Hyper-Personalization in Digital Banking: Use Cases, Implementation, and Challenges

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Hyper-personalization lets banks use data analytics and AI to deliver tailored banking experiences to each customer. It includes understanding their unique needs and using the data to offer them the right products and services.

As per a recent report by BAI,” Addressing banking’s key business challenges in 2023,” –

As per a recent report by BAI,

For banks, hyper-personalization helps boost customer satisfaction, loyalty, and engagement. This leads to higher conversion rates and revenue.

For clients, it offers a more timely banking experience. This way, they are more likely to find the right products and services. This enhances the overall experience.

What is Digital Banking?

Forbes defines digital banking as:

While it may be used in many different ways online and elsewhere, digital banking combines online and mobile banking services under one umbrella.”

“Online banking means accessing banking features and services via the bank’s website from the computer.

Mobile banking means using an app to access many of those same banking features via mobile devices such as smartphones or tablets.”

What is Hyper-personalization?

Deloitte defines hyper-personalization as:

Hyper-personalization can be defined as harnessing real-time data to generate insights by using behavioral science and data science to deliver services, products, and pricing that are context-specific and relevant to customers’ manifest and latent needs.”

Benefits of Hyper-personalization in Banking

1. Customer Retention and Satisfaction

Hyper personalization lets banks offer customers a more tailored and suitable experience, increasing customer satisfaction and loyalty. Moreover, banks can improve customer retention and reduce churn by providing high-quality banking services.

2. Increased Revenue and Cost Savings

By enhancing customer satisfaction and loyalty, banks can increase their revenue. At the same time, AI and automation will help streamline routine tasks. This reduces banking costs and helps offer customers an efficient and convenient experience.

3. Customer Loyalty

Customers who have experienced positive and personalized banking services will likely be loyal to their bank and recommend it to others. 

Use Cases 

1. Product Suggestions and Customized Dashboards

As per a recent report by Capgemini, “World Retail Banking Report 2022

World Retail Banking Report 2022,

Banks use data to understand customer needs to help them recommend products per customer interests. A bank, for example, can offer a high-yielding savings account to a customer who saves money frequently. They can also offer credit cards with cashback rewards to customers.

Customized dashboards show customers their account balances, recent transactions, and other essential information. These dashboards display only the crucial data relevant to customers.

2. Customer Needs

One of the best use cases of hyper-personalization in digital banking is how banks anticipate customer needs. For instance, if a customer has a checking account, the banks may suggest a savings account or credit cards tailored to the specific needs.

It enables them to analyze customers’ past transactions and use ML to anticipate future behavior. This saves time and helps banks make better financial decisions.

3. Personalized Loan Offers

Hyper personalization helps map customers’ spending patterns and understand their financial goals. These insights enable banks to offer loans specifically tailored to each individual. It ensures that customers get the best possible rates and terms.

4. Financial Management

Banks can use the gathered data focused on customers’ spending habits, repayment behavior, and other interactions in financial management services to build accurate profiles. They can use this data to deliver targeted content and products that meet customer needs.

Implementation

1. Use the Existing Data

Fragmented databases and legacy systems make it hard for banks to gain deep consumer behavior insights. Therefore, they must capture interactions across all channels to obtain a complete customer behavioral profile. Access to actual customer data allows banks to target customers properly.

2. Break Down Silos

Traditional banks lack cross-functional collaboration. Introducing customer-led strategies to align teams and drive objectives can help break down silos. Banks must understand every customer’s needs to achieve a robust customer-centric ecosystem.

Banks must use tech, including customer orchestration and engagement, to achieve this at scale. They must use AI of ML to synchronize data, centralize decisions, and deliver insights across the organization.

Moreover, applying application programming interfaces (API) can enhance data quality and facilitate secure sharing across banks.

3. Deploy the Right Tech

While AI helps banks understand customer behavior, data analytics allows them to categorize it. APIs can help them deliver personalized experiences. Deploying customer data (CDP) and digital experience platforms (DXP) will help provide the best-customized experience.

4. Use Analytics

Banks must use analytics to offer insights and alerts to help consumers manage their funds. However, these solutions will gradually improve as the model learns from historical behaviors.

Challenges and Ways to Overcome

Some banks lack the abilities in data analytics and behavioral science. This limits them from using the customer database efficiently. Banks must integrate real-time structured and unstructured data from internal and external sources. They must also invest in behavioral sciences research abilities to overcome this issue. It will help them navigate, measure, and predict online consumer behavior.

At the same time, changing customer needs necessitates the banks to address customer pain points and their needs quickly. This is hard to achieve for banks with a vast customer base. Hence, banks must enhance product functionality innovation to meet customers’ needs. It will help them efficiently deliver the most relevant financial opportunities.

Also Read: Six Digital Banking Myths Financial Organizations Must Be Aware Of

Conclusion

Over the past, banks thrived under more traditional systems and were not inclined toward digital trends. As per the report by Capgemini

report by Capgemini

As customer behavior keeps evolving, they expect a personalized experience when interacting with banks. Dependability and empathy are the most essential factors. The customer expects banks to be available, reliable, and predict and meet their needs.

Banks must earn customer trust and differentiate by making meaningful connections with customers. With hyper-personalization, they can focus on building customer relationships and provide value through better customer engagement.

Moreover, tech advancements have enabled banks to efficiently gather and analyze customer data. This helps facilitate a more tailored experience. Hyper-personalization boosts customer retention rates, increases revenue, and minimizes costs.

In the coming years, more banks will use AI, ML, and automation to deliver proactive CXs. They will have a centralized and standardized approach to ensure they can observe and analyze customer behavior in real time.

This helps deliver customers the right experience, action, and message at the right time. To do this, banks must better understand and continuously assess customer risks.

Apoorva Kasam
Apoorva Kasamhttps://talkfintech.com/
Apoorva Kasam is a Global News Correspondent with TalkCMO. She has done her master's in Bioinformatics and has 18 months of experience in clinical and preclinical data management. She is a content-writing enthusiast, and this is her first stint writing articles on business technology. She specializes in marketing technology, data-driven marketing. Her ideal and digestible writing style displays the current trends, efficiencies, challenges, and relevant mitigation strategies businesses can look forward to. She is looking forward to exploring more technology insights in-depth.

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