A Banking Product Made to Order

I think we would all agree with basic philosophy of what you propose in terms of addressing specific customer needs and allowing customers to be “valued as individuals”.

But the example you give is not really achieving this, as your example is really generating another “off the shelf”, take it or leave it, product flavor – not a customer specific solution. Taken to an extreme, this would simply lead us to a situation of made to measure products per customer, something that is neither efficient nor truly viable with existing core systems and operations.

What’s really needed is the ability to create a single product offering template that can then be dynamically and intuitively personalized to the needs of each customer. Let the customers themselves interact via any channel and dynamically adjust the characteristics of the template product at the point of sale to the specific needs, preferences and profile of each individual.

In the case of saving and investment products, this would be relatively “normal” in a HNW / Private Banking environment, but if we want to take this into a Retail mass distribution environment, a different type of solution is needed.

Imagine each customer adjusting a product’s characteristics to trade off guaranteed minimum interest rate, planned liquidity, market participation, and even potential capital at risk – all with interactive and dynamic re-pricing.

Achieving this in a way that does not impact the bank’s operations, that allows multiple product flavors, yet can be managed as a single product offering and single hedging transaction is the secret to true customer specific, segment of one capabilities. And this is something that traditional core systems cannot manage given their architecture built around the concept of a product catalogue. We therefore need to compliment and extend the current core system capabilities before being able to resolve the challenge you present.

CHOICE Savings & Investments is today the only solution capable of resolving this requirement, and does so through its patented, unique platform - delivering much needed innovative and disruptive bespoke savings and investment products (www.choicefs.com).

Banks will want to examine the financial viability of delivering offers targeted at a "customer segment of one", especially one like the "World Cup Package", where many items are "bought out" nonbanking products. By definition, the bank makes this offer to one and only one customer. Let's say this customer signs up for this offer. The bank has to now book just one match ticket, one air ticket and one hotel room, incurring some costs in this process. The bank now has to make one of the following decisions: (a) Eat these costs and charge them to some internal account  like "customer advocacy account" or whatever (b) Pass on these costs to the customer, hoping that the customer will pay a premium for such a unique offer (c) Pad these costs into its own banking products like foreign exchange and travel insurance, hoping that the customer won't comparison-shop for them, or, even if s/he does, will let the relatively higher costs for these items pass. When it comes to corporate banking, such offers and options (a) or (c) are par for the course but I was keen on knowing your thoughts / experiences on them in the context of consumer banking.

I agree with you. The fine balance needed is between one extreme end of having one product completely tailored for each customer and another extreme end of giving little choice to any customer. By tweaking certain characteristics of a basic product, one should be able to offer different variants. And today technology allows to achieve what is now well-known as ‘mass customization’, at little cost.

In our experience, varying product parameters to come up with offers for segments of "one" or even "few" is very challenging for banks for several reasons: (1) Their viability for banks may be questionable, as in the above example (2) They may lead to customer dissatisfaction e.g. when a customer who gets a mortgage at 10% interest learns that another customer has received the same mortgage at 8% from the same bank (3) Regulators may not permit such variations and offers.

We expect offers to be viable and successful only when they incorporate the element of "intent" into them. Offers doing that may not even need any product variations. For example, a customer has a monthly income of 10K (in whatever currency, it doesn't matter for this example), s/he regularly spends 2-3K per month on his / her credit card for 6 months. Then, during the seventh month, the credit card spend shoots up to 8K. For obvious reasons, even a plain-vanilla product offer made in Month 7 to "Convert your credit card outstandings to Equated Monthly Instalments" is both likely to be viable and successful.