You’ve probably already noticed it as a general consumer. And you’re most likely noticing it in the banking world — digitalization. Everywhere. It’s being applied to all aspects of consumer engagement at an unprecedented pace. Future trends in banking are signaling a need for hyper-personalized outreach efforts. Financial institutions that aren’t ready to embrace this change may end up feeling it on their bottom lines.
While the transition has been on the horizon for some time, the pandemic has created a unique climate that has accelerated things more quickly than most financial institutions could anticipate. These days, consumers not only expect a personalized shopping experience from the companies they interact with, but also a meaningful relationship.
Several e-commerce pioneers have mastered the art of personalization, and it is increasingly evident that consumers are not only embracing it but starting to expect it. In a survey conducted by Epsilon and GBH Insights of 1,000 U.S. adults, 80% of respondents stated that they valued more personal service from retailers regardless of industry.
Is it necessary for banks to adopt hyper-personalization?
The concept of personalization shouldn’t be thought of as something that exists outside of marketing objectives or only in specific industries. From seamless onboarding to exclusive offers, the financial sector has the data available to them to provide consumers with hyper-personalized experiences. Personalization can enhance customer service and strengthen consumer loyalty to a brand.
Adopting hyper-personalization allows the right message to reach the right consumer at the right time. This allows products tailored to each consumer’s specific needs to be applied and better converted than with traditional mass-marketing strategies.
Successful implementation has shown increased consumer retention and brand advocacy. In a recent survey, 91% of respondents indicated they are more likely to shop with brands that provide a more personalized service. And 58% of consumers felt that personalized products were crucial in determining their purchase intent.
Personalization as a brand differentiator
The financial industry has become increasingly competitive, as fintech and digital giants enter the market with massive amounts of consumer data, offering everything from easy payment tools such as ApplePay and PayPal to reward programs and credit cards. Plus, many banks and credit unions share similar branding and appearance at first glance as well as common products, services, and even unique selling propositions — making brand differentiation very difficult. Providing consumers with relevant, personalized, and exciting content is a critical quality of a strong and easily distinguishable brand.
For a brand to be truly successful, however, it must also create an exceptional consumer experience. Many financial institutions have been slow to respond to the increasing demand for more robust online banking services, leaving them vulnerable to digital disruptions. Not only has the pandemic demonstrated the necessity for this, but it has also demonstrated how the banking industry needs to be able to connect with its consumers from anywhere. Many will return to brick-and-mortar stores in the future, but this industry has to start adapting to reach those who prefer to receive customized offerings without leaving their homes.
Personalization as a growth-hacking strategy
Finding growth-hacking techniques that achieve results quickly and with minimal expense is key to differentiating yourself in a highly competitive industry like financial services. The goal of a growth-hacking strategy for banks and credit unions is to find clever shortcuts that will bring positive outcomes. This is where hyper-personalization can come in, transforming marketing into a powerful tool.
Employing a consumer-centric approach allows you to gather crucial customer data which can be used to detect behavior patterns and anticipate needs. This is an effective way to cross-sell to consumers by offering complementary products at the right time, such as mortgages or loans. Many institutions are so out of touch with their clients that even something as simple as a birthday greeting is never sent.
Revenue and valuation also create a strong case for hyper-personalization. Salesforce reported that 97% of marketers increased their personalization efforts in 2020, and more than a quarter saw revenue growth of over 20%. These statistics clearly illustrate that personalization is now an essential element for attracting new consumers and retaining existing ones, as well as for your company's overall bottom line.
Some legacy banks and credit unions have attempted to digitize and personalize several consumer touchpoints. But most have failed due to a lack of internal expertise or an inability to break down their data silos to create omnichannel solutions. An analysis by Walker predicts that the quality of the consumer experience, rather than price or product, will become a company’s key differentiator in the future — yet 94% of banks have yet to deliver on hyper-personalization.
Why are banks reluctant to adopt hyper-personalization?
Balancing personalization with privacy
The banking industry has vast amounts of consumer data that can be used with marketing campaigns to create a phenomenal consumer experience. However, this data remains untapped due to legacy technology, where obtaining this data is a challenge. Banks need to figure out how to blend data and use it effectively for their business models.
Aside from that, strict privacy and security regulations are in place to protect consumers’ rights, making hyper-personalization challenging. Banking institutions must collect, analyze, and use extensive nominative and personal data to provide their consumers with highly personalized services while maintaining their privacy.
Consumers also respond negatively to communications that appear intrusive and annoying. The more invasive it appears to customers, the less likely they will be to permit businesses to engage with them.
Maintaining customer engagement after acquisition
Many financial institutions are more concerned about securing the next client than ensuring those currently in their consumer base are satisfied with their services. Obtaining new business comes at the cost of never really considering what it takes to maintain current client relationships. As Asimakopolous points out, “Financial institutions have to think about how they rebalance an acquisition mindset with an experience mindset and make sure they spend a little more to keep the customers they already spent money to acquire."
Neglecting consumer retention translates into a disproportionate amount of attrition early on in the relationship. A more balanced mindset involves better appreciating the high costs of acquiring a new customer and enriching their experience to keep them happy throughout the entire consumer lifecycle.
Doing this can be simple — as small, meaningful gestures like checking in with the client soon after onboarding to see if they have any issues or offering the right supplementary products to the one(s) already purchased. This shows the consumer that you know who they are and is a brilliant way to drive revenue through cross-selling. These personalized gestures — an inexpensive and simple investment, given the technologies readily available to make them happen — help open up interactive communication lines between you and the consumer.
Besides the fundamental issue of privacy, there are strict regulations governing communication between a business and its consumers. In North America, the TCPA and CASL protect consumers' business texting rights. These regulations are mandatory and protect consumers from being inundated with unsolicited emails.
Because such regulatory bodies impose severe penalties on those who violate the law, many businesses are reluctant to implement such a system. Despite their abundance of data intelligence and marketing prowess, financial institutions still have to obtain permission from their consumers to leverage those resources.
What is the best course of action?
Next-gen personalization requires enterprise-wide thinking; a combination of personalization and automation is necessary. The banking industry must engage with consumers through a one-to-one channel, so they fully understand the options available. This is especially true when it comes to educating consumers who are used to using brick-and-mortar outlets and unfamiliar with digital services such as apps.
However, with the ubiquity of smartphones, consumers can now connect with companies in a matter of minutes, so providing a hyper-personalized experience right where they are is the future of retail. During the pandemic and lockdowns, retailers such as BestBuy championed consumer experience by implementing real-time data processing to offer a dynamic and personalized consumer experience at the right place, right time with the right message — and banks and credit unions can emulate this system, too.
With open communication channels, such as one-to-one messaging solutions, banks can demonstrate their understanding and concern for their consumers throughout the life cycle. It’s imperative to make sure offerings and customer support features are similar to in-person experiences, such as mortgage repayment breaks, contactless transactions, and credit card and loan repayment breaks. The online experience must reflect the convenience and human touch of an in-branch visit.
For this to work effectively, an omnichannel strategy is required.
Statflo provides the leading compliant one-to-one business messaging platform that enables financial institutions to have productive, two-way conversations with their customers over text messaging. With seamless integrations to existing CRM/core systems, full consumer context, and rich shareable content, consumer-facing teams have all the tools they need in a single platform to engage, retain, and grow their consumer base. Learn more.