How finance gets personal, or the revolution of hyper-personalisation in Banking

 

“Imagine if we, as a bank, could precisely know what each customer needs before they even articulate it. We could offer them financial products that they actually want, not just what we think they might need,” says Emily, a successful bank manager who is always eager to innovate. 

She wants to pursue advanced hyper-personalisation tactics, while her colleague Marco, a stickler for traditional methods, remains sceptical. She tries to persuade him. 

“But our current systems work fine. Why fix something that isn’t broken?” retorts Marco. “Customers have always come to us because they trust our traditional approach.”  

Unfazed, Emily pulls out her tablet, showing Marco data from a recent study on customer satisfaction.  

“Look here,” she points out. “Banks adopting personalised services report higher customer retention rates. It’s about evolving with the customer’s expectations, not just sticking to what’s been done before. If that would make you more comfortable, we could test it out first.” 

Despite his first hesitation, Marco finds himself reluctantly drawn in by the appeal of hyper-personalisation. As he considers the possibilities, his curiosity gradually outweighs his scepticism, letting him embrace this innovative approach’s potential.  

Weeks later, the results from the pilot project are undeniable. Customer feedback is overwhelmingly positive, and Marco acknowledges how it has improved efficiency and satisfaction. 

This friendly exchange between Emily and Marco was the start of a bold journey in their banking services—and with a reasonable ground. A PwC survey on customer loyalty shows that 82% of participants express their willingness to provide personal data in return for an enhanced customer experience.  

Likewise, in another PwC survey, 73% of participants consider experience to be a significant factor in their purchasing decisions, ranking it behind price and product quality. Moreover, they are willing to invest more in the aspects of the experience that are most important to them: 43% would pay extra for increased convenience, while 42% would pay more for a friendly, welcoming experience. Lastly, 65% say they value a positive brand experience over exceptional advertising. 

In short, customers are craving tailored experiences. Thus, banks that adopt hyper-personalisation strategies tend to see higher customer retention rates because satisfied customers are more likely to remain loyal and less likely to switch to competitors. Plus, personalised experiences can attract new customers seeking services that cater to their needs and lifestyles. 

In this blog, we examine how hyper-personalisation is revolutionising the banking industry. We also explore the technology that drives it, its major benefits, and the hurdles banks need to face to become more attuned to their clients’ needs. If you want to find out how your bank could soon understand you better than you do, read on as we unpack the future of personalised banking. 

So, what exactly is hyper-personalisation in banking? 

Traditional banks often struggle to deliver great customer experiences, while fintechs and digital banks are raising the bar by showing the opposite. Customers now expect tailored interactions from all service providers, including their banks.  

Quite simply, hyper-personalisation takes customer interaction to a new level. Banks can use data and analytics to dive deep into each customer’s needs, preferences, and behaviours. With new tools, engines, and artificial intelligence (AI), they can process recent customer activity, events, and real-time signals.  

AI algorithms then analyse these data sets to find patterns and trends in customer behaviour. Let’s say that a customer often makes international transactions. The bank might recognise this pattern and offer services related to foreign currency exchange or international travel insurance.  

Hyper-personalisation also relies on historical data to predict future behaviours. For instance, if a customer’s spending increases in certain categories, it can forecast future spending and suggest budgeting tools or special offers in those categories. 

The outcome is personalised services and products that match each customer’s needs, creating more appealing and enjoyable experiences for them.  

Five benefits of hyper-personalisation 

Just as streaming platforms like Netflix capture our attention with tailored recommendations, banks can achieve a similar engagement by personalising their services.  

Indeed, we believe customers would welcome a similar experience in banking, receiving personalised product suggestions and service interactions that make them feel valued every step of the way—and beyond. Here are the main advantages of applying hyper-personalisation in banking, which ultimately benefit customers: 

• Competitive advantage: Banks that implement hyper-personalisation differentiate themselves from competitors. Offering a premium, tailor-made customer experience allows them to stand out in a crowded market, attracting and retaining customers more effectively. 

