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Get to know your customers really well—right now

Jim Marous on how banks can get personalization right.

Named one of the most influential people in banking and a top 5 Fintech Influencer to Follow, Jim Marous is an internationally recognized financial industry strategist and keynote presenter. He is co-publisher of The Financial Brand, and the owner and publisher of the Digital Banking Report, advising on innovation, portfolio growth, customer experience, marketing strategies, channel shift, payments and digital transformation within the financial services industry. Jim recently discussed why personalization in banking is so important.

You published a research report this past spring on the topic of personalization, representing both consumers and banks. What were the most significant gaps between the two?

When we researched consumers in conjunction with Personetics and GfK, we found that consumers want their primary financial institution to know about their personal financial goals, lifestyle, major life events, etc. Consumers were even willing to share personal data to help their bank or credit union to know them, look out for them and reward them. Likewise, the vast majority of financial institutions want to leverage the considerable technological sophistication and vast data resources at their disposal to give consumers the customized guidance and services they desire. In fact, fewer than 20 percent of organizations surveyed didn’t think it was either "very" or "extremely" important to know their customers.

Unfortunately, consumers made it very clear they don’t believe their primary financial institution really knows the important components of their financial life. According to the research, less than one-third (3 percent) of customers believe their bank knows them and their financial needs well. And nearly the same percentage (28 percent) say their bank puts their own interests ahead of customers’ needs.

What our research found was that it’s one thing to know what the consumer wants and what should be done to provide a differentiated and contextual consumer experience—it’s another to be able to deliver on the "personalization promise." Fewer than 20 percent of financial institutions considered themselves advanced in delivering a personalized experience; another 40 percent described their capabilities as "emerging."

Bank marketers should no longer settle for mediocre response rates, and consumers should no longer be provided irrelevant offers.

It is clear that successful financial services institutions in the future (legacy banking organizations or Fintech start-ups) will differentiate themselves by the ability to deliver on the "personalization promise" and be in the best position to integrate solutions with a consumer’s daily life.

There is extensive discussion in the report on the role of analytics. Why are banks still so challenged by analytical data on customers?

Unfortunately, despite the vast amount of data available, the early start the industry has enjoyed and formidable resources, most banks are far from realizing big data’s full potential. One of the reasons for this slower-than-expected use of advanced analytics to drive contextual personalization is the number of competing priorities most organizations face, such as increasing compliance and regulations, reducing operational costs, improving digital capabilities, etc.

On top of competing priorities, banks rarely use the full breadth and depth of data at their disposal because of multi-layered systems and siloed data. This has been an issue in the industry for more than 30 years, despite advances in data capture and reduction in costs of advanced analytics.

Finally, we are observing a time when the knowledge of the need for advanced analytics is not met with an increased prioritization and investment in moving data from internal report generation to customer-facing solutions. This results in sub-optimal allocation of human and technical resources, and limited interaction and exchange of ideas.

The risk of falling behind in leveraging consumer insights has never been greater since consumer expectations are rising rapidly. The majority of these expectations are being set by non-financial competitors, who have the vision and focus on providing contextual and personalized solutions through digital channels.

Fintechs, Fintechs, Fintechs. What are they doing differently with personalization and what can banks learn from them?

The vast majority of Fintech firms have been established to provide consumers an improved digital experience based on contextual insight and simplified delivery of financial services. By leveraging advanced analytics of consumer data and digital technology, smaller start-ups have been able to build solutions that are superior to those from legacy financial institutions.

…Think big, start small—but start now.

Because the consumer does the vast majority of their shopping for a new financial institution using digital channels, it is no longer adequate to wait until the customer or member walks into a branch or decides to purchase a new product online or via smartphone. Instead, banks and credit unions must engage customers at every stage of their purchase journey, not just because of the immediate opportunities to convert interest to sales, but because two-thirds of the decisions customers make are informed by the quality of their experiences all along their journey.

