Banks need Hyper-Personalisation to Catch up with Customers – and Starbucks

Use the Starbucks app and you may start getting offers for chai latte with soy milk or chocolate muffins, if those are your favourites. Watch Netflix for just a little while and you’ll get recommendations for new shows similar to what you watched in the past as well as shows in adjacent genres that you might enjoy. Consumer companies like these leaders use customer data, artificial intelligence (AI) and more to deliver real-time hyper-personalised recommendations for services you use and products you did not even realise you wanted.

As a customer of a bank, however, you’ll more often see a generic dashboard and receive about the same as everyone else. It’s not that customers don’t want personalisation. Indeed, research by McKinsey shows that 71 percent of consumers expect companies to deliver personalised interactions and 76 percent get frustrated when this doesn’t happen. Moreover, 90 percent of customers spend more with a brand that offers a personalised experience. It’s just that most banks can’t deliver what other retailers offer and what consumers want.

The Problem with Banking

Indeed, the online dashboards and messages that banks deliver to their customers have been fairly generic for decades. Even digitisation and the advent of apps hashave made little difference.

A key issue is that the capabilities to deliver personalisation are lacking. To do well in personalisation, it requires you to be able to leverage data and insights really well, said Commonwealth Bank’s Chief Digital Officer Fredrik Lindström.

Older generations of banking technology stacks were never designed to capture any of this.

Fredrik Lindström, Commonwealth Bank

The result, systems vendor Pega found, is is that only 10 percent of global banks are prepared to reimagine the customer experience and use technology as a catalyst for organisational change. Consulting firm Wavestone found similarly that only 20 percent of banks personalise the customer journey in real time and just 28 percent have multichannel personalisation.

The Solution

While most banks struggle to personalise their message for the customer of one, a small number have been able to advance to hyper-personalisation that delivers messages customised for individual customers.

To achieve this level of service, Pega suggests, banks need to develop the capabilities for AI to use transaction data, propensity models, business rules and levers to evaluate customers’ real-time context and determine the next best experience for each individual customer in that moment. A combination of demographic, transaction and behavioural information provides the data needed for AI to work.

At a fundamental level, Lindström said, banks need to make sure their technology stacks are geared to use data to deliver the value and experience that customers expect. To address this at Commonwealth Bank, he said,

“We are relying on APIs, microservices and obviously Cloud. To now connect quickly, safely and easily with others constitutes a whole new set of requirements on our technology and how we build software. New, much more subtle and sophisticated interfaces, such as wearables and voice, are getting traction and add to the ecosystem.

Fredrik Lindström, Commonwealth Bank

The result for banks that can hyper-personalise their interactions with customers is impressive. Pega found 89 percent of banks that develop multichannel strategies and use omnichannel personalisation break even in less than two years. Wavestone similarly said that traditional players that offer personalisation have been able to demonstrate that a change in data usage and a customer-centric strategy results in improved retention, more customer engagement, a better understanding of customers’ needs and enhanced customer satisfaction.

As one example, UOB in Singapore has leveraged AI so that its TMRW app shows each customer customised information based on their historical purchases and cash flow, reminders on payments and subscription alerts for goods and services. The app also flags errors such as duplicate charges or accidental multiple purchases and assists customers in resolving them.

Case Studies in Sustainability

A newer area where banks can use personalisation to benefit customers and grow their brand is sustainability. 75 percent of people in 19 countries in North America, Europe and the Asia-Pacific region label global climate change as a major threat, according to Pew Research, and Bain found in its research that 90 percent of consumers in Asia-Pacific are willing to spend a premium on sustainable products. Delivering hyper-personalised insights about climate change can help banks engage and retain. Two examples, from software companies supporting banks on personalisation, show how it can work.

Cogo, for instance, pairs real-time banking data with a carbon footprint model to allow customers to track how much carbon is associated with their spending. Banks can promote green initiatives and offers based on each banking user’s spending habits, individual position and carbon emissions, said Cogo head of enterprise solutions David Beer. They can offer lower interest rates to customers who take steps to reduce their carbon footprint, for example, such as switching to an electric vehicle or installing energy efficiency home retrofits.

Enfuce said its My Carbon Action tool goes even further by taking into account the environmental impacts the entire lifecycle of products customers purchases, from raw material extraction and manufacturing to use and disposal. It also leverages data users input such as lifestyle choices around diet, housing and transportation, such as whether they are vegans or meat-lovers. Banks can use this information to provide information on the sustainability of customers’ consumption and offer personalised tips on how to reduce their carbon footprint. A large Dutch bank that used the solution found that more than 90 percent of customers answered the lifestyle questions, for example, and the results positively affected the lifestyles of 30 percent of the users.

Hyper-personalisation Creates Competitive Advantage – For Now

Offering hyper-personalised information and solutions clearly requires technical expertise, mindset change, analytics and data. Laggards who have done little to personalise their interactions with customers will need to do far more to leverage AI and data just to keep up. Banks that have embraced change and started to offer these customised solutions, on the other hand, are gaining a competitive advantage that may widen in the years ahead.

Author: Richard Hartung, Research Director, Singapore, Payments Consulting Network

Richard has more than 20 years of experience in the payments and financial services industry, primarily in the Asia Pacific region. He has held executive management roles in payments in the US, Japan and Singapore. He is also a freelance writer for The Asian Banker and other media. He is proficient in Japanese. Richard has a BA from Pomona College and an MBA from Stanford University. He is active in community organisations, including serving on the boards of the Metropolitan YMCA and the Jane Goodall Institute.


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