• Better targeting and segmentation: These are the cornerstones of hyper-personalisation in banking. By using data, banks can unlock invaluable insights, gaining a deeper understanding of their customers, their preferences, and the factors that differentiate them.  

In turn, this understanding allows banks to create targeted segments based on customer behaviour, preferences, and needs. This data-driven approach empowers banks to create highly personalised customer experiences by consolidating customer data from various transactional, behavioural, and observational sources into a unified 360-degree customer profile view.  

• Higher conversion rates: By tailoring content and communications to each customer’s stage in their financial journey, banks can build their most effective communication and customer interactions strategy.  

When creating marketing campaigns, banks can segment their audience according to different criteria such as demographics, behaviour, and interactions. This allows them to create targeted campaigns that effectively resonate with specific customer segments—delivering the right message to the right audience.  

This personalised approach ensures that customers receive relevant information at every touchpoint, from marketing campaigns to personalised emails, chatbot interactions, or website content, addressing their individual financial needs.  

Platforms can also be designed to enable lead scoring and nurturing capabilities, empowering sales teams to focus on high-potential customers.  

As a result, personalised and targeted interactions lead to higher conversion rates as customers are more likely to engage with relevant product recommendations or personalised offers, feeling that the bank’s offerings are curated just for them. 

• Improved customer retention: Hyper-personalisation in banking goes beyond marketing—it also plays a crucial role in improving customer retention and enhancing service interactions.  

By analysing signals such as transaction history, banking preferences, and pain points, banks can trigger targeted messages to encourage customers to complete their transactions or address their specific financial needs. This level of customisation ensures that customers feel valued over time, contributing to improved customer retention. Satisfied customers who perceive a bank as attentive and responsive are more likely to continue their relationship, thereby increasing customer lifetime value. 

Moreover, hyper-personalisation extends to customer service interactions. Support agents can provide more efficient and relevant assistance by understanding a customer’s history, preferences, and previous inquiries. With a unified platform, banking agents can access customer data in real time, leading to faster issue resolution and improved satisfaction.

• Increased customer loyalty: Consistent attention to individual needs and preferences strengthens the bond between customers and banks, fostering increased loyalty as customers feel uniquely valued and understood. 

Hyper-personalisation allows banks to recommend financial products based on individual preferences and transaction history. These personalised product recommendations can be displayed on banking websites, in emails, or within mobile apps. By enhancing the banking experience and increasing cross-selling opportunities, personalised recommendations also drive revenue. 

Furthermore, hyper-personalisation ensures that customer experiences and expectations remain aligned with banking services. When tailoring interactions to individual financial needs and desires, banks can effectively engage customers at different decision points, enhancing overall customer engagement. 

Challenges to watch for when going for hyper-personalisation  

Now that you are aware of its benefits, here comes a word of caution: hyper-personalisation in banking isn’t, however, straightforward. There are several challenges banks need to be aware of and overcome as they try to tailor their services more closely to individual customers. These are the primary ones we have seen: 

• Scattered data: Customer information tends to be dispersed across various systems. For instance, while sales details might be stored in the Customer Relationship Management (CRM) system, transaction histories could be tucked away in the point of sale (POS) system. This fragmentation makes it challenging to obtain a comprehensive and clear understanding of each customer’s preferences and needs. 

• Multi-channel communication: In today’s digital age, customers interact with their banks through various channels, including social media and text messaging. This presents two main challenges. 

First, similarly to the first point, aggregating data from multiple channels, such as social media interactions, text messages, as well as more traditional channels like in-person interactions and phone calls, is a significant challenge.  

Banks can gain a comprehensive 360-degree view of their customers, enabling them to provide truly personalised experiences, only by collecting and integrating data from all these channels. 