Digital channels are at the center of this transformation, no longer just representing a cheaper way to interact with customers, but also being critical for executing promotions, stimulating sales and increasing market share. In order to effectively remove friction along this journey, customer insights need to be leveraged. These insights go far beyond simple demographics, to include channel preferences, life-stage insights and even geo-locational information.

As we found in our report, Top 10 Retail Banking Trends and Predictions for 2016, having access to data and the ability to process this insight is not enough. Consumers expect their primary financial institution to be able to provide real-time recommendations based on changes in their financial profile. This includes improving the ability to save money, achieve specific financial goals, increase financial knowledge, better budget spending, etc.

Aside from being transparent with customers, what other advice do you have for banks on data privacy?

As consumers increasingly engage digitally, providing personal transaction data, social data and geo-locational data using mobile and online channels, they are providing the banking industry massive insight for segmenting and targeting. For the most part, this is insight into consumer behavior that, prior to the internet, was nearly impossible to obtain. Today, banks and credit unions can understand the entire customer journey from early research to post-purchase, with the consumer digital footprint being one of the most valuable tools in personalizing marketing messages and content.

With this insight comes a “personalization privacy paradox,” as marketers try to find the sweet spot between individualized and invasive communications with consumers. While consumers know they are providing their financial institution with unprecedented amounts of insight into their behavior, attitudes and sentiment, they want to have the option to limit this access, and want their financial partner(s) to provide personalized solutions in return. The consumer also wants to be part of the data validation process, and to be involved in how the data will be used.

There is a lot of very interesting data in this research from both banks and consumers. In your opinion, what were the some of the most important statistics and surprising findings?

It was clear that consumers expect their banks to look and act more like their non-financial partners in how they gather and use their personal and transactional data. They expect their financial institution to understand where they stand financially and what may lie ahead. It is encouraging that they are willing to share personal data and partner with financial institutions to provide this personalized experience.

Unfortunately, while institutions know the importance of providing real-time, customized guidance, the vast majority of organizations are not prepared to deliver. A key missing component of this deliverable is the ability to provide these insights in real time… through digital channels.

It was very surprising that such a high percentage of institutions researched considered their ability to deliver contextual insights as "static" (little or no digital personalization, with little possibility of offering in the future). Except for the very largest organizations, roughly 40 percent of all financial institutions placed themselves in the "static" self-assessment category.

In addition, the ability to provide specific contextual alerts and notifications was also very low in our research. This was found to be highly desirable from the consumer perspective, so there is obviously a significant opportunity to grow this important communication feature with the consumer.

<1/3 of customers believe their bank knows them and their financial needs well | 28% of surveyed customers say their bank puts their own interests ahead of customers’ needs

You provide a very solid argument for personalization and why banks need to step up—fast. How do you recommend banks get started?

As I travel and meet with financial institutions of all sizes, there is definitely a desire to use data and advanced analytics to deliver a personalized customer experience. Banks and credit unions know this is what their customers and members want, and that there are analytic tools available that are more accessible than ever. And, availability of data is definitely not a challenge.

The challenge is knowing where to get started. My recommendation is to think big, start small—but start now. There is no reason to boil an ocean. Instead, move up the analytics ladder, initially tackling “rear-view mirror insights” and quickly moving to “insight GPS,” where an organization can predict needs and offer solutions in real time.

Most importantly, insights that remain in an internal report format are not nearly as impactful as insights that directly change a customer experience and improve the value proposition from the customer’s perspective. As banks and credit unions look at their overall growth goals, modernizing their marketing strategies has to become a central component of the approach—and it should be data-driven.

Bank marketers should no longer settle for mediocre response rates and consumers should no longer be provided irrelevant offers. Data should lead the charge in developing communication programs that banks can count on to generate strong conversion rates and uncover hidden revenue opportunities—all of which should also have a direct, positive impact on customer satisfaction.