Personalization in Banking – How Customers Can Create Their Own Banking Package

By Santhi S
Principal Architect
Revenue Management Product
SunTec Business Solutions
According to BCG Retail Banking Advisory Survey, “for every $100 billion in assets that a bank has, it can achieve as much as $300 million in revenue growth by personalizing its customer interactions”.1 Personalization is a multi-billion-dollar market opportunity.

Personalizing customer interactions in this context is not just sending a personalized message or having a relationship manager associated with the customer. The purpose of this is to provide a complete personalized experience that extends far beyond the typical bank-customer exchange.

On the customer side, the ability to personalize banking experiences is a key expectation among bank customers. Customers are happily willing to pay for the services based on the value they get from the bank. As per Capco research report, 72% of customers rate personalization as “Highly Important”.2

Banking systems have traditionally been rigid, making it difficult for them to take advantage of this opportunity. The implementation of personalization has been challenging, and whatever progress has been made has been mainly through bank-led personalization strategies, where the choice of the customer is limited. Banks have been able to bundle products to some extent which has helped them get closer to a dynamic segment, but the holy grail of “segment of one” has been forever elusive.

Tailor-made relationships helps banks to create more powerful and impactful personalization experience for banking customers which differentiate them from their competitors. Technology has made it possible for customers to select, define and personalize experiences by consuming products and services that enrich their banking relationship for a truly bespoke experience. Here the customers are provided with the option to choose from the bank’s existing portfolio of products and services to create the package that meets their requirements. They empower customers to customize their packages or bundles from the available set of products and services. This self-service model in banking ensures customers get what they want and how they want it. Further, it allows the customers to choose from the price points/rates that match their anticipated consumption.

How Banks Benefit?

Improved Customer Trust and Loyalty: The customer who spends their time choosing offerings for themselves will be more engaged and committed to the bank in the long run. The customer’s trust in the bank increases as there is upfront transparency and customers know in advance what they will be charged for. In fact, they themselves selected it.
Cost advantage: When customer engagement becomes symbiotic based on tailor-made banking interactions, banks can design their offerings which match the market need. This leads to huge cost savings by eliminating wastage that goes otherwise in designing offerings that do not have an uptake.
Competitive Advantage: The data captured from the services customers opt for can reveal a wealth of information about their preferences, the trends that they care about, and their requirements. This is invaluable for banks as they strive to deepen their relationships with customers and stay ahead of the competition. Also with deep engagements, the voice of customers becomes a powerful marketing tool for the banks.
Lesser Disputes and better balance sheets: Some banks report that only 40% of their customers pay the charges levied on the banking services on time. This low percentage is because customers do not understand the charges and undergo a long dispute-resolution process with the bank. Overall transparency brought in by tailor-made relationships, leads to lesser disputes from customers. This ensures customers are paying their bills on time which improves the balance sheets of the banks significantly.

Technology-Fuelled Tailor-Made Capabilities

Post-COVID-19, the adoption online and mobile banking has risen significantly across customer segments. Technology, therefore, is key to drive customer-made bank accounts. Most banks understand it is critical to invest in a powerful digital platform that can ensure optimum revenue management and enable relationship-based pricing models. Any platform they choose must also be able to facilitate customer-driven tailor-made accounts. A robust cloud-native technology platform will offer banks the easy scalability and flexibility to offer this service to customers. Such a platform must be able to:
Support the creation of tailor-made relationships – Every tailor-made product made by the customer should be as good as a bank-driven product variant. The platform should be able to host the customer-driven variants while the core banking ones should remain on the core system. This will lessen the pressure on the core, and the bank business team will be able to easily manage the variants on the tech platform through simplistic configuration.
Instantaneous Product Roll Out – A scalable digital platform can implement customer-made variants in seconds and manage the lifecycle of each variant efficiently.
Monitor Customer Commitments – Tailor-made models are subject to certain commitments made by the customer. The platform must be able to track these commitments to ensure that the customer continues to be eligible for this facility.
Performance monitoring – The data generated can help track the performance of each variant and provide insights on service usage and revenue generated. This data is vital for the bank to identify trends ahead of the competition and act quickly to capitalize on them.
The technology-powered modern world thrives on personalization. Hyper-responsive brands like Netflix and Amazon offer personalized recommendations for entertainment and shopping and even apps like Uber suggest destinations based on ride history. Understandably, customers expect a similar level of choice and customization from every other service including banking. For retail bankers, delivering a hyper-personalized experience to every customer can be a challenge, especially under the current volatile market conditions. Empowering customers to tailor-make their product suite from an existing array of offerings is an effective strategy to deliver personalization without overwhelming them and to streamline product management practices. It is key to long-term customer delight, loyalty, and revenue growth for the bank.

Sources:

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