24 February 2018
Olivier Berthier

Banking Technology

Olivier Berthier - Moneythor

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Online Banking

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Personalization comes to digital banking

21 January 2014  |  5049 views  |  2

A personalized customer experience has been a de-facto feature of online services and particularly e-commerce for years. Pioneered by the likes of Amazon and their mining of data to create a truly curated experience, consumers have grown to expect tailor-made services from all their online providers.

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.

TagsMobile & onlineInnovation

Comments: (2)

Daniel Smith
Daniel Smith - CHOICE Financial Solutions - New York | 23 January, 2014, 08:41

Olivier, I think you raise a number of very valid observations.

I would even go a step further and suggest that in addition to the personalized customer experience you describe in terms of how a bank tailors its services and interactions with a consumer, they should also look to tailor and personalize the actual attributes of the underlying product offers that they provide.

Analyzing a customers needs or appetite for a particular solution based on the data resources you mention is absolutely valid, but converting the same analysis into a pure off the shelf product is not optimal as the end result is a "push" of a product catalogue that does not achieve the desired customer centric goals that everyone talks about and says they want to achieve.

Ideally, the underlying product processor systems need to be empowered with the ability to additionally tailor the characteristics of the underlying products to the specific personal needs of each consumer in terms of economic attrributes such as rates, term, liquidity, market participation etc.

Think of it as democratizing private bank style personalization, but at a retail, mass distribution level. Banking today however is still too much like Henry Ford's model of mass production, where you can choose any color as long as its black..!

Don't get me wrong, what you propose is completely valid, but I feel its only the first step in achieving the optimal solution for consumers.

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 23 January, 2014, 10:40

Articles on this subject are generally pontificating in nature. Kudos for going off the beaten track and providing pragmatic examples of personalization. Many of my banks regularly send alerts via telephone, credit card statements and NetBanking for personal overdraft and fixed deposit, which I find on your list.

Taking personalization beyond a certain level is fraught with several challenges:

  • When a customer receives a mortgage offer from a bank (because they have visited the mortgage product webpage often), and then gets rejected (because their income level makes them ineligible for the product), the bank ends up with an irate customer because it's human nature to assume that when one receives an offer, one is deemed eligible for it. 
  • Many personalized offers can't be fulfilled profitably. I remember this comment when someone proposed front row seat to a baseball game as an example of "offer-for-one".
  • 'Mass customization' could be viewed as 'massive discrimination', thus inviting regulatory ire, as Ron Shevlin points out here

That said, this is still not preaching to the converted since there could be many banks who haven't even started on the A-B-C of personalization.

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job title CEO
location Singapore
member since 2007
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Olivier is the Founder and CEO of Moneythor, a financial technology company operating an online personal finance service and developing banking software components designed to help consumers monitor a...

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