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Thursday, November 16, 2017

Can fintech deliver the personal touch in banking? 11-17





Humans are social creatures. We crave interaction and attention. We like to be treated as individuals and not as “a number”. For example, you feel better when you are recognised at your favorite restaurant or when you are addressed by your name when flying on a plane or when a hotel receptionist says “welcome back”. We all love to be treated as individuals. Delivering the personal touch is challenging, companies have used loyalty programs and CRM systems to focus their efforts on their “most valuable customers”, but this alienates everyone else. Rapid advances in technology have enabled some leading firms to deliver “mass personalisation experiences” and in the process have delighted their customers. So, in this age of personalisation, does your bank offer you a personal touch?

Until reasonably recently, the only way to interact with banks was through their branch networks, and those branches had branch managers and other staff who took pride in knowing their customers. However, with the proliferation of channels and increasing time pressures on customers, the need to visit bank branches came down and banking interactions started becoming less personal. As technology became more capable and pressures on costs increased, banks focused more on “standardisation” and the personal touch continued to disappear. As with many other industries, disruptors sensed an opportunity. Fintechs and many new age banks realised that customers were looking for something more and were ready to choose them because of the unique experience that they had to offer.

But it is not just about the experience. It is not just about convenience. It is not just about cost. Customers today want to be treated as individuals; they want products and services that are tailored to their specific needs. Ideally, they want companies to anticipate their needs, but in a non-intrusive, non-creepy way. When it comes to financial services, they want products and services which cater to their specific requirements, for example offering pre-approved loans when their balances are low and there are upcoming payments, or tailoring terms, rates, pricing to meet their individual requirements.
     
For banks and other financial institutions, aligning their products and services to match customer expectations is a tremendous challenge. To make it more challenging, they need to deliver personalized products, tailored recommendations, and individual communication - profitably. The good news is that technology can help. Insights derived from predictive analytics can help fine-tune the target customers and identify the key parameters for new products.

Technology can help banks create new loan products in minutes, so they have the flexibility to offer a unique loan product to each and every customer – if they choose. Backed by analytical insights, banks also know the most preferred channels to reach out to their customers. And when banks reach customers at the right time using the right channel, customers are much more likely to engage in interactive conversations. With mobile banking apps in their smartphones, customers are far more connected to their banks. So the personal touch is not just restricted to the first engagement during the initial “sale” of the product but extends throughout the loan lifecycle.

For example, lending provides considerably more opportunities to interact with customers during the loan servicing period, than in the short time when the original loan is being “sold”. During the life of the loan, a well-crafted personalized approach can translate into repeat business for the bank. With a higher conversion rate, personalization in lending can bring down the overall cost of customer acquisition. And let’s not forget that while cost is an important driver, it is not the only driver. Research has shown that customers are willing to pay more if they are offered a product/service that suits their needs and is wrapped in an experience that matches their expectations. Thus, personalization can also serve as an enabler for a unique positioning and premium pricing.

This kind of focus on personalization may appear to be complex, but with the advances in technology, backed by artificial intelligence and machine learning, it can be handled quite easily. And as technology continues to evolve, it is easy to see a time when bots / digital assistants working on behalf of customers will be interacting - with growing levels of autonomy – with bots working on behalf of financial services providers. Robust processes, reliable systems and self-directing technologies that can handle the details at micro level while facilitating large volumes at high speed at macro level would be absolutely critical in these kinds of scenarios.

Banks are founded on trust. In the past they had a strong personal connection with their customers, however over time that connection has eroded. As consumers’ attention spans shrink (to about 8 seconds now), and as options continue to explode, it is critical for banks to reconnect with their customers at a personal level. The good news is that banks know how to do it and the better news is that the technology now exists to enable them to do it profitably.

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