New-age technology such as big data & analytics, RPA, AI and ML, cloud, APIs, open banking, etc. are providing the stepping-stones for banks to undertake digital transformation initiatives. These technologies are being applied by banks to offer bespoke solutions, optimize processes, reduce costs, and increase efficiency. The next phase of banking revolution is expected to witness banks adopting hyper-personalization initiatives to offer advanced tailored products and services suiting to the needs of its customers. Banks are adopting technologies which help them understand customers better and offer services suiting to their needs. Further, banks are utilizing the vast amount of data generated to gather insights and learn more about the wants and needs and behaviour of its customers. Predictive analytics is being adopted by banks coupled with AI and ML algorithms to predict and influence customer behaviours.
OTT Effect and its Implications on the Banking Industry
At present, rich, personalized, simple, intuitive, and resourceful interactions drive customer engagement and loyalty. As OTT platforms offer hyper-personalized experiences and AI driven recommendations, more power is given to the customers to view content as per their choice. As customers continue to use the OTT platform, they get recommendations as per their viewing pattern and history. The OTT platforms utilize the vast amount of data generated to accurately predict and influence customer behaviour. In the same way the OTT effect is also being applied in the banking industry. Once a customer starts banking with a particular bank, the bank gauges which products and services are frequently used. The data generated in the process is used efficiently to gather insights and offer bespoke or tailor-made services, suiting to the needs of the customers.
As OTT platforms are setting the bar high by creating hyper-personalized and AI-driven recommendations, banks in similar manner, are starting to offer solutions based on customer’s needs and preferences. Customer experience is becoming like a battleground where every organization wants to win and have the maximum share. Banks are now deploying personalization strategies and offering services to win customers and retain them.
Importance of Personalization & Big Data and Analytics in Banking
Banks adopting a personalization strategy and led by customer-centric digital transformation initiatives are at a competitive advantage as compared to its peers who haven’t. Such initiatives help banks have a greater reach and offer one-on-one services befitting the customer’s needs. Banks need to move beyond the traditional competitive models of lower interest rates, products, and account features and offer services which are more relevant. Thus, just as any OTT platform applies technology to read the mind of its viewers and sends suggestions and recommendations accordingly, banks are also adopting technologies which help them understand the customers better and offer services and solutions as per their needs.
Predictive analytics coupled with big data, AI and machine learning algorithms can help banks work on providing personalized services. These technologies when combined can help banks gain abundantly. Benefits of such include:
Increased conversion: Relevant and strategically driven action plans and products and services are expected to increase overall customer conversion rate.
Relevant product recommendations: The data generated can help banks analyse customer behaviour and offer relevant products and services suiting to the needs of its customers.
Enhanced customer loyalty: When customers get services as per their needs, they are sure to be delighted and would often want to transact with that bank only. Thus, offering personalized solutions can help banks gain more visibility on their customers and helps build more banking loyalty.
Market Adoption of Big Data and Analytics for Banking
Global predictive analytics in banking generated USD 1.2 B in 2018, and is estimated to reach USD 5.4 B by 2026, registering a CAGR of 21% from 2019 to 2026. Concerns regarding lower customer retention, increasing payment fraudulent activities, availability of IoT devices, and changing market dynamics is leading to banks to adopt tools and solutions to better predict the banking pattern and behaviour of its customers. Further, the pandemic has forced banks to adopt models which help determine financial uncertainty and overcome economic turbulences. Predictive analytics can go to great lengths to determine data driven logical conclusions about the current and future events. The techniques behind predictive analytics using data mining statistical tools, machine learning algorithms make predictions apt and accurate.
Further application of predictive analytics by banks is gaining prominence and is being widely adopted across cross sell and upsell, customer retention, customer segmentation, account transaction management, collection, and cash/liquidity planning.
Smart Banking Predictions for 2025
There is an overwhelming belief that personalization and predictive analytics will be the driving force for the next wave of customer-led banking transformation. There are four core areas where banks in the future are expected to focus and transform to become a customer-centric banking partner. These include:
Banks to become digital: Rather than adopting digital tools only for certain banking practices, banks are expected to become digital completely in the coming years. Banks will be digital-led offering only digital products and services. The number of bank branches are expected to reduce and the rise of fintech firms and neo banks will be witnessed. Such banks are expected to adopt personalized concepts of banking, becoming more niche and customer oriented.
Drive innovation: From new product development – new ways to deliver services – provide customer support – back-office process rethinking – the entire journey of banking model is being revamped. Banks are undertaking innovation in each of its business processes with overwhelming caution and are seeking to serve the right set of customers for partnering for success.
Transformation of CX: Banks in the future are expected to adopt customer-led digital transformation initiatives. The concept of personalization is being redefined every day and is becoming a pertinent component of the overall customer journey. Using data effectively for delivering contextual communication in real time will help build engagement across all channels. Further, personalization of customer experience is expected to reward a bank with more active participation, customer retention, increased loyalty, and revenues.
Competition from non-traditional banks: Traditional banking organizations are expected to witness competition from non-traditional digital giants such as Amazon, Walmart, Alibaba, etc. Going forward, non-traditional digital organizations are expected to foray into financial services and offer ancillary banking services. Such banks are digital led without any problem of legacy systems and can rapidly evolve with customer preferences. These banks are expected to grow their market presence by adopting the right technology, business strategy and customer employee culture.
Personalization & Big Data & Analytics Use Cases in Banking
A large bank in the US is undertaking various personalized strategies and is enhancing its mobile banking app as part of its ongoing commitment to meet its clients’ banking, investing, and lending needs. Within the mobile app, the bank’s clients can benefit from convenient, easy, and safe access to:
An integrated view of accounts: Clients can view their financial information in one location, including checking and savings accounts, investing or retirement accounts and private bank accounts.
AI-driven extended support: The AI-driven virtual financial assistant supports clients through insights on portfolio performance, trading, investment balances, quotes, and holdings.
In-app trading: Clients can access and execute trades for investment accounts directly in the mobile app.
Streamlined rewards: Clients have a greater opportunity to maximize benefits with a consolidated view of rewards and offers across the accounts.
A broad set of capabilities in one app: The mobile app offers virtually anytime, anywhere access to several banking capabilities to help clients manage more of financial lives, including spending; bill pay and fund transfer; budgeting and planning; digital mortgage and auto experiences, etc.
A European bank adopted a new hybrid digital wealth management platform to improve its digital services to reach customers outside its super rich core client base. The bank’s emphasis on a digital approach to customers highlights a major shift in the world of private banking, where human connections and personal contact are usually the key to doing business with the very wealthy. The platform helps build an investment portfolio suiting to the personal needs and preferences is an intuitive and enjoyable way. Since being rolled out, the platform has attracted interest ranging from smaller clients to billionaires.
A Canadian digital bank launched a full suite of personalized automation tools that is the central hub for customers to view full account activity, get nudges and reminders about relevant financial activity as well as automatically shift ‘safe-to-save’ funds into specially designated savings accounts. Using the tools, the bank has witnessed higher growth in mobile banking utilization and lower customer attrition as compared to industry attrition rate.
Way Forward with Xebia
Xebia helps banks develop the roadmap from elementary to mature stages of personalization and optimization. It helps banks deliver with agility by building light, and innovate by scaling relevant digital solution. Its experience spans across digital onboarding, omni-channel banking, consumer lending, core banking systems, consumer banking analytics including data strategy/ data pipeline/360 view, self-service enablement, and open banking.
Xebia also offers superior digital product engineering, engaging omnichannel experiences and services in digital trends such as AI, eKYC, Digital Payments, Digital CX, Automation, Cloudification, IoT, and Open Banking, pre-requisites for a firm foundation for digital banking.
Xebia has a strong partnership ecosystem with Backbase, Iexceed, ACTICO, Mambu, helping banks accelerate their digital transformation journeys. Xebia provides banks with microservices-based Unified Digital Banking Experience through an omni-channel platform, which offers seamless end-user experience and helps enhance sales effectiveness and customer delight and satisfaction.