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Personalization, banking’s new mantra

“Know your customer” is more than compliance credo. Tech makes it universally possible

Bank tech trends can make your head spin. So regularly longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.” Bank tech trends can make your head spin. So regularly longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.”

The bad news is that recent research shows that many businesses miss the boat by not realizing the value of providing exceptional customer experiences.

Despite all the lip service and analysts’ advice about how customer centricity should be a basic in this century, businesses in general keep falling short.

The good news is the banking industry, according to other surveys, generally gets high marks in delivering positive customer experiences.

Of course, there’s always room for improvement.

And that begins with understanding.

Service versus centricity

Good customer service has long been recognized as key to business success—the ancient British sitcom, “Are You Being Served?”, a PBS staple, has spoofed the concept since the 1980s.

But customer centricity is a much different and a much more recent concept.

It is born of the converging and evolving technology trends of faster computer speed, vastly sophisticated analytics capabilities, lightning-quick telecommunications, mobile connectedness, and the internet itself, with its spinoffs of social media, geolocation, and virtually unlimited data storage.

All of this has engendered the concept of personalization on a massive scale—and that’s no oxymoron.

Personalized service once was reserved for, and was profitable to provide to, only the richest of clients. One financial example would be private banking, in which wealth management companies could dedicate and pay staff experts to manage the financial affairs of ultra-high net worth customers.

These individuals would form personal relationships over the years, each getting to know each other. The bank would be recompensed enough to cover the costs and make a decent profit.

However, that model typically became highly uneconomical when applied to vast numbers of customers with more modest means.

Now, though, in this high-horsepower technology world, customer centricity and mass personalization have not only become economical, but expected.

Customers expect to be known by the businesses—including banks—with which they transact. After all, every time they buy coffee at Starbucks or order something from Amazon, those companies respond not only by knowing the customers’ name but what else they likely would be interested in and, by the way, here’s an appropriate coupon with your name on it.

So, let’s examine both the bad news and the good news about personalization.

First, the bad news …

So here are results from the bad news surveys:

Not enough juice from the data fruit. Management consulting firm North Highland surveyed top executives at 162 companies, each with $1 billion or more in annual revenue. Forty-eight percent cited a lack of consistency across brand and locations as the No. 1 pain point in delivering a great customer experience. The survey found that 80% of respondents feel they are not getting the value out of the customer data they have already captured.

“It’s evident that customers now value their experience as much as cost and quality. However, companies are struggling to convert their customer needs into experiences that drive brand loyalty and company growth,” says Alex Bombeck, customer experience lead at North Highland.

• “Make me an offer.” Mindtree, a technology services company, surveyed 6,000 consumers across the globe as well as 900 executives of major companies. Some results: 78% of consumers say personalized promotions encourage them to buy products and services; only 28% of the executives say their organizations are investing significantly in personalization.

“While most companies are in transformation mode and consider themselves pioneers in adopting or investing in digital technologies, few are investing in personalization initiatives that consumers say will increase the depth and breadth of their shopping experience,” the survey says. [View an interesting infographic from Mindtree.]

Big data disconnect. A Gartner Inc. vice president, Douglas Laney, recently commented, based on his analysis, that “Although some organizations have begun to invest in big data technologies in relation to their customers, with a view to direct or indirect monetization, many organizations lack business models to monetize their customer data.”

In other words, the customer data is there but the businesses don’t know how to make money out of it.

Don’t give up hope. I promised you some good news too.

Now the good news …

Here are details from the good news surveys:

Big banks please Gen Z. J.D. Power surveyed customers’ overall satisfaction with retail banks last year and found it had risen, compared to 2014. Of note, it found, those in Generation Z—children of the millennials, just now coming into adulthood and comprising about a quarter of the population—actually are most satisfied with the business they do with the biggest banks.

“It is not surprising that Gen Z is satisfied with website and mobile at big banks, but they are also satisfied with the in-person experience at big banks,” says Jim Miller, senior director of banking at J.D. Power.

Miller also offers a wakeup call for retail bankers:

“There is a common misconception that younger customers aren’t using the branch, but they use it about the same as Gen X and Y. Midsize and regional banks risk losing the Gen Z customers to big banks if they can’t meet their needs regarding digital and in-person interactions.”

Power of branches. Ipsos Loyalty evaluated more than 10,000 “critical incidents,” or “moment-of-truth experiences” across seven different U.S. industries. These could be either positive or negative. It found that positive critical incidents were most frequent for hotels (61%), bank branches (57%), and car dealerships (54%) [really!].

Going further, the study measured which industries consistently provide the most positive critical incidents, and bank branches came out on top—72% of customers who had a positive experience at a bank branch noted that it was not the first time it happened.

“These critical incidents have a major impact on loyalty and advocacy,” says Jean-Francois Damais, deputy managing director at Ipsos.

This is all good news for banks, but this is no time to relax.

Technology development never stops, and, increasingly, where technology goes, banking goes—as long as it helps focus on customer centricity and personalization.

Not surprisingly, IBM, that tech giant, has much to say on the subject.

In a recent blog, IBM’s Alvaro Ruiz Sautier-Casaseca* advised that “transforming the bank to engage with tomorrow’s customers will require new thinking in a number of areas. The bank must establish agile, data-driven platforms that personalize every engagement.”

Here are the four areas he identified for a bank:

Cloud. “It will benefit from cloud capabilities that enable agility, flexibility, and scalability.”

Analytics. “It will require robust data and analytics ecosystems to guide its decision-making.”

Machine thought. “It should explore cognitive systems to give its products, services, and processes the power to think.”

Cyberprotection. “It must build a robust security infrastructure to combat sophisticated cyber-threats.”

Okay, the high-level strategizing has been done. Now, banks just have to go out and do it. Good luck!

* His title is a bit long: IBM Global Business Services Europe Banking and Financial Markets Industry Leader for Tier One Clients.

Sources used for this article include:

Gartner Says Customer Data Has Monetary Value But Many Organizations Ignore It

Bold Thinking For The Next-Generation Bank

Hotels, Banks, And Car Dealerships Make The Happiest Customers

Overall Retail Banking Satisfaction Is Up, Mobile And ATM Satisfaction Declines

Companies Aren't Investing In Personalization As They Should To Meet Consumer Expectations: New Mindtree Study

Customer Experience Becomes New Benchmark For Success, But Organizations Struggle to Deliver

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at [email protected]

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