Personalization: The Secret Ingredient To Customer Engagement For Banks

James Eardley, Jr.

Banks have played a central role in society for centuries. Their function as a safe place to store money and valuables, combined with their diverse portfolio of payment, lending, and investment services, has made them prominent fixtures in cities and towns around the world.

They have reinforced this image through their physical presence as well. A bank building often stands at the intersection of major streets at the epicenter of the community. While modern glass towers have replaced colonnaded granite, every iteration has continued to bolster their image of permanence and strength.

These physical representations now take on a different symbolism as the world of retail banking in the digital age shifts from product-centric to customer-centric. Banks are just as important as ever, but the importance of bricks and mortar has faded as the customer, rather than the institution, takes the dominant role.

Today’s banking clients have more options than ever before. Each customer has become the focal point of their own retail lives in what is rapidly becoming a “Bank of One” experience. Thanks to online and mobile technology that allows the bank to travel with customers wherever they go, they rarely need to set foot inside a branch.

This shift is a fundamental realignment for the entire retail banking structure, which is so accustomed to being the center of everything.  It is changing everything from the products offered to “banker’s hours” (hint: they are now 24/7).

Perhaps the most significant change of all is the way retail banks must now manage their customers. They are starting to follow the lead—once unthinkable—established by retailers in other industries like telco and consumer products. These industries are also responding to a simple fact: In this mobile age, every customer expects a personal, highly tailored experience.

Personalization can be difficult for banks to deliver, however—not because they lack the desire, but because legacy systems, regulations, and their own bureaucracies confine them to the traditions of the past. These forces hold them back, even while they recognize that location and products alone are not enough to attract and keep empowered customers.

Delivering a more personalized experience means understanding the needs of each client in a far more granular way. It’s not just about structured data that lists balances and other hard data. It’s also about unstructured information from social media and customer activities that can lend insight into understanding people’s individual needs and the context of what’s driving them. Only then can banks start down the path towards a more proactive and engaging experience.

Banks must answer the call for customer-centricity by becoming advocates rather than just service providers. It is not the frequency or quantity of contact that needs to be increased, but rather the quality and personal relevance of that touch. There needs to be a shift of focus away from simply selling products and toward providing relevant and contextual financial advice—in other words, banks need to demonstrate genuine interest and commitment to the customer’s financial well-being.

More than most industries, banking has a unique opportunity to do just that through the regular customer interactions that characterize the industry.  Who doesn’t check balances or make online bill payments at least once or twice a week?

Perhaps the best new competency a customer-centric bank can master is to quickly identify the individual financial journey that each customer is on, and proactively anticipate the likely twists and turns that may come with them. While “death and taxes” are still a certainty, a single predictable and linear life of financial product purchases is not. In the digital age each customer journey has become an individual one, skipping back and forth between the steps of the once linear and familiar process of awareness, interest, desire, and action.

If banks dedicate themselves to providing a more personalized and advisory relationship to their customers, customers will beat a path to the bank’s door, or rather, to its website. Banks that fail to change their ways will find that while their grand buildings may still dominate the landscape, the offices inside will be empty.

The world has changed. Not only is there a competing bank across the street, there are hundreds more just a click away.

For more on how digitalization is changing the banking industry, see Digital Revolution Drives Banks To Offer New Products, Serve Customers Better.

This post was originally published on The Future of Customer Engagement and Commerce.

About James Eardley, Jr.

James Eardley, Jr, is global director of Industry Marketing at SAP.