How Personalized Banking Helps FinTech Companies to Retain Clients

In 2021, the international consulting company Capco prepared a review Insights for Investments to Modernize Digital Banking. Researchers found that 86% of customers see personalization as the basis of their relationship with banks. Consumers are ready to give annual feedback on the work of financial institutions to improve the quality of services. What is personalized banking? How to implement it in financial software?

What is personalized banking? 

Previously, to receive personalized service, bank clients had to hire personal assistants. Personal bankers helped them to open savings accounts, arrange loans, maintain accounts, and solve other financial issues. 

Nowadays, this premium service is available for every user of banking software. Clients of banks independently solve financial issues thanks to digital banking and a personalized approach. 79% of Millennials, 75% of Gen Zers, 74% of Gen Xers, and 58% of Boomers value personalization and consider it when choosing a new bank. 

For a user of banking software, personalized banking means: 

• Customized products

With the help of mobile applications, a bank collects consumer data, such as income level, spending history, marital status, hobbies, and other information. Bank employees analyze information and offer personalized services. For example, they see that a client’s car is more than five years old and recommend a soft loan for a new car. If they learn that a customer is into video games, they will send information about credit cards for gamers. 

• Adapted content

ML and AI algorithms analyze user behavior on a web page or in a mobile app and send relevant messages. If a client starts to open a bank account online but doesn’t complete the procedure, the system will remind them about the necessity to complete the operation. If a user has viewed insurance offers in a banking app, the platform will suggest a consultation with an insurance agent. 

• Multichannel strategy

To make bank messages reach the target audience, it is worth using a convenient communication channel such as email, instant messengers, or SMS. This will increase the chance that clients will read the messages and respond to them. Recently, banking apps have been using Instagram-style stories where they post personalized recommendations. For example, a travel lover may come across information about last-minute tours or insurance plans for trips abroad. 

• Binding communication channels 

When a person approaches a bank with a problem that demands the assistance of several operators, s/he doesn’t want to repeat the essence of the appeal to different people. Each manager who joins the conversation should have the necessary information about the client’s request. Therefore, banks set up channels in such a way that data from several sources are accumulated in one archive. 

• Targeted advertising  

People have different desires and life circumstances. What is interesting for one customer will be of little interest to others. Therefore, personalization is aimed at segmenting the audience by interests, problems, and wishes. Thus, banks can do relevant advertising. 

For example, everyone can have a desire to save, say, $500,000 to secure a comfortable old age. But for a twenty-year-old consumer, the priority is to pay off debts and find a normal job. The issue of savings is more relevant for a forty-year-old client with a stable income and a desire to properly prepare for future retirement. It is worth making different offers for these groups. 

How to set up personalized banking 

To set up personalization, banks must have quality mobile software able to collect user data and process them to build better interaction models. Modern information technologies make it possible to maintain personalization at the proper level. You need to follow these steps:

1. Set up customer data collection 

Personalization is built on the basis of personal user information. That’s why it is important to implement a tool for collecting demographic data, spending history, and information about the use of financial products in a banking application. This information is already hidden in banking software. You only have to set up a mechanism for collecting, processing, and storing information.

     2. Involve additional sources of information

Perhaps the necessary information has already been collected but is stored in another corporate system. You only need to connect the mobile banking application with the analytics software via an API. The bank can also integrate the application with the software of partner companies. For example, it can offer insurance company products via online banking. A client can accumulate points to exchange them for tickets of partner airlines.

     3. Use tools for Big Data analytics.

It is impossible to process large amounts of incoming information manually. Therefore, it is worth engaging machine learning and AI algorithms that will work with data. As a result, managers will obtain data in an analysis-friendly format.

One can implement these tools in an old application or create a new product taking into account all the possibilities of its personalization. 

Three examples of personalization in FinTech 

We’ll give examples of mobile banking applications to demonstrate how personalization works.

Buy now, pay later

A European FinTech company has implemented an application that offers credits for goods from partner stores. A client chooses the desired product, places an order, opts for a convenient installment plan. The system divides the total cost into several payments. The buyer sets up reminders so as not to fall into arrears. When the store sends the order, the app sends an email with payment details to the client. As a result, more than 13 million users per month receive personalized services and are satisfied with them.

Individual user registration

Wealthfront, a financial management platform, learns about customer preferences during registration. Users fill out an interactive questionnaire where they specify their financial goals and lifestyle details. To simplify the task, the system suggests possible answers. Animated elements help to maintain a dialogue with users and decide on an investment plan.

More options for digital interaction

Certain online banking platforms offer a client to choose an appropriate payment method. For example, when ordering goods in an online store, one can pay using an application. For people who are concerned about the safety of personal data, this is an important element of personalization. The bank sends account statements by mail so that the client does not have to go to a bank outlet or communicate with employees by phone.

Conclusion

The above examples only partially illustrate the capacities of personalized banking. There are many options for personalized service. The main thing is that clients are ready to share personal information and FinTech companies are able to protect their confidentiality and use data reasonably for the benefit of their customers. 

Financial institutions should analyze suggested products and decide which one is suitable for personalization. They need to turn to a financial software development company that will find data sources, teach how to collect them, and create algorithms to personalize user experience.