Are personalised experiences flavour of the month? Is the divide between digital leaders and digital laggards real? And who’s afraid of millennials anyway? We took a closer look at three often-heard claims about personalisation in banking to demystify the hype.
1. Personalisation is the latest buzzword in banking
Far from it. Think back to your first mobile phone. Or maybe the second or third one, depending on when you – or your parents – gave in to the mobile craze. Remember those customisable ringtones and screensavers, aka the definition of uber-cool in the late 1990s and early 2000s? We’re right there with you. In fact, it was around then that people got a taste for personalised user experiences – even if it was in the form of a few blaring notes from Shaggy’s ‘It Wasn’t Me’.
Now they’re a must. Consumers of all generations are swarming to Facebook, Spotify, Amazon and Netflix, getting high on hyper-personalised content and recommendations. Personalisation in the digital space has quietly grown into a massive part of our lives. Yet it’s deeply rooted in our analogue existence. Ikea, with its kitchens that are customisable to a fault, has been among the first to embrace mass personalisation, as was Nike, who sold the first pair of customised Air Force One sneakers in 1999.
“Analogue banking used to be a personal affair: customers would drop by a branch and talk to a customer service representative. It was personalisation 1.0. The quality of these conversations had a substantial effect on customer satisfaction, loyalty and the bank’s bottomline,”
– Adrián Lénárd, W.UP’s Head of Innovation.
And the same goes for personalisation 2.0. In a BCG study, 68% of respondents said that they’d deepened ties with their bank because of the tailored experience it had offered.
2. There’s no rush to catch up with digitalisation
Wrong again. “Digitalisation has been largely completed. Digitised processes and systems have been set up wherever needed, especially in online and mobile banking,” Adrián says. The processes and systems banks need to make the most of them, however, have not – especially in online and mobile banking. The benefits of personalised digital experiences are a prime example of what digital laggards have been missing out on.
Even though their economic and reputational payoff has long been foretold, shown and retold. “We believe the impact of personalisation in retail banking will be dramatic, generating a 30% to 40% sales lift in some product areas, reducing customer churn rates by 10% to 30% and lifting customer engagement scores by a factor of 2X to 3X,” BCG writes. Accenture’s experts strongly agree, predicting an ever-widening profitability gap between digital leaders and, well, the rest.
3. Millennials are bad with money, hate banks
Unless two half-truths equal one whole truth, that’s another miss.
Seven out of ten millennials define financial stability as being able to pay all of their bills each month, a study has found, so there’s definitely room for improvement on the money management front. But millennials have had less money to manage than other generations to begin with. With a whopping $1.1 trillion worth of loans, they’re the most indebted generation in US history. That said, they’re also a generation that came of age during a huge economic downturn that still lingers, having turned them into bank-sceptic adults.
But that might change soon. According to Forbes, 90% of millennials will experience a major financial event, like buying a home or car, within the next 36 months. And only 8% think they are financially literate enough to deal with them. And that’s where banks have a real chance to turn the tide. “People between 25 and 35 today will become banks’ primary source of income in the next decade,” Adrián says. As a result, financial well-being is bound to take centre stage in global banking strategy.
So is personalisation.
We’re talking about the consumer group that grew up with those fancy customised Nokias after all. And that’s exactly how they’ll take their financial advice, too. Adrián explains: “Banks are ideal catalysts for building a financially savvy, responsible and sustainable society. They can help customers manage budgets or set up long-term savings plans and give advice on how to stick to them. As people have widely different financial backgrounds and goals, personalisation will be an essential part of this.”