Super-specific segments: Can banks fulfill the promise of personalization?

The rate of digital transformation has been accelerating across industries, with a predicted compound interest rate of 23.1% globally from 2020-2030. The challenges caused by the pandemic have been a huge factor in spurring that change, as have the ongoing development and adoption of artificial intelligence (AI), analytical software, and cloud computing.

These structural changes have also been in tandem with a broader cultural shift occurring in consumer expectations. From algorithmic shopping recommendations and smart houses to chatbot teachers and automated prescriptions, digital transformation is already infiltrating many areas of our lives. Additionally, as digitally native Gen-Z consumers mature, businesses need to cater to this younger demographic to catch the allegorical worm and stay ahead of the competition.

We live in an era of tailor-made services, and deploying technological tools is vital to scaling offerings. What is most revolutionary about digital transformation is that it aims to improve efficiency and user experience as AI insights are helping to switch from product-centric to customer-centric thinking.

When you shop online, retailers collect information on your shopping behaviors and preferences in order to suggest new products and know when to offer a repeat buy. This type of individualized service is known as personalization. Now imagine how many people’s lives could be improved by a similar transformation to financial services.

The rise of personalization

As a result of accelerating digital transformation, we’ve come to expect personalized offers and discounts in return for the data we give up about ourselves online. In fact, 51% of people want their needs anticipated from customized marketing, and roughly 60% of millennial and Gen Z consumers say they are willing to share data for personalized offers and discounts.

The hyper-personalization of services, therefore, becomes a strategic imperative for growth for both businesses and banks.

Hyper-personalization is multi-pronged in its benefits. To start, personalization for the consumer means tailor-made service and product recommendations built from analytic data provided by the individual’s consumer habits. The more data that can be provided, the better picture of consumer needs that can be formed and offerings improved.

For those delivering the services and products, a more satisfied consumer is more likely to continue their relationship. Taking a more holistic approach to capturing customer data further helps businesses build an empathetic connection with customers and better understand their consumer habits. Captured data can additionally give insights into how to include those traditionally excluded from traditional banking, providing pathways for financial literacy to those who may have previously lacked sufficient access to and education on the financial world.

Personalization applied

To reach the largest number of individuals most effectively, banks can pair with employers to connect with employees and find what financial challenges they struggle with most. Using AI, analytics insights into consumer behavior and patterns can be used to construct each individual's most accurate profile possible. Hyper-personalization can then occur as individuals are targeted with products and services based on this data.

What’s more, when banks work with employers to reach employees directly, they can capture real-time and high-quality data from individuals that would otherwise be lost or go unseen. Personalization works best when banks can go from reacting to consumer needs, a loan in a crisis, for example, to predicting consumer needs such as a saving plan suggestion or investment guidance to help build emergency funds.

Empowering financial literacy

In Maslow’s Hierarchy of Needs, if an individual's more basic needs are being met, such as financial stability, they can go on to excel in other areas of their lives. When banks and employers work together to personalize banking, they can help individuals develop their financial literacy and be ready for more advanced banking offerings.

If banks and businesses focus their attention on genuinely listening to their customers, their reward will be satisfied customers not feeling the need to look elsewhere. Personalization can also be a marketing strategy where banks and employers differentiate their offerings to foster a stronger brand identity as a result.

Personalization also removes barriers to financial inclusion. AI insights allow us to better understand consumer needs and behaviors and provide improved suggestions for product development and service offerings. AI then amalgamates individual data into company or industry-wide that improves service offerings at scale.

With more people included in our financial systems, banks also see an expanded customer base, and employers can conduct more supportive relationships with their employees. As more people become financially literate and catered to, we also improve the health of our economic ecosystems to the benefit of everyone.

Visit BOND.AI to learn more about AI in digital banking.

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