Personalized Banking – Need of the hour

Oxford dictionary defines personalization as, “to design or produce (something) to meet someone’s individual requirements”. In today’s consumption driven world, consumers have evolved from accepting simple, available choices to being entitled, analytical decision makers. Gone are the days when Henry Ford could say about the Model T that, “A customer can have a car painted any colour he wants, as long as it’s black.” Today’s consumer is fascinated with choices and likes to be in control. Firms like Netflix have taken this a notch up, by not only providing recommendations but also personalizing the artwork that subscribers see while browsing. Their spokesperson says, “This is yet another way Netflix differs from traditional media offerings: we don’t have one product but over a 100 million different products with one for each of our members with personalized recommendations and personalized visuals.” Another well-known brand, Nutella, allows its customers to add their name to the jar. As we increasingly see personalization in every domain of life, how can financial services be left behind?

The banking sector globally is becoming focused to changing consumer expectations to retain market share against competition from Fintech. New age solutions that take advantage of data, predictive analytics, blockchain, digital technologies and intuitive delivery platforms have taken center stage. Innovation is happening in sourcing, expanding services, re-inventing processes for delivery channels, delivering proactive advice, integrating payments. As part of these mega-trends, banks are also experimenting with new mobile applications and voice-enabled gadgets to enhance contextual personalization. Ultimately, the consumer will be front and center.

Developed Nations are at the forefront of this transition, leading with multi-pronged approach through private firms to engage with consumers. Using predictive analytics has enabled mBank, first Internet-based bank of Poland, to discover individual customer preferences and identify better activities for its marketing efforts.

Now the bank can initiate more direct conversations, resulting in better understanding of its clients leading to revenue growth. In US, Finn, the digital banking arm of JP Morgan Chase, lets users set their own saving rules. It empowers customers and gives them the charge of making products for themselves based on their needs. Consumers consent the bank to look at their data because of recommendations which they wouldn’t have thought themselves. Hence, customers are willing to embrace technological advancements for a better & personalized experience.

Buoyed by internet penetration in rural areas, the number of web users in India will see a two-fold rise at 730 million by 2020 against 350 million at the end of 2015, according to ‘The Future of Internet in India’ report by Nasscom and Akamai Technologies. India has over a billion mobile connections with around 240 million smartphone users and is expected to grow to 520 million by 2020 as per a report on Digital Payments by BCG and Google. This population will dominate the financial space over next few decades. Plethora of fintech startups have mushroomed to cater to the millennials and serving their needs like additional credit, investments, insurance, etc. There is something on offer for every demographic segment and favorable behaviours are being rewarded. Taking cue from the trend, Cred, the latest venture of Freecharge, has launched a product for credit card users that rewards them for timely payments of their dues by giving offers and discounts on shopping, health services and ecommerce. It also assists in discovering hidden charges in card statements and points them out to customers.

The Gen Y and Millennials express their individuality differently from previous generations. They like personalized products to express their own uniqueness. They are also open to experimenting with newer methods of transactions and are financially adept. Financial institutions must understand this and have a grasp on purchase behaviours, social interactions, life stage and insights like health or key life events. Concurrent adoption of open banking & machine learning would help the banks in understanding their customers better.

Traditional banks are currently standing at a crossroad of opportunity and threat. Opportunity because they are sitting on a huge data pile that can be used to make personalized offerings. But it would become a threat, if they don’t evolve and the modern customer shifts loyalty to newer alternative. Thus, it is an imperative for banks to transform and stay relevant with the changing market dynamics.


Sonal Dubey

She has been an advisor to the Banking industry since last four years. She has been associated with KPMG for nearly seven years and was consulting Utkarsh SFB during their setting up process.

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