Financial services personalized through software innovation

The promise of personalized banking – a tailored approach to financial management is no longer a distant dream. Banks already offer services tailored to individual goals and patterns, using advanced data analytics and artificial intelligence. McKinsley group reports that in 25 cases AI technologies can increase revenue through personalization and better use of resources, reduce costs thanks to automation, reduce errors and locate areas for improvement or discover new opportunities. All this thanks to algorithms that are increasingly improved in processing big data and drawing conclusions from analyses.

Personalized banking was born out of the need to move away from the traditional approach to banking towards a strategy that takes into account unique customer preferences, behaviours and data. Currently, companies providing services in the financial sector, in order to gain more customers and financial revenues, want to meet the individual needs of customers.

Before digitalization, banking looked slightly different - banks tended to focus on a one-size-fits-all approach and minimal customization options. However, the era of digitization and digitization has forever changed the face of banking, considering the adaptation of needs to the consumer. The advanced development of software technology and the emphasis on the development of machine learning have led to the ability for banks to analyse huge data sets and extract significant information from them.

Although now having a banking application on your phone is rather something "normal" and everyday, the emergence of even digital platforms signalled that we were dealing with a significant change - not only were they changing the direction from a "universal" approach to a personalized one, but also (finally) all data was in one, easily accessible place. These platforms laid the groundwork for more personalized interactions and became the testing grounds for innovative software solutions, setting the stage for a new era in financial services.

The emergence of digital banking platforms signalled a notable shift in personalized banking. Online and mobile banking solutions empowered customers with unprecedented access to their financial information. These platforms laid the groundwork for more personalized interactions and became the testing grounds for innovative software solutions, setting the stage for a new era in financial services. Digital banking platforms have empowered financial institutions to gather and assess customer data, enabling them to provide personalized products, services, and recommendations customized to individual customer requirements.

It is easy to conclude that the spread and development of banking platforms were possible thanks to the development of the Internet and mobile technology - they significantly influenced the financial services sector by introducing innovative solutions and providing a foundation for enhanced personalization in banking services. As a result, customers benefit from intuitive interfaces, and personalized financial guidance aligned with their spending patterns and financial objectives.

Consumer expectations have increased – high-quality services are expected everywhere and without exception. Designing a user-friendly financial application is a complicated but necessary business move, as we saw when designing applications for Renault Group brands and for the Nissan Group brands. However, in the digital world it looks slightly different, because users of banking applications expect to make transactions on many devices, at any time and place. At the same time, services should respond to their desires, needs and pain points or potential errors that may occur in the client journey. It is also worth noting that customers themselves, not only companies, want to have insight into their expenses, organized e.g. in terms of preferences and expenses.

You can hear about personalization everywhere and this is not surprising - it is a procedure that brings the product to a higher level and allows the customer to repay the customer with loyalty. In this way, the company can build trust and brand loyalty. According to Zendesk Customer Experience Trends Report 2024, this is what consumers expect:

• 72% of respondents said they expected immediate service. Moreover, all customer service should be carried out in such a way that the support should know in advance about the context of the conversation;
• Over 60% of customers expect flexibility and seamless self-service between analog and digital spaces;
• Over 60% of survey respondents expect personalized experiences. This is a priority in designing services to provide specialized offerings.

To meet these expectations, financial institutions can reshape their services in the financial services industry to match growing customer demands, offering more flexibility and customization options.

Technology dramatically improves personalized banking in the digital age by providing a customized banking experience to customers. It does this through:

• Leveraging data analytics and machine learning to enhancing the customer experience with data-based personalisation;
• Expediting transaction processing using simple, understandable, UX-driven navigation;
• The development of user-friendly navigation, taking care of users' needs and eliminating customer pain points allows for cutting costs;
• Customizing services according to customer needs and preferences to enhancing the customer experience.

The implementation of personalized banking services demands a strategic methodology. Financial institutions are leveraging customer data to offer personalized services, integrating digital channels, and partnering with fintech companies to achieve this goal.

We’ll examine these strategies more thoroughly.

Artificial Intelligence (AI) is already helping in the automotive and aviation sectors - the same is true with finance. Using AI technology – its Machine Learning and Deep Learning algorithms – banks can effectively utilize customer data for:

• Gather insights from various touchpoints. Each stage of the customer journey generates important data, so analysing each touchpoint can improve future user experience design;
• Collecting data from the customer journey can help deliver personalized services and targeted offers;
• Proactive and better support through all online banking channels.

Analysing customer data enables banks to deliver personalized products and services that meet the distinct financial needs and preferences of their customers.

Integration ensures smooth and consistent customer service - contact with a human, bank employee, combined with a digital product should go hand in hand. Banks are advised to use artificial intelligence, fintech and open banking to integrate digital and analog channels, or rather collect data on this integration. This could lead to strengthened cybersecurity and, above all, the inclusion of AI-based personalization to guarantee a seamless experience across all online banking channels.

Partnering with fintech companies is crucial for banks, providing them access to state-of-the-art technology, ensuring seamless digital interactions for customers, and helping to minimize opportunity costs. These partnerships often lead to the development of new and improved financial services tailored to individual needs.

Despite the clear advantages of personalized banking, banks encounter numerous obstacles in executing it. These include the existence of data silos, outdated legacy systems, and concerns over data privacy and security. However, these barriers are not insurmountable.

Banks are making strides in breaking down data silos, modernizing their legacy systems, and ensuring data privacy and security.

In banking, data silos refer to the separate storage and management of data by various departments or business units within a financial institution. These silos can create challenges in sharing and integrating data, hindering the delivery of personalized customer experiences – which is confirmed by the WBR Insights report.

Financial institutions can eliminate data silos by implementing a robust data governance framework that would allow for reliable data management. This involves, for example, creating clear data quality standards and defining procedures for their integration.

Unification of, among others, customer data allows you to have data in one place, which can significantly contribute to improving the creation of personalized offers for regular and future customers. Moreover, data management tools can foster cross-departmental collaboration to bridge knowledge gaps between different areas of the organization.

In banking, legacy systems are mainframe-based platforms that can process up to a trillion transactions a day. Mainframes, as they are high-performance computers processing large amounts of data from transactions and operations, must be constantly modernized and improved.

Modernization is needed due to:

• Improving performance and efficiency
• Enhancing security
• Integrating with new technologies
• Adapting to evolving customer demands

Banks can achieve modernization of their legacy systems by implementing strategies such as establishing a flexible data platform, utilizing microservices, and categorizing capabilities.

Maintaining data privacy and security in banking is a major challenge and crucial to success. Primary obstacles may include compliance with regulations and legal standards, development of authentication methods, while ensuring that customers have control over their banking and their needs are met. To mitigate these challenges, banks are implementing the following actions, including: robust endpoint protection, train employees in cybersecurity, security awareness training for employees, adoption of a zero-trust architecture, restriction of downloads and external transfer of data.

Ethical handling of customer data is crucial to maintaining customer trust in personalized banking. This is important, not only in terms of marketing and branding, but also in legal terms.

Banks need to:

• Be transparent with their policies
• Demonstrate responsible data use
• Respect customer privacy
• Ensure data security
• Minimize the risk of data breaches or misuse
• Adhere to ethical standards and values.

Therefore, banks should pay attention to transparency with their policies and demonstrate responsible data use. Data should be secured, security procedures should be constantly modernized and the risk of data breaches or misuse should be minimized. All this should be done while respecting ethical procedures, values and customer privacy.

In the era of digital banking, inclusion and accessibility are of paramount importance. Personalized banking offers numerous benefits, but there’s a risk of excluding segments of the population who may face barriers to digital access. Therefore, financial institutions must prioritize enhancing the customer experience through personalization and utilizing fintech for the digitalization of financial services.

Measuring the impact of personalized banking services is vital to confirm their effectiveness and optimize their benefits. This can be done through key performance indicators, customer feedback, and continuous improvement.

Key performance indicators (KPIs) are essential metrics that help track the success of personalized banking initiatives. Some key KPIs to consider are:

• Net interest margin
• Return on assets
• Return on equity
• Loan-to-deposit ratio
• Customer satisfaction rate
• Customer retention metric

These metrics can provide valuable insights into the effectiveness of your personalized banking strategies and their impact on financial health. Regularly tracking these KPIs and analysing trends and patterns can help banks make informed decisions and implement actionable improvements.

Customer feedback and surveys provide valuable insights into the effectiveness of personalized banking services – can be analyzed by financial analysts, but also by