The Value of Hyper-Personalization in Banking

By Philip Bush, Amazon Connect Lead, North America, Capgemini’s Business Services

Banks, and the banking experience that they offer, are changing. The emergence of new challengers has ushered in a paradigm shift. While bricks-and-mortar branches once formed the foundation of all customer service offerings, a new digital frontier has begun to take shape, characterized by gamified, hyper-personalized and readily available customer experiences.

In this shift to a new digital landscape, some incumbents are still to adapt. While they might lack digital agility, they are until now considered more legitimate by many, something that the challenger banks are yet to achieve. Australian neobank Volt’s recent collapse shows that success in the sector requires more than just an easy-to-use app.

That said, the tone has been set, and customers are increasingly expecting these hyper-personalized experiences from traditional banks as well. This is pushing the incumbents to create agile and tailored experiences to remain competitive.

Deliver personalization at scale

The success that neobanks – banks that exist purely online – have achieved since their inception can be distilled down to one core principle: establishing an emotional connection with their customers. The competition for wallet share is getting tougher, and Chief Marketing Officers are playing a more integral role in the development of the bank’s consumer strategy.

Much like consumer brands, neobanks have placed significant emphasis on gamification of their customer service offerings. Through sociology, psychology and cognitive sciences, FinTechs are able to drive behavioral changes and can evoke feelings of accomplishment.

So, how can traditional banks tailor their services to better match the needs of their customers? In fact, of those surveyed for the recent World Retail Banking report, 44% of customers stated that their banking experiences were not sufficiently personalized. Today’s customers are seeking services that are always available and easy to navigate, and that is drawing them to the neobanks. Three in four customers have indicated that they are drawn to FinTech competitors that provide these services.

What’s needed is a service that is customizable, omnichannel-based and tailored at its core. Consumer insights will be the key to unlock this level of adaptability and can be delivered through a cloud-and-platform-based contact center. Through these, banks can work to break down silos, remove legacy systems and become truly frictionless enterprises.

The value of data, analytics, and AI

To challenge FinTechs and bridge the customer experience gap, incumbents need to truly harness data. They will need to allocate resources effectively and leverage artificial intelligence (AI) and cloud elasticity as part of a wider data and analytics strategy. Fortunately, incumbents have all the necessary ingredients to implement this change. Owing to years of customer service, they possess swathes of consumer financial, social, media, lifestyle and behavioral data.

However, having all the necessary components is only half of the battle. For many incumbents, there are institutional bottlenecks that stand in the way of their data informing a wider customer experience strategy. We know that nearly three quarters of all executives stated that they struggle to turn their data into useful insights. Of those surveyed, 80% cited data reliability as a concern, with 70% stating that they lack the necessary resources to analyze the data. Recent partnerships in the industry have shown the value of a collaborative approach. By partnering strategically, incumbents can leverage cross-industry data ecosystems to produce the hyper-personalized experiences that customers have become familiar with through their FinTech interactions. Thankfully, regulatory requirements, and technologies such as the cloud, AI, as well as data and analytics are helping to foster increased cross-industry collaboration.

Switching on cloud-based solutions

In 2016, owing to the introduction of open banking initiatives like PSD2[i], traditional incumbents were forced to stride further into the world of digitalized finances. The EU directive forced a shakeup in the industry, fostering collaborative partnerships and connecting banks to a wider base of customers.

Despite this initiative, many banks find themselves hampered by legacy systems. An enormous 95% of banking executives have stated that legacy systems and outdated core modules are hindering efforts to optimize data and stunting personalization at scale.

However, by implementing cloud-based data, analytics, and AI, banks can move past these historical barriers. The role of the customer service contact center is critical and innovation is already in progress within banking institutions. Various banks are placing increased emphasis on Contact Center-as-a-Service (CCaas) as a new model of operation. By leveraging Open Finance partnerships, they are transforming into experience hubs through which tech-enabled customer service agents work to produce personalized interactions, reducing the cost per call at scale.

CCaaS provides everything required to run a contact center in the cloud without requiring expensive IT and telephony infrastructure. It drives a “work from anywhere” approach for contact center agents, enabling the rapid delivery of omnichannel contact center solutions with minimum set up time, and a reduction in operational expenditure through only charging organizations for what they use. Take for example Amazon Connect. A solution that is on demand, serverless, open platform and can be scaled automatically, enabling benefits and collaboration across a large ecosystem of partner services.

Collaboration through Open Finance

Open Finance, in essence, works as an enabler of collaboration, facilitating and supporting a network of third-party applications. Open platforms like Amazon Connect are crucial in facilitating integration with third party platforms, allowing for banks to share customer information. For example, NatWest has partnered with European open banking platform Tink, an open provider which synchronizes data to create actionable insights. Through this, NatWest was able to curate a newsfeed on its mobile banking app which generated 1.3 million responses in the first few months, enabling NatWest to know what their customers needed the most.

Today’s consumers expect their banking experiences to be hyper-personalized and available at the touch of a button, while constantly staying on top of trends and providing up to date information. In recent times, financial institutions have had their infrastructures stress tested. However, consumers still require stability. Banks need to leverage the cloud-enabled contact center, open finance and third-party strategic collaborations, making regulatory compliance a core operative pillar to achieve innovation at scale and retain the modern-day consumer.

[i] Payment Services Directive Two (PSD2) is a directive issued by the European Union that came into force in January 2016, but EU member states had until January 2019 to bring it into national law. PSD2 is a piece of legislation designed to force payment services to improve customer authentication processes and to also bring in new regulation around third-party involvement.