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#Payment Technology

Hyper-personalization in banking: 6 ways to success

5 Mins.

Banks have tailored products to customer segments for decades, which has helped differentiate financial services and provide a competitive advantage. Now, though, the global trend of hyper-personalization is cutting across many industries, and goes far beyond target-group-tailored offerings.

In a world where customers happily trade their personal data for better customer service, companies are having to stay alert to keep their competitive edge.1 Other industries, such as online retail and transport, have redefined customer expectations, using hyper-personalized approaches to deliver context-specific, hyper-relevant services. What does this mean for services in the payment space? And how can banks respond to this? We look at six ways financial institutions can boost revenues and foster customer loyalty by focusing on hyper-personalization.

How to improve banking personalization

1. Use existing data

David Ritter, Financial Services Strategist, CI&T

With fragmented databases and legacy systems, it’s not always easy for retail banks to gain deep consumer behavior insights, especially without leveraging the power of big data. Yet to fully understand and respond to customer needs and target them directly, it’s imperative that this changes. David Ritter, Financial Services Strategist at CI&T, states that, ideally, banks “need to capture all interactions across all channels to get a complete behavioral profile.”

The United Kingdom’s Open Banking Initiative2 and the European Union’s Payment Services Directive3 are just two approaches that have been introduced to create some transparency in banking, while promoting competition in the payments space. With broader access to high-quality, real-time customer data, banks can target customers in need of specific products at the appropriate time. One study suggests that banks that embrace open banking can increase revenues by 20%, while those that fall behind may lose up to 30% in revenues.4

“Banks are heavily regulated and risk-averse by nature, so there are cultural barriers to change. Some struggle to make the business case to invest in the next-generation technology they need to personalize customer experience.“
David Ritter
Financial Services Strategist, CI&T

2. Break down silos

The financial services market is growing – and so is its competition. For traditional banks, a lack of cross-functional collaboration means that data may be available, but simply isn’t able to be leveraged. The introduction of customer-led strategies to align teams and drive objectives can help actively break down these silos and foster customer focus. Vilve Vene, CEO and co-founder of Estonian fintech Tuum, believes that working in silos hinders banks: “The future is customer-oriented, and in order to achieve that, in order to have an understanding of each individual customer and the products and services they use and need; the business needs to become cross-functional.”

Ritter believes that “banks need to focus on discrete customer use cases, then capture and organize the data they need to address those use cases. In other words, they should put all of their data into a warehouse and then try to tap into what they need. This takes close collaboration between IT and business managers.” Vene says that banks require a change in mindset: “With modern core banking technologies that are API-based and modular, banks can take the big, long-term goal, break it into smaller projects, and get going step by step.”

Vilve Vene, CEO and co-founder of Tuum

By introducing application programming interfaces (APIs), data quality can be improved and shared securely and simply across various organizations. APIs are intrinsically linked to recent open banking initiatives, and the substantial quantities of data related to customer behavior collected enable banks to understand their customers better. G+D has collaborated with US-based card issuing platform Marqeta to provide card personalization services using Convego® Connect APIs, enhancing customer satisfaction through personalization. Vene sees much value in the implementation of APIs. “APIs are the basis of modern core banking systems and therefore the basis for the digital transformation of banks,” she explains. “They enable you to get rid of a big, monolithic system that is rigid and instead build a flexible and agile system.”

“All digital channels need to work together. It cannot be that a website is updated, but there’s an older version running on mobile devices, and data between channels is not synced. Whatever the touchpoint for the end customer, the data and information about the customer need to be linked at the back end.“
Vilve Vene
CEO and co-founder of Tuum

3. Use insights to innovate

With almost three-quarters of customers rating personalization as “highly important” in today’s financial services landscape, banks must adapt to integrate solutions that offer personalized services.5 Privacy – and transparency – is another important topic, with studies suggesting that customers desire more control over their personal data.6 Knowing what customers desire is one thing, but implementing this knowledge across an entire organization is another. At board level, customer-centric objectives need to become a number one priority.

Vene believes that mobility is a keyword here: “Today, people expect to do everything on the fly, and banking is no exception. Therefore, mobile devices are the most important touchpoints for hyper-personalization: smart phones, smartwatches – the things we carry around and have access to at all times.”

4. Ensure localization

With highly personal brand touchpoints, banks can increase customer trust. Services adapted for regional markets are more appealing for customers short on time. G+D has introduced personalized payment cards to customers in China, with services centered around three popular themes: children, weddings, and pets. On days like the Chinese New Year, applications for personalized cards peak at over 50,000 a day. Customized payment cards are one tangible way of reinforcing brand loyalty.

5. Implement the right technologies

A whole host of technologies are available to drive banking success. With artificial intelligence (AI) and machine learning, banks can better understand customer behavior. With data analytics, banks can categorize customer behavior. APIs can help introduce personalized experiences. Ritter states, “Technology such as customer data platform (CDP) software and digital experience platforms (DXPs) are being adopted rapidly in other industries but more slowly by banks,” and this is the crux of the matter: the technologies are out there, but they must be harnessed. Vene agrees: “No matter how pretty the front end looks, if the back end does not support the channels, nothing actually changes. Coming out with a shiny new app for end customers is not digital innovation. Luckily, this is something banks are starting to realize.”

6. Use analytics

Ritter notes that “mobile apps of big banks are now using data analytics to offer insights and alerts to help consumers manage their money. These solutions will improve as the models learn from historical behaviors.” Analytics can also help banks monitor their current measures: to what extent have current hyper-personalization measures proven a success?

Strong customer relationships nurture trust

The benefits of hyper-personalization are many. It can lead to an increase in revenues, improved trust, better relationships, and word-of-mouth recommendations.7 The future of banking is personal, and it’s a trend that cannot be ignored.

  1. Making it personal: Why brands must move from communication to conversation for greater personalization, Accenture, 2018

  2. Open Banking, 2022

  3. Payment services (PSD 2) – Directive (EU) 2015/2366, European Commission, 2022

  4. How banks can thrive in an API economy, Accenture, 2019

  5. 72% of customers rate personalization as “highly important” in today’s financial services landscape, Capco, 2021

  6. KPMG Survey: American Consumers Want More Control, Visibility Into How Companies Use Their Personal Data, KPMG, 2020

  7. Experience is everything: Here’s how to get it right, PwC, 2018

Published: 29/03/2022

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