However, when it comes to banking, little personalization has been rolled out so far behind the firewall of online & mobile banking services, despite the huge amount of highly relevant data begging to be exploited. Things are changing though, as it appears to be the next key development for digital banking.

Comprehensive transactional capabilities

By and large, financial institutions world-wide offer a rich set of transactional capabilities through their online channels today, including multiple types of internal and external fund transfers, domestic or international, standing orders, bill payment, remote check issuance or deposit, card services, account opening, trading and more.

Despite the availability and maturity of such a broad set of transactional features, their delivery within a personalized experience has so far been lagging behind. In several discussions with consumer banking executives, various reasons are mentioned to explain that lag, ranging from limited budget and resources to go beyond the initial priority of getting the transactional capabilities right, to lack of skills in the area of personalization or a fear of the regulator and concerns over privacy issues in exploiting too much of the customer data.

Far from neglecting the need for more personalisation, we are now seeing many bankers acknowledging that analytics to better understand customers’ financial behaviour and the ability to turn these into enhanced digital services are a key investment priority in the year ahead.

Marketing behind the firewall

Analyzing personal and transaction data gives banks the opportunity to understand customers’ needs today and anticipate future ones. Personalization then adds the ability to deliver those insights to customers in a contextual manner. The most obvious application of these techniques, and the one directly inherited from the e-commerce pioneers, is to increase sales targeting and effectiveness.

A low balance with upcoming bills might call for a personal overdraft offer, a high balance on a current account might suggest appetite for a fixed deposit, recurring visits to the mortgage loan information page might indicate plans to purchase a home, a frequent traveller may be interested in a travel insurance, a fine dining lover might appreciate discounts at a popular restaurant, etc. The opportunities to leverage customer-centric data analytics and personalization for targeted cross-selling or merchants-based campaigns behind the firewall are numerous.

Personal finance advisory

While there is a clear opportunity to drive business from the online channels, it is also crucial for banks to avoid limiting the benefits of personalization to achieving pure sales & marketing objectives. The risk of alienating the customer with too many ads and offers, however clever they might be, is significant.

Personalization presents a unique opportunity for a bank to delight its customers with proactive and intelligent online advisory. It is also the ingredient largely lacking from most of the first generation personal finance management (PFM) tools to improve consumers’ financial performance.

Beyond the need to deploy the right technology to enable personalization, maintaining the right balance between marketing messages and unbiased money management advices is a key challenge which banks must not underestimate. Even more so for global financial institutions operating in countries where local culture and preferences might move that cursor of interest and acceptance differently between both.

Not ending up being plain creepy is also a prominent challenge of any implementation of personalized financial services. But doing nothing to make their digital services more relevant and personal for fear of doing too much is not an option either for banks these days.

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But that relationship is also laden with paradox. Despite the apparent breakdown of trust in financial services brands, report after report from around the world show good satisfactions of customers in their banks.

Decent satisfaction… but appalling loyalty

According to the World Retail Banking Report by Capgemini, customer satisfaction has reached a respectable global average of 65% in 2012, with regions like North America leading at 80% and banks in Asia Pacific trailing at 53%. However, attempts at gauging loyalty of the same customers shows worrying results with only 50% of customers confident that they will remain with their primary bank over the next six months.

Customer Satisfaction with Primary Bank (%) by Region, 2012 – Source: 2012 Retail Banking Voice of the Customer Survey, Capgemini

Needless to say that customer loyalty in banking, as in any other industry, is of paramount importance, particularly in a time when banks desperately look to generate revenue. The lifetime value of loyal customers is significantly higher as they buy more banking products in support of the key events in their life. They also generally cost less to serve and naturally act as customer advocates.

Lack of trust… but likely acceptance as infomediary

The dreadful level of trust and confidence of consumers in the banking industry hides another paradox. When asked which party they would trust as a guardian of their personal digital information – or infomediary, guess who comes significantly ahead of social medial sites, telcos and even governments? Banks, of course. This is one of the interesting results of a recent report by Cisco IBSG, where banks were chosen by 42% of the respondents as the most qualified organisation they would be willing to use for a digital footprint management solution.

The optimistic way to look at these paradoxes is to believe that things can be fixed.

Increasing loyalty through financial advisory

In recent years, increased competition and fear of commoditisation (more than the image crisis of the banking industry) have been powerful drivers for banks to focus on customer satisfaction. Improvements such as extended branch opening hours or making sure that customers can accomplish a complete range of everyday banking activities online are laudable efforts. But they might not give banks that extra edge required to trigger a real increase in customer loyalty.

One obvious approach is for the banks to go the extra mile when customers face accidents of life, big (like losing a job) or small (like reverting a fraudulent transaction). Delighting customers upon those high-stakes moments, when the true meaning of “being here for you” is tested, is clearly key.

Building a long-term strategy of ongoing multi-channel assistance to customers might be a more powerful method though. Offering regular personal financial advice from experts who care, with no artificial gee-whiz factor, might be the best way to keep customer from switching. And the online banking service is a natural and cost-effective channel to deploy this value-add financial advisory.

And, beyond increased loyalty, what better way for banks to drum up some much needed customer trust and to improve public opinion than to fulfil their social role and responsibility as financial advisors?

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