5 minute read

Banks need data-driven answers to improve hyper-personalization

Tuesday, June 25, 2024

5 Minute Read

If customers feel appreciated, they tend to remain loyal. In the financial industry, that means understanding their needs to deliver personalized experiences in an effort to retain their business for years.

Many banks say they prioritize personalization, with 57% focused on improving engagement. Yet according to their customers, these efforts often fall short.

Only 14% of customers describe their financial institution (FI) as “extremely effective” at delivering contextually relevant experiences and offers.1 Another 65% say banks should make it easier to find and shop for financial products.

Generally, most banks are aware of their shortcomings. That’s why 68% of FIs plan to increase their investment in personalization technology.

The problem is 94% said they can’t give customers the kind of hyper-personalization they want. Hyper-personalization is a way of supercharging personalization using data, advanced analytics and AI to understand and engage the audience at every step of the customer journey.

of banks said they can’t give customers the kind of hyper-personalization they want.1

Banks and FIs may need to improve how they use customer data, such as cardholder purchasing history, for more effective individualized experiences.

“Why does my bank not know me? The customer feels this way,” said Alyson Clarke, Principal Analyst, Forrester Research.2

By improving personalization efforts, banks and FIs may build trust and deliver enticing offers to customers — offers that make them want to make purchases and feel relevant. This can result in keeping their business year after year, potentially driving revenue — sometimes up to 30%.

What’s holding banks back from this revenue growth? Possibly the lack of insights into individual cardholders.

Business needs vs. customer needs

There are many reasons why banks struggle with personalization.

Increased costs rank as banks’ top business impact due to challenges of achieving and expanding personalization objectives, according to one study.

Perhaps the most notable reason is prioritizing business needs — such as selling more products — over customer needs. This approach often leads to personalization strategies that lack critical data and insights capabilities. The result? A limited understanding of the customer, and an inability to deliver the right message and establish a trusted relationship.

On the other hand, the opposite approach can lead to positive results. It all starts with meeting customers where they are — in the digital world.

An “emotional tug to the digital world”

Years ago, a typical scene at a bank was one customer talking to a teller about getting cash, more customers in line, and another asking a manager about a loan. With the shift from in-person to digital banking, “the emotional feeling is a lot harder these days,” said Jaron Murphy, Sr. Partner, FICO. “I don’t know the last time I went into a bank.”1

How can something digital be personal? By understanding how to engage customers. Financial information should be:

  • convenient (mobile, desktop friendly)
  • conversational (chat, voice)
  • relevant (tailored offers)
  • conveyed with the right message or tone

For example, if a customer loses his job, the last thing he wants to see is an ad for a new credit card. Instead, his bank creates a personalized online banking menu with an offer to lower installments to have more time to pay bills.

This is the approach of Banco Bradesco, the third largest bank by assets in Brazil and Latin America. They wanted a customer-centric strategy and to provide sustainable credit for customers. Their approach focused on UX (listening and understanding customers), technology and business strategy (value prop and life cycle).

Now every Banco Bradesco customer has their own personalized online banking menu. These efforts led to more than a 56% increase in clients with loan applications per month and a 30% increase in conversion rate. Plus, more than 82% of customer reviews have been positive.

“Understanding customer behavior is key,” said Fabiana Falcão, Sr. Business Growth Manager, Banco Bradesco.3

And the first step is getting the data.

Deliver the right experience with the right data

Data can help get the right offer to the right customer at the right time.

Getting that data often means moving from legacy technology to next gen platforms. Inefficient technology is another challenge for delivering great customer experiences because of the lack of data, automation and integration into existing solutions. Next gen platforms can help address gaps in — and access to — data.

Issuers may also offer APIs, reporting dashboards, even event streams for real-time customer data. By analyzing data such as transaction spending patterns and credit utilization, they get insights into individual preferences. With that information, banks can create personalized offers, discounts and rewards.

Credit card offers and rewards for travel are an often-used approach. If a cardholder sees a travel deal — one that their bank provides — on their banking app or by email that’s within their budget, they may be inclined to book a trip.

Next generation data analytics platforms provide the framework to efficiently manage all that data and get to those insights. It gives banks a way to better manage their portfolios, including opportunities to mitigate risk, improve efficiencies, grow revenue, cross sell or upsell products. - TSYS VP of Global Data Products Kenneth VicianaNext generation data analytics platforms provide the framework to efficiently manage all that data and get to those insights. It gives banks a way to better manage their portfolios, including opportunities to mitigate risk, improve efficiencies, grow revenue, cross sell or upsell products. - TSYS VP of Global Data Products Kenneth Viciana

Taking it a step further, data can be used to trigger real-time notifications based on cardholder activity. When a cardholder becomes eligible for a credit card account upgrade, say from gold to platinum status, a bank is alerted. The notification enables the bank to personally reach out to the customer with marketing communication highlighting the benefits and rewards of a platinum card.

Event Streaming Use Case

Cardholder Remi spends enough with his card and has a high enough credit score that he is eligible for a card account upgrade. His bank is notified, and can reach out to him with marketing communication highlighting the benefits of having a platinum card. Within a few days after Remi accepts, he receives the new card and can start spending with it.

The result? Data streaming helps reduce the personnel resources needed for account status upgrades, increase revenues by capitalizing on otherwise-missed opportunities and ensure that you continually meet the high expectations of and satisfy your cardholders.

AI: Deliver future personalized experiences to the present

Financial services ranks 4th out of 5 major industries when it comes to personalization (behind retail, media and technology). With more than 70% of consumers expecting companies to deliver personalized interactions, how can banks be prepared and effective at connecting with customers in the future?

AI and predictive analytics may offer a potential path. Banks are starting to leverage these to deliver such experiences and interactions, particularly with life events.

When looking at a consumer trajectory with life events such as a wedding, having kids or buying a house, the data helps predict customer milestones. This is where the customer journey connects with predictive analytics. That data ties in their needs and anticipates products they want.

Through such relevant and valuable information, customers will feel like their bank is being proactive in trying to help them. Additionally, customers can feel as if their bank understands and cares about them and their financial well-being.

This opens opportunities for banks to grow with personalization. They just have to go about it the right way.

“AI will bring data to insights a lot quicker, and we will see faster personalization capabilities,” Viciana said. “AI and predictive analytics will need to become a high priority for banks to help deliver future customer experiences.”

If you are interested in learning more about how to use your data and analytics to grow your hyper-personalization strategy with TSYS Loyalty, TSYS Event Streaming and TSYS next gen analytics solutions, click here.

1. FICOWorld 2024, Jaron Murphy, Sr. Partner, FICO, Turn Customer Data into a Major Competitive Edge with Real-Time Analytics & Event-Based Decisioning, Breakout Session, May 16
2. FICOWorld 2024, Alyson Clarke, Principal Analyst, Forrester Research, How to Grow Business and Build Trust with Always-On Hyper-Personalization, Breakout Session, May 17
3. FICOWorld 2024, Fabiana Falcão, Sr. Business Growth Manager, Banco Bradesco, Empowering Customers through Personalized Digital Offers, Breakout Session, May 16

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