Customer loyalty in banking and finance these days is increasingly fickle. In an effort to foster new loyalties, a fascinating concept is ripe for prime time: hyper-personalisation.
Marketers are no doubt familiar with the concept; the ability to make every interaction and product as uniquely tailored to the customer as possible. This is done by analysing and interpreting all available data on a customer segment and/or their demographic available to them, as quickly as possible.
Today in financial services we have a lot more data on a person and can profile using lifestyle, purchasing habits, credit repayment history and more. This is an area being explored by digital banks, which seem to be able to offer more personalised services faster than traditional firms (recent research found that digital banks are 1.8 times more easily able to innovate and develop proofs-of-concept, and to offer personalised, differentiated products and services, than traditional banks). Meanwhile, traditional firms largely remain focused on offering products that don’t account for those personalised needs.
Traditional Vs Modern
Take the customary credit card process. A person applies for a credit card and is assigned a limit based on data they provide. At regular, scheduled stages, they’ll be offered a credit increase.
Sure, this has worked for decades — but there’s nothing personal about it. It’s transactional, and competitors are offering the exact same thing. This process does not truly consider the spending habits of the person, intended purchases, when they would actually need a credit increase and more.
Faced with that process, customers have ample and easy opportunity to take their money and their valuable personal data elsewhere, such as to a “Buy Now Pay Later” (BNPL) option like Afterpay — BNPLs have fewer barriers to entry, easy access to funds, lower fees paid to merchants and a less intensive application process. It’s no wonder why BNPL stock prices have skyrocketed in recent months.
Perhaps hyper-personalisation can be applied in response, whereby a credit card is an extension of the person’s overall financial aspirations. A single product that offers multiple credit limits and rates that can be flexed by purchase category, with personally tailored benefits and promotions.
This hyper-personalised offering fosters greater loyalty and a sense that the financial services provider ‘gets it’. And yes, this is something customers want: according to Accenture, 91 per cent of consumers are more likely to shop with brands who recognise them, remember them, and provide them with relevant offers and recommendations.
Why shouldn’t my credit facility be intelligent and helpful in my aspirations, with gamification for keeping to a category budget, and promotions to help with any stated major purchases (’our retail partner is offering you a large discount offer on [that major purchase you told us about] and we will back that with a pre-approved credit for that retailer along with your major purchases interest rate’)?
This can be done through the power of AI, Machine Learning and Data Analytics. The marked difference between traditional firms compared to newer entrants is the agility and process of adopting their customers face.
Without the legacy technology and processes, while digital banks can conceivably more rapidly deploy hyper-personalisation, they lack the rich streams of historical data and the established customer base.
Traditional firms must find technologies that enable what Gartner calls ‘bi-modal IT’ delivering both a stable information backbone (think compliance, operations, etc) and innovation — without requiring a ‘rip and replace’ to get started.
One option is to implement an intelligent, real-time data fabric that accesses information wherever it is and makes sense of it, before surfacing insights. (My colleague, Michael Hom’s article, on implementing a data fabric explores this topic further)
Hyper-personalisation is here in many sectors, and I am looking forward to seeing how this new era of open banking and new entrants will drive improvement in our financial circumstances; along with the pleasant by-product for a more personalised and enjoyable customer experience.