Recent studies showed that 52% of consumers expect their offers to be personalized, and 62% want firms to anticipate their needs. This is excellent news for financial institutions who are looking to leverage innovative approaches to understanding their clients better while deepening their engagement.
Now is the time for your FI to gain a competitive advantage by capitalizing on the power of personalization by offering a more user-centric and solutions-based experience for your customers.
To do that, though, you have to understand the power of personalization. Let’s discuss the concept in more detail.
Personalization in Financial Services
Personalization in financial services focuses on transforming a firm’s customer interactions using data and analytics to anticipate individual needs and build deeper relationships.
It is not all about selling, but providing information about the FI’s products and services on a regularly occurring basis. By doing so a financial institution can transform itself into the go to source for a consumer or business’s financial needs. This strategy demands recursive learning, a 360-degree view of customers, and a personalized curriculum intended to change customers’ behavior and attitude.
Numerous firms have shown how personalization is vital. Netflix, for instance, uses personalization techniques to provide movies and TV show recommendations. Starbucks uses digital partnerships and technologies to build relationships with millions of consumers across its 7,000 stores.
That said, while most FI’s are significantly investing in their data and analytics capabilities, the “Netflix of banking” has not yet emerged. The primary reason is that real end-to-end personalization means deploying data science capabilities that utilize clean and accurately categorized transaction data delivered daily.
Eventually, if done perfectly, personalization can offer a direct route to reduced customer churn rates and higher sales. It can lead to yearly revenue uplifts of up to 10% for financial service firms. It will enable firms to truly understand their clients, anticipate their needs, and engage in rich dialogues about their financial capabilities, fostering loyalty that lasts a lifetime.
What Are the Perks of Personalization?
Here are some of the benefits of personalization:
- Studies estimate that for every $100 billion in assets a financial institution offers, it can achieve over $300 million in revenue growth by personalizing customer interactions.
- Personalization also helps drive sales communication, even though these might not be the most frequent interactions. Some financial service firms have used personalization to boost branch sales productivity by over 30%, while others have seen an increase in revenues by 20% in three years.
Examples of How Financial Service Firms Can Deliver Personalization
Three core elements form the foundation of banking personalization at scale:
- Analytic Engine & Recursive Learning – by using systematic experimentation, financial institutions allow flexibility and create tailored offers that evolve with time. The recursive learning ability needed for personalization constitutes a built-in advantage for individuals who leverage it first
- Consumer DNA – bank systems need to feed a single, enterprise-wide view of every consumer—a view that systematically reflects every customer at any given time
- Personalized Curriculum – consumer offerings are customized to one segment. They define desired consumer behaviors and strategize on how best to incentivize those behaviors
Financial institutions today are not just competing against each other but against technological powerhouses that harness data to their advantage. To keep up with the changing environment, FI’s have to revamp their approach to serve their customers at a personal level.
With proper personalization, FI’s can decrease friction in their customer journey and attain higher engagement.
For the past 20 years, Insight Financial Marketing, L.L.C., has provided financial institutions with customer insights from the analysis of customer financial transactions such as ACH, debit card, credit card, and wire data. These insights are typically leveraged to help deepen relationships with consumer and business customers.
With IFM’s data analysis sophistication, financial institutions can better understand the unique changes in their customers’ financial lives as they happen to enable the financial institution to enhance marketing messaging resulting in outreach that is well received by their customers.
Rob Reale is an Associate Partner and National Sales Manager responsible for business development and sales at Insight Financial Marketing. Rob began working in the Mortgage Banking industry in 1990 and currently helps the financial service industry leverage unique and innovative solutions.