Why Banks Must Focus on Personalized Experiences in Times of Economic Uncertainty

The customer experience is critical to a community bank’s success, especially in a potentially recessionary environment. Consumers and small business owners have virtually endless choices when it comes to finding the right financial services partner for their financial needs, with banks, credit unions, and new entrants all vying for market share.

As many customers consider moving their cash from deposit accounts into higher-yielding products such as money market funds, it’s essential that community banking leaders do what they do best — deliver a superior, personalized banking experience for the people they serve.

Finastra’s Financial Services State of the Nation Survey 2022 found that global financial institutions are being prudent with their technology investments, with 82% noting constraints caused by the current economic environment. However, this doesn’t mean innovation and progress cannot occur. In fact, technology can help elevate a bank’s digital personalization strategy, helping to retain the deposits of local families and business owners.

What personalization means today

At its most basic level, personalization in financial services means delivering the products and services that individual customers want and expect, when they need it. If one bank doesn’t offer what a customer expects, they’ll likely move on to the next option.

A financial services customer in 2023 has varied needs and wants, and we cannot treat every group as the same. Some people may demand the traditional branch experience, while others would be unlikely to use a brick-and-mortar location.

Some may want easy access to a customer call center, while others are happy to interact with chatbots instead of picking up the phone. Many customers will pay a premium for the products and services they need, and another group would never pay for basic financial services solutions.

When planning a personalization strategy, community banks must remember that, by definition, personalization is different for everyone. Community banks are known to get the human side of banking right, with team members deeply understanding the financial needs of small business owners, local families, and others in the communities they serve. As technology has evolved and operational costs have increased, staffing has become more of a challenge, highlighting why banks must successfully blend the human experience with the right technology to enable an ideal customer journey.

With this in mind, it is critical to consider that bad digital experiences can result in decreased revenue, highlighting the need to get personalization right.

Simplifying digital loan and account applications

Research from Qualtrics shows that companies across all industries risk losing 8% of revenue due to bad experiences in 2023. As digital adoption increases with services such as loan applications or online account opening, the challenge of “cart abandonment” increases. If a process is overly complicated or simply takes too long, users may move on to another institution.

Digital application experiences don’t need to end this way. Community banks have the tools they need to both retain and grow their client base at a time when customers have plenty of choice. Sometimes this is as simple as taking a step back and evaluating internal policies — do we need to include all the questions we’re currently asking to complete an application, or can we simplify and achieve the same result?

Investing in making processes less intricate and instead more intuitive and seamless can go a long way in keeping customers happy, which in turn has a tangible impact on a bank’s bottom line.

Combining the best of human and digital interactions

Delivering better service to customers when they need it most is key to a successful personalization strategy, whether they are a local couple searching for the right mortgage, a business owner securing the right accounts, or a young professional beginning their financial journey. Chatbots can help, especially outside of business hours or when a customer is unable to pick up the phone or visit a physical location. However, they aren’t always perfect.

While chatbots have made tremendous progress, they are just the beginning. A more sophisticated approach is the concept of a specialized bot, where a human community banker operator may copilot the customer’s screen when needed, helping to guide and take them to the right solution rather than providing an answer with no explanation.

This seamless transition from bot to human operator goes unnoticed by the customer, delivering a personalized experience that helps eliminate frustration, making calls and chats more productive, while reducing costs and ultimately supporting revenue growth.

Enabling financial stability

In a challenging economic climate, many consumers and small business owners may worry about saving money for their emergency funds or about their ability to borrow. The right technology can help these customers achieve greater financial stability through more personalized interactions with their financial institution.

Analyzing customer account behavior and transaction history allows banks to create a personalized safety net for their users. Specialized solutions can be integrated into a bank’s systems to determine how much money an individual can reasonably save every couple of days, automatically transferring that money into savings from a checking account. This approach provides a valuable, personalized service to customers, while securing deposits for the growth of the bank.

While saving is certainly ideal, many customers will encounter situations where they need to borrow, whether it be for a planned expense or an unexpected emergency. Credit score solutions can be easily integrated into online and mobile banking platforms, offering personalized tips for understanding or improving a score. This type of service has a low impact on bank resources but adds significant value to the customer relationship.

Customers have come to expect seamless, personalized digital experiences, including in financial services — an industry not always known for speed and efficiency. During challenging economic times, one might think a personalization strategy would no longer be a priority, with banks tightening operations and taking a more traditional approach to customer service.

To some extent this may occur, however, a challenging economy also provides community banks with an opportunity to remind customers that they’re here to serve when they’re needed most, retaining local deposits at a critical time.

About Narendra Mistry:
Narendra leads Finastra’s global product organization for Universal Banking as Chief Product Officer. He has been in the financial software industry for more than 25 years, with 13 years at Finastra.