If you haven't heard of the "Netflix effect," you are clearly living under a rock. Few companies have managed to permanently alter and reshape global industries like Netflix. What Apple did to the music industry in the early 2000s, Netflix is doing to the TV and entertainment industry now— leading a phase of absolute and incredible disruption, putting the customers in the driver's seat. And thanks to companies like these, digitally savvy customers now look for (and demand) "aha!" moments and instant gratification. They make choices based on which service provider can proactively predict their needs and adapt intelligently to their preferences. And for this modern, millennial customer, why should banking be any different? Today, rich, personalized experiences and simple, intuitive, and resourceful interactions drive customer engagement and loyalty.
But what really is the Netflix effect, and what does it have to do with banking? In an era when global brands are leaving no stone unturned to assess and predict what their customers want accurately, Netflix is setting the bar high by creating hyper-personalized experiences and AI-driven recommendations. It gives absolute power and flexibility to the customer to decide the type of content they want to watch and makes recommendations based on their viewing pattern. The recommendation algorithms leverage every visit to the Netflix service to enhance the accuracy of their predictions based on what a customer is likely to watch. By analyzing vast amounts of customer data available, they are able to accurately predict and influence customer behaviors—the winning formula for success.
Banks Must Take Technology and Insights to the Next Level
Traditionally, banks have operated and competed based on their product and account features and interest rates. Not anymore. Today banks that leverage data actively to provide personalized services are the ones that will lead the pack. And just like Netflix, the more the bank applies technology to mine customer data, the more they will learn about their customer's transaction data and spending patterns. Offers based on customer behavior, in all likelihood, will be lapped up faster by the customers.
The new-generation, dynamic, and digital-only approach to banking is not hard to imagine, and there will soon be a day when banks will offer services to a significantly larger customer base. But to do so, they will need to aggressively deploy the vast digital tool kit and undertake complete, inside-out digital transformation. New-age tech, including data-driven marketing, robotic process automation, AI and machine learning, cloud, APIs and apps, and many other tools, is now available to provide an essential step towards banks' digital transformation.
Banks and financial institutions have been notoriously slow to adopt new technology and combine engagement channels to offer their customers a streamlined and seamless experience. Banks often find it challenging to stitch together siloed customer data that sits across several disparate systems. The key lies in establishing incremental and short-term goals that will drive a more sweeping change through the organization. And then partnering with a strategic partner who can help the various technologies, data-sets, and products to work together and maximize customer value. The right partner will be instrumental in achieving faster speed-to-market, innovating, and being future-ready. And all this while gaining a richer, deeper understanding of customer engagement and journey and delighting them when they least expect it.
Leveraging the Banks' Most Valuable Asset—their Customer Data
The banking industry is perhaps sitting on one of the richest customer data sources based on years and decades of customer transactions, interactions, and behavioral insights. However, they have been slow to leverage this priceless asset, sometimes owing to inertia or digital ineptness and even a short-sighted focus on products vis à vis the customer. Banks often use the data available to focus on how to up-sell or cross-sell their products to the customer when the question they should be asking is: "what does my customer really want?" And that's where customer data can make a remarkable difference.
As customers expect a higher level of personal interactions from their banks, minimal personalized insights will become table stakes for providing minimum viable products. Given the plethora of customer channels available today, banks must actively leverage them to identify customer needs based on transaction data and access relevant information through digital channels. As customer experience becomes the new battlefront, banks can personalize customer journeys and deliver higher engagement value to customers by leveraging behavior-based customer insights and applying predictive analytics.
For instance, applying AI and machine learning to past transactions can help financial institutions predict when a customer is in the market for a new home and proactively offer a low-interest loan. As banks and financial institutions embrace digital transformation and increase investment in technology to serve the always-on customer, data will be the key driver to success, and how it is leveraged will help stay ahead of the curve.