Long reads

Hyper-personalisation - Are super-apps over?

Hamish Monk

Hamish Monk

Reporter, Finextra

Hyper-personalisation has become something of a buzzword in discussions of the Future of Digital Banking in Europe. On the ground there are many holes that need to be plugged – both in terms of the technology and scalability – before it can become prevalent.

A Deloitte report, ‘The Future of Retail Banking: The Hyper-Personalisation Imperative’, shows that customers are looking for the level of detailed understanding around their needs, behaviours and preferences that they enjoy from other sectors, such as e-commerce or entertainment. What’s more, they are willing to give up their data in exchange for it. Yet, over 9 in 10 banks cannot currently offer customers hyper-personalisation.

In a survey of 2,000 retail customers – including the banked (with an income above £15,000/year) and underbanked (with an income below £15,000/year) – less than a third of respondents felt that their chosen financial institution personalises their services, Deloitte revealed. There are several areas that the European financial sector must work on to implement and promote at-scale hyper-personalisation.

As ever, customer data underpins everything. Analytics and behavioural science capabilities are key to pushing the customer-service envelope, and generating not only descriptive, but diagnostic and predictive insights.

A report from Infosys Finacle and Qorus found that while “71% of banks are running personalised campaigns and communications, less than 50% are leveraging enterprise customer data management, providing proactive advice and recommendations, data-driven micro-segmentation, and incorporating human-augmented sales...”

Know your customer – really well

The first area for improvement is for institutions to get to know their customers on a deep level; simple demographic data is no longer nuanced enough. Success is establishing a customer data platform that pools structured and unstructured, real-time information from multiple sources – including social media – to build a colourful picture of an individual’s preferences, behaviours, attitudes, motivations, and sentiments. This is the much-sought-after ‘single view’ of a client-base, enabling micro-segmentation to identify the most valuable ones.

Once this perspective is achieved, banks need to build algorithms that can spot behavioural patterns and model customers’ likelihood to buy a product or be open to receiving a service. Of course, institutions must be mindful that current societal biases around age, sex, gender, or ethnicity are not baked into the system. It is only with this level of insight that institutions can hope to deliver a truly tailored fit.

For banks looking to reduce the go-to-market timeline, there is a short-cut (of sorts). It is referred to as the ‘customer genome’ approach, which exploits ready-available demographic data – such as age, gender, life-stage – to place customers into purchasing imprint groups. With insights into why customers have certain habits, diagnostic modelling can be exploited. Such a course has been taken with schemes like buy now pay later, where data beyond typical parameters is studied in order to determine an individual’s creditworthiness.

Riding the latest technological wave

Of course, the correct architecture must be in place to ensure such data can be shared freely between an institution’s various departments. This helps to laser focus on certain clients, as well as support neglected ones.

Clearly, this technological element of hyper-personalisation is critical. For many, highly precise messaging – deploying machine learning (ML), cloud computing, and artificial intelligence (AI) to process customer activity, events, and signals in real-time – should become fundamental to its characterisation; be it in the commercial or investment space.

Amarjit Singh, EY EMEIA, Blockchain Leader, says that “hyper-personalisation can be delivered via fractionalisation and tokenisation of funds and real-world assets using today’s technology, but the ability to employ blockchain technology would materially ease recordkeeping and settlement. It would also allow for much smaller ticket sizes and for firms to more efficiently personalise investment portfolios, and should increase access to a greater range of asset classes.”

To effectively leverage new technologies, institutions would need to construct an asset library with four layers: data, analytics, decisioning and execution. Then, to scale up the offering, the cloud should be utilised to support AI and ML-derived value. In its whitepaper, ‘Just For You: The Route to Hyper-Personalisation’, BCG finds that 86% of banks are considering cloud solutions for their customer relationship management platforms.

Singh recognises the potential here also, pointing out that “AI has the ability to construct and pull portfolios together, using underlying blockchain technology.”

Where’s the finish line?

Whenever we see an emerging service or technology – irrespective of industry – it is only human to question where might lead. The story of hyper-personalisation in finance does not buck this trend, with many commentators pointing to super-apps as the endgoal. Research from Rapyd reveals that nine in ten banking consumers welcome the opportunity to organise their financial lives through such a facility. 

This is because the super-app is the nirvana of financial personalisation – an evolution of the personal finance app (PFA) – placing the full gamut of banking services in the palm of customers’ hands, around-the-clock.

Essentially, a super-app is a portal offered by an institution that has the capacity to fulfil consumers' sundry banking needs, via one user account. This might include shared wallets, bill reminders, automatic bill payments, subscription management, investment options, savings accounts, payments, budgeting tools, loans, and more.

Today, American tech giants, such as Apple and Amazon, are leading development, but for the European financial industry, organisations and regulators have their work cut out to ensure long-term success:

1. User experience

First and foremost, it is challenging to simplify so many intricate procedures into a single application. Current strategies include intuitive navigation, visual aids, progress markers, and tooltips for end-users. There are also visual hierarchy techniques, around typography, colour, and spacing, to direct focus on key information or actions.

2. Trust

Open banking and open finance are the floodgates that can release the amount of borderless data required to build a super-app. Organisations will need to get a handle on how it is stored, where it is coming from, and how it is used. Trust from the end-user will then ensue.

There is also the technological feat to consider, requiring unprecedented integration with innumerable external systems, services, institutions, payment providers and insurers – using different application programming interface (API)s, protocols, and data types. Robust tech stacks will be necessary.

3. Compliance

Following on from the connectivity piece is the necessity to adhere to an overwhelming plethora of information-safeguarding laws. In the European Union, that may include General Data Protection Regulation (GDPR), Revised Payment Services Directive (PSD2), Anti-Money Laundering Directive (AMLD) and the Artificial Intelligence Act (AI Act).

Measures to protect customers data should include encryption, multi-factor authentication (MFA), ultra-secure servers, as well as other privacy configurations and preferences.

4. Specialisation

A super-app is, by definition, a facility that can serve anyone for anything. This means that particular focus will be required for niche markets like insurance and portfolio investing, which have a nuance to them that the average banking app may not support.

5. Monetisation

Naturally, all this technological and regulatory investment will need to be clawed back – and with some profit on top. But how can super-apps be adequately monetised?

The key avenues for revenue may include transaction fees, subscription models, commissions, advertising, partnerships, as well as cross-selling financial products.

Evidently, the potential is there for a full-scale roll-out of super-apps. The question that remains is: do customers and clients have the appetite and trust to receive it?

A tentative runway

There is no doubt that hyper-personalisation is the future of banking, but for it to become commonplace in the European financial services industry, a mindset shift will need to take place within banks – foregrounding the individual, with cutting-edge technology to boot.

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