Second, ensuring consistency across communication channels can be challenging for banks. Therefore, it’s essential for banks to prioritise ensuring a smooth and uniform customer experience, regardless of the channel through which the customer reaches out.  

• Privacy and security: The more data banks use, the bigger the privacy concerns. Staying compliant with regulations like the General Data Protection Regulation (GDPR) while handling more detailed personal information is a big challenge. Ensuring top-notch security and respecting privacy is crucial. 

• Technology integration: Hyper-personalisation relies on modern technology such as AI and machine learning and other advanced software solutions. However, integrating these technologies into existing banking systems can be both costly and complex. The integration process involves aligning new tools and software with the bank’s legacy systems, which often requires significant customisation and infrastructure changes and upgrades.  

• Cultural shifts: Moving from a product-focused to a customer-focused approach means changing the bank’s culture. This shift can be hard in traditionally structured banks, requiring their current teams to receive training and sometimes new talents to be hired to handle these new tools and engines. 

Building the right technical foundation for hyper-personalisation  

These challenges seem difficult to overcome, but having a solid technical setup will allow banks to get hyper-personalisation right. Multiple technologies can transform banks from faceless entities into attentive service providers that are always a step ahead, making every interaction feel personal and prompt. It’s as if your bank is that friend who can anticipate your needs, sometimes even before you do. 

AI, machine learning and big data are the technologies busy behind the scenes, crunching numbers. They enable banks to delve deeper into customer data by analysing financial patterns and preferences to predict future needs and having a 360-degree customer view. 

While these tools are the backbone making the magic, building the right technical foundation for hyper-personalisation requires banks to adopt a tailored approach that recognises their uniqueness, especially in terms of existing environment and technology infrastructure.  

That’s why they need to assess their current systems and processes, identify areas for improvement and optimisation, and define their own client strategy. We can help them here and provide a clear and practical roadmap. 

How Luxembourg is catching up 

Luxembourg’s banking sector is gradually embracing AI-based technologies, though the journey has its twists. Back in 2021, a PwC Luxembourg survey highlighted a surprising lag: 80% of banks in the Grand Duchy were unsure about how to use AI, even though there was a universal interest in integrating it as well as process automation, especially in risk and finance operations. 

Fast forward to 2023, a joint study by the Central Bank of Luxembourg and the Commission de Surveillance du Secteur Financier (CSSF) paints a more optimistic picture. Now, 68% of banks plan to invest in AI, a significant jump from the 32% reported two years earlier.  

Moreover, the Luxembourg Bankers’ Association (ABBL) has partnered with the University of Luxembourg’s Interdisciplinary Centre for Security, Reliability and Trust (SnT) to address the AI’s reliability challenges in banking. 

Looking ahead, banks are set to broaden AI applications beyond traditional uses. They are exploring its potential in market sentiment analysis, cross-channel customer experience analysis, algorithmic trading, and robo-advisors. These innovations could transform banking operations and customer interactions, providing more sophisticated, real-time services. 

But, before AI can truly work its magic, there’s a laundry list of chores to tackle, mainly around data governance and quality.  

Bottom Line 

Looking back, Emily showed Marco how offering personalised services to clients can be a game changer for banks, which inspired him to try something new. In fact, banks have been adopting technology to enhance their customer service; hyper-personalisation is just one example of this trend, and its potential is significant.

It goes beyond understanding client needs—it even exceeds their expectations. It does so with AI and big data, which allow banks to provide clients with tailored financial services precisely when they need them. Not only will this increase banks’ productivity, but it will also help them connect with their consumers on a deeper, more personal level. 

Undoubtedly, banks of the future will have to be able to anticipate their customers’ wants and requirements before they even say them. Successful personalisation in this new age will ensure their survival and even flourishing, transforming mundane banking into a real opportunity for genuine interaction. 

So now you know your current banking experience could be improved with a touch of personalisation. If you’re ready to see how your bank could become more attuned to your needs, why not start a conversation about its personalisation strategies today? 

 

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