diligent in their approach to implement a personalized banking solution successfully. Segmenting customers, gathering and analyzing their data, offering tailored products and services, developing personalized marketing campaigns, and introducing CX best practices across all departments are the key steps of the process.

For banks ready to take the plunge into personalized banking, our team is here to help. Contact us to learn how we can help you introduce personalization.

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