How banks can unlock the power of hyper-personalisation to maximise customer financial wellbeing

Banks find themselves thrown “back to the future”. After more than a decade of record-low rates, suddenly higher central bank base rates mean interest rates are on the rise and bank customers are starting to shop around for the best place to park their money. Yet the traditional tactics banks have historically used to retain and grow their customers' deposits – like promotional rates and signup bonuses, are out of place in today’s new financial landscape. 

Customers now expect, even demand, banks to deliver services that add more value to each interaction. For banks this means hyper-personalisation, using real-time data and AI and machine learning models to create timely, personalized interactions. Gone are (or gone should be) the days of carpet-bombing huge numbers of people with blanket offers for introductory credit card rates or offering incentives that don’t match with an individual’s life stage.  

Neobanks and more progressive banking institutions have shown the transformational impact fintechs can have on an otherwise traditional and slow-to-change industry. Banks are now becoming increasingly aware that hyper-personalisation is a significant competitive differentiator when it comes to winning and retaining customers.  

In a recent Forrester study, 55% of the European bankers surveyed said their banks plan on leveraging digital money management tools in the next 12 months to personalise customer experiences and drive sales. More than half of banking executives surveyed said offering more personalised products and services to customers was a high or critical priority for their bank. With growing digitalisation, banking customers want to spend smarter, budget better, save more, and are increasingly looking to banks for personalised advice on their finances. 

Give customers more active control over their finances 

The key to delivering a valuable personalised experience is knowing what your customers need right now and finding ways to solve their problems. 

Some banks are actively working to provide more hyper-personalised financial wellness and advanced money management solutions, but, for many banks digital money management tools are still not being put to good use. According to the report, 77% of European banking respondents say fewer than half of their customers actively use these tools. Many of these solutions fail to drive behavioural change and deliver tangible outcomes for customers.  

Deploying legacy money management tools leads to lower engagement rates. Over time that lower engagement leads to lower satisfaction, impacting banks’ business outcomes. Customers want their bank to recognise their individual circumstances and tailor offers accordingly. They want to have more control over their finances and be equipped to make informed decisions.  

How can banks answer this call for hyper-personalisation? They need to deploy Artificial Intelligence (AI) powered solutions that improve customers’ financial wellness. These advanced money management solutions can deliver valuable predictive, intelligent interactions to customers, such as: automated cash flow analysis, transaction categorisation, smart budgets, automated savings tools, and personalised advice and recommendations. This hyper-personalised approach drives higher engagement and perceived value, leading to more satisfied customers and stronger business outcomes. 

Technology challenges persist 

Investing in the right technology or partner collaboration is essential for banks to execute these programs successfully and cost-effectively. However, many banks struggle to select or prioritise the right technology stack or lack a suitable third-party vendor.  

As a result, banks often rely on outdated first-generation solutions that are not able to support their business objectives. These solutions don’t have analytics models to access and analyse financial data and create timely, contextual insights and recommendations. Additionally, these tools often are not linked to external data sources to better understand the entirety of customer financial behaviour. This means that currently only 56% of European banks can provide sufficient personalised financial insights and product advice based on customers’ financial data.  

Banks need to understand the major benefits that come with the new generation of advanced money management tools and take action. Delivering customer-centric offerings with the use of AI and predictive analytics enables a customer to gain an in-depth understanding of how they can reach their financial goals. The technology to provide hyper-personalised banking exists. It’s up to banks to decide whether they want to deploy it to maintain their competitive edge and ensure the best outcomes for their customers.