The Power of Personalization: How Banks are Tailoring Services to Individual Customers

Banks are gradually recognizing the transformative potential of personalized interactions. A survey by Boston Consultancy Services says a bank with $100 billion in assets could achieve up to $300 million in revenue growth through personalized customer interactions. The adoption of personalization in banking not only enhances the overall customer experience, but also unlocks substantial revenue growth. Banks that are armed with data-driven insights are reshaping their services and products to cater specifically to individual customers. Let's now explore how banks are forging a more tailored and responsive approach to meet individual customer needs via personalization.

How Banks are Tailoring Services to Individual Customers

“Everything is going to be connected to cloud and data…

All of this will be mediated by software.” Satya Nadela (CEO, Microsoft)

Banks are customizing services to meet the needs of individual customers, especially with the help of data analytics and artificial intelligence (AI). Let’s explore how:

• Personalized product and service recommendations

Banks leverage advanced analytics and AI to personalize customer experiences. How? By analyzing customer data, including transaction history, preferences, and behaviors. This analysis helps identify patterns and predict customer needs, allowing banks to provide personalized solutions and services like customized investment advice, tailored loans, and individualized financial planning, and offer personalized financial service and product recommendations (think relevant savings accounts and credit cards). Banks may also customize loan and credit terms based on individual customer profiles. This could include adjusting interest rates, repayment schedules, or credit limits to better suit the customer's financial situation.

• Personalized marketing communications

Customer data acts like a treasure trove of information for banks, using which they can personalize marketing messages–like targeted offers, promotions, information about relevant financial products and services, and so on. AI crunches all customer data like preferences, behaviors, transactions, etc. and provides banks with valuable insights that can help them craft highly relevant and targeted marketing messages for customers. This data-led approach not only increases the effectiveness of marketing campaigns but also fosters a more meaningful connection between the bank and its customers. Personalization in marketing communication leads to higher trust, customer engagement, satisfaction and loyalty. 

• Customization of account features

Some banks allow customers to personalize their account features, like spending limits, receiving real-time transaction alerts, etc. This empowers customers to model their account features on their unique preferences and financial habits. It also increases control and security for customers and makes for a more responsive banking experience. For example, spending limits can help customers manage their finances better, and transaction alerts help them stay informed of transactions all the time. Customization of account features enhances customer experience and loyalty, and is a sure-shot strategy of success for banks.

• Mobile banking facility

Banks offer cloud-based mobile apps, online platforms, digital wallets, etc. to serve customers better and meet competition in the market. These on-the-go digital solutions–with features such as spending analysis, credit score, personal budgeting advice–not only empowers customers but also creates a personalized and tailored experience for them. 

• Customer loyalty programs

One more area where the twin advantage of data and AI work their magic is customer loyalty programs. Advanced data analytics and AI models help banks to analyze individual spending patterns, preferences and behaviors – to design personalized rewards and benefits for their customers. This tech-led tailored experience enhances customer engagement and satisfaction - thereby improving customer retention and loyalty. 

• Real-time customer support through chatbots

By 2022, around 98 million users, roughly 37% of the U.S. population, interacted with a bank's chatbot. Projections indicate this figure will rise to 110.9 million users by 2026. ChatGPT showcases the power of natural language processing (NLP), generating human-like text based on input. NLP powered chatbots are increasingly revolutionizing customer service and automation in the banking industry. For instance, chatbots can offer 24/7 assistance, handle customer inquiries and resolve issues promptly, provide account information, and facilitate basic transactions–all leading to increased customer satisfaction and lowered operational costs, potentially saving banks up to 30% in customer service costs. Moreover, bots can be trained to extract valuable insights from unstructured data, such as customer reviews and social media posts, offering a deeper understanding of customer sentiment and needs.

• Enhanced security measures and fraud detection

Banks leverage AI and machine learning to analyze transaction data and look for fraudulent patterns that can help them detect unusual activities and report fraud. Advanced data analytics and AI models pull in data from various sources – and thereby, use customer behavior and patterns to identify suspicious activities. This enhanced security helps banks stay compliant with various regulatory bodies and systems, including Anti-Money Laundering, KYC, etc. 

Strategies for implementing personalization

Successful personalization efforts go beyond incorporating a customer's name in marketing communications. It involves collecting and meticulously analyzing customer data--both demographic as well as transactional. Ensure a more effective personalized customer experiences by:

• Utilizing advanced analytical tools and technologies like AI/ML
• Gaining insights into the customer’s preferred communication channels
• Creating interactive customer pathways by tailoring website landing pages and providing customized promotions and offers.
• Gathering data from external sources through open banking initiatives
• Giving customer privacy an equal weightage
• Continuously adapting and evolving their strategies with changing times and customer needs

Getting started

By combining technological advancements with a deep understanding of customer behavior, banks can create a more personalized and tailored experience for their individual customers, ultimately enhancing customer satisfaction and loyalty. However, establishing a perfect synergy between technology and customer understanding is paramount in unleashing the full potential of personalized solutions and services. Hence, finding a partner adept at merging technology with customer behavior insights is crucial for achieving extraordinary results in personalized banking experiences.

Despite significant AI investments, only 8% of banks effectively utilize predictive insights from their machine learning models in marketing campaigns. Let Srijan optimize your personalization efforts and guide you through the process.