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Financial Services' Missing link: Personalization at Scale and Mindsets

By Keith P. O'Brien

6 minutes estimated time to read

My father has always had a “bank manager,” his main point of contact for financial services—mortgages, pensions, personal and corporate bank accounts, investments. And, by way of comparison, his 26-year old niece in Austin does not have a bank manager—she uses Marcus by Goldman Sachs as her savings account and orders a customized Starbucks halfway through her commute to work that she pays for through her Starbucks App when she picks her coffee up in her building’s lobby. These relationship-based banking approaches may appear either anachronistic or radical depending on your perspective, but they are actually identical. I am not contrasting 20th Century banking with our digitally focused financial services but rather analogizing them.

Digital banking becoming the norm

My father’s customer experience encapsulates what personalization should deliver—interactions, advice and services tailored to individual needs and priorities. Banks fund significant IT and analytics budgets to replicate the one-on-one personalization my father expects but delivered via the digital platforms that my cousin takes for granted. Personalization at scale—to use the marketing term of art—is a priority for every financial institution.

A recent BCG (Boston Consulting Group) analysis captured the personalization relearning that the banking sector is undergoing:

“In many ways, personalization at scale is a 21st-century approach to delivering what the banking industry lost many years ago: the ability to truly know customers, anticipate their needs, engage in a rich dialogue about their financial lives, and, as a consequence, foster loyalty that can last a lifetime.”          

What Does Personalization in Banking Really Mean? March 12, 2019, Boston Consulting Group

The onus on personalization has nothing to do with nostalgia and all to do with escalating competition among both traditional institutions and new entrants (as forecast by The Economist for 2020). Consider Goldman Sachs, a capital markets powerhouse, prioritizing Marcus, it’s online consumer banking platform or the US launch of Monzo, a UK-based “bank” that operates solely as a mobile app. Such in Monzo’s ability to deliver services innovatively that 18 new customers join Mono for every one that leaves—the highest rate for any UK bank.

“Almost everywhere, competition will intensify with the rise of online banking. Fintech companies and payment services will extend their reach.”                                                                                                                                 Financial services industry outlook, The World in 2020, November 5, 2019, The Economist

A more competitive banking marketplace is not a recent phenomenon. What has fundamentally changed is consumer expectations. Personalization has been redefined for all banks because the standards set by digital innovators like Netflix, Amazon, Spotify for customized experiences, convenience and access have reset consumers’ service expectations of all consumer industries. 37% of consumers said they’d like their bank to be more like Amazon in a BCG survey.

Banks, given the centrality of money in our lives, are subject to especially demanding expectations. Meeting consumer anticipations creates an array of operational issues from navigating fragmented customer databases to coordinating across sales channels. Important as implementation issues are, almost every bank overlooks how personalization must align with human behaviors.

Attitudes are the “why” of human behavior

The conventional wisdom around banking personalization underscores demographics, psychographics and behaviors as the ways to segment and personalize interactions with prospects and customers. The point of personalization is influencing behaviors of course. But humans make decisions based on attitudes or mindsets towards the issue at hand; everything else is largely irrelevant. Think about this way: if Jane is a procrastinator this mindset affects how she views choices and acts. Say a bank wants to sell her a one-year CD: Jane will get personalized messages shaped by Jane’s lifestyle, zip code, age and so forth. This personalized approach is highly unlikely to get a response because they’re ignorant of how procrastination stalls Jane’s economic choices. Behaviors can be seen; attitudes must be uncovered.

Choices are mostly based on attitudes, and once we understand attitudes, we can determine consumers’ likely choices with a higher degree of reliability. Personalization that influences an individual’s choices must engage that individual’s mindset. Communications must be compatible with Jane’s procrastinator mindset by pairing a time-sensitive offer with customer support that simplifies and expedites purchase.

To deliver an effective personalized engagement strategy requires financial institutions to adopt a paradigm shift towards a customer’s mindset rather than informational or marketing segmentation models. Artificial intelligence (AI) has the ability to translate customer data into insight on an individual customer's mindset. We partnered with DXC Technology, the global IT services firm,  and American Banker to show how financial services providers can leverage AI to transform the customer experience,  reduce customer turnover, and boost share of wallet in an on-demand webinar. Watch Using AI to Personalize Customer Engagement.

Contact us: Info@discourseanalytics.com

 

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About Discourse Analytics: Humans make choices and act based on how they think, not their socio-economic status or demographics. We harness AI and cognitive science to deliver personalization that engages each individual’s attitudes towards a specific topic.

Our AI-platform profiles the attitudes of everyone within a target population—customers, students, patients—using the existing data on IT systems. A patented “Think-alike” engine clusters like-minded people to predict behaviors and prescribe nudges to maximize the desired outcome. We enable financial services firms, higher education institutions and health care providers to personalize at scale by nudging people's shared mindsets. info@discourseanalytics.com