November 22, 2024
Personalization in Banking: Minimise Customer Churn
4 minutes
You’ve probably heard a lot about personalization lately – personalized services, personalized experiences, and so on. But what does it really mean, and why is this trend so important, especially in the banking industry?
Today’s savvy consumers demand experiences that resonate with their unique needs and preferences. A study by McKinsey1 found that 71% of consumers expect companies to deliver personalized interactions. When these expectations aren’t met, it can lead to frustration and churn.
Why Personalization Matters in Banking
Consider your daily experiences: whether you’re shopping online, streaming your favourite shows, or using a banking app, the idea is to create a seamless experience that feels just right for you. This is especially true in banking, where personalization is transforming the way financial institutions connect with customers and provide value.
So, why is personalization everywhere? It’s not just about making customers happy; it’s about building deeper relationships, boosting loyalty, and ultimately reshaping the financial landscape. Let’s explore how personalization is changing the game in banking and what it means for end users.
KYC in the age of hyper-personalization
Historically, banking was limited by traditional branch models and one-size-fits-all products. With advancements in technology, banks can now deliver hyper-personalized experiences, offering tailored solutions that go beyond general demographics. From personalized financial advice to real-time spending insights, these innovations make banking more relevant and accessible for each customer.
When banks combine hyper-personalization with Know Your Customer (KYC) processes, they not only stay compliant with regulations but also deliver products and services that really fit individual needs. This approach helps build trust, boost customer engagement, and support smarter, data-driven decisions, ultimately creating stronger and more secure relationships with their clients.
The Value of Personalized Banking Services
Enhanced Customer Experience
Align services with customer preferences. For example, personalized spending insights and tailored financial advice help users manage their finances, transforming banks from service providers to trusted financial partners.
Increased Customer Loyalty
When customers feel understood, they are more likely to engage with the bank, leading to increased loyalty and a longer-term relationship. This is especially critical in a competitive landscape where switching costs are lower than ever.
Improved Financial Health for Customers
Provide customised insights, budgeting tips, and reminders to help users make better financial decisions, fostering trust and positioning the bank as a proactive partner.
Operational Efficiency
Leverage AI-driven insights to predict customer needs, offer relevant products, and reduce acquisition and retention costs. Automated tools streamline processes, freeing up resources for strategic priorities.
An example of how a bank can show spending data with categories or map frequent purchases for easier identification.
How Technology Makes Personalization in Banking Possible
Artificial Intelligence (AI) and Machine Learning (ML)
AI and ML drive personalisation in digital banking by analysing data, predicting behaviours, and enabling targeted recommendations, tailored insights, and fraud detection.
Transaction Enrichment and Advanced Categorization
Transaction data enrichment transforms raw data into detailed, categorised insights, allowing banks to offer customised advice, such as savings tips for dining or transportation. This enhances relevance and helps banks stand out.
Geolocation and Real-Time Data
Location-based personalization allows banks to send real-time offers and alerts based on a customer’s location. For example, while travelling, banks can provide updates on currency exchange rates, ATM locations, and spend limits, keeping customers engaged and informed.
What to Keep in Mind
To build trust, banks must manage data responsibly, transparently, and in compliance with regulations. Protecting privacy and honouring customer consent are key when using transaction data for personalization. As open banking expands, banks gain access to more data, enabling richer, more tailored experiences and opportunities to collaborate with fintech companies for innovative, customer-centric services.
Personalized digital banking is more than a trend; it’s a fundamental shift in how banks engage with their customers. As banks continue to innovate, the future looks promising for a more personalized, responsive, and impactful banking experience.
Chief Strategy Officer
Experienced CPO and CMO leader with drive, passion and a results-oriented approach to achieving the strategic vision. Extensive experience energising and motivating teams across all areas of product management, product marketing and corporate marketing.