The Future of Banking: Embracing Hyper-Personalization Through AI

The banking industry has been steadily advancing in technology over the past decade, with a heavy focus on digital transformation. Investments in areas like omni-channel convergence, big data, analytics, customer journey mapping, user experience, and chatbot technologies have been common. However, cloud adoption remains in its early stages within the financial services (FS) sector, and many financial institutions (FIs) are gradually moving forward with plans to migrate to the cloud. Today, most banks offer digital features that allow customers to perform basic banking remotely through a browser or mobile app. This shift has resulted in fewer visits to bank branches, helping banks reduce costs and optimize capital expenditures.

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The increasing application of AI in personalization - Digital Transformation in Banking

Artificial intelligence is now becoming a crucial player in the banking sector, especially in personalization. Banks are using AI to deliver more tailored services to customers, anticipating their needs and providing them with relevant offers or services at the right time. This goes beyond offering the next best product—AI enables banks to predict customer needs and create personalized interactions that can strengthen customer relationships.

External competition, especially from tech giants such as Facebook, Amazon, Apple, and Google (FAAG), has pushed banks to accelerate innovation. While big tech leads in areas like mortgages, payments, and credit cards, FinTechs are creating a better customer experience for certain segments of banking. Banks are now looking to deepen their digital offerings and be better competitors in this fast-paced environment.

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What's Next for Banks: Benefits of Hyper-Personalization in Banking

In banking, personalization has graduated from just the next best product offer. It means that data and analytics can be used to understand and anticipate what customers might need: perhaps suggesting a product, service, or advice during relevant customer interactions. Real-time, or "hyper-personalization," can create more profound customer relationships and deepen trust. Blanket credit card offers or investment account promotions, for example, are giving way to targeted, one-to-one offers. This shift can enhance the acceptance of offers by customers, improve loyalty, and increase trust.

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Case Study: Nudges for Financial Well-being - Hyper-Personalization and the Future of Banking

One large bank introduced a feature on its app where customers could set savings goals and track them. Starting in October 2019, this effort aimed to help customers manage their money and cultivate healthy savings habits. Customers started receiving personalized in-app notifications encouraging them to keep track of their goals and celebrating their milestones starting July 2020.

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Customers provided the following feedback:

- Out of every 10 active users, one sets a savings goal.

Popular savings goals are as follows: "House" is 24 percent, "Holiday" is 18 percent, "Car" is 11 percent, and "Rainy Day" is 9 percent.

Over 2.5 million in-app notifications were sent

Customers with the goal "home" were most active towards the notifications.

The average balance of the customers having savings goals is thrice that of customers not having a goal

Close to 7,500 customers moved from the stage of transactors to becoming savers.

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Pre-Cursors to Hyper-Personalization - AI in Banking

Hyper-personalization requires banks to have an all-around view of their customers, involving data from different sources. Data siloing is a common problem with most banks, and this has limited cross-departmental collaboration and sharing of data. To overcome these silos, the banks should integrate data from business, marketing, and technology teams in order to deliver a seamless experience to customers.

Once data silos are removed, there is the possibility of integrating external data sources to enhance the predictive models. This includes information from other financial services providers, cx management which can help provide a more complete profile on the customer and deliver more contextual offers.

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Hyper-Personalization Journey

There is a need for a bank to view every moment of customer interaction as opportunities to deepen relationships in embracing the hyper-personalization stage. This requires acknowledging existing gaps in the customer experience and defining the clear vision for the future. Gaining commitment and support from management is needed in order to bring this vision into reality. Cross-functional teams, including business, risk, marketing, and technology stakeholders, must collaborate in an agile, iterative manner in the development and testing of MVPs. A "start small, fail fast" approach enables the bank to learn quickly and correct course based on customer feedback.

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Hyper-Personalization: The Next Step in Banks' Digital Revolution

Hyper-personalization is a powerful business differentiator with tremendous growth potential for banks. Those who move swiftly will have a first mover's advantage in a fast-paced market.

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Ready to Revolutionize Your Banking Experience?

Learn more about how hyper-personalization is changing the face of customer engagement in the financial services sector through One Point One Solutions' latest report. Explore the new landscape and discover the key strategies your bank needs to stay ahead in the digital transformation journey. Contact us today to begin your journey toward personalized banking solutions!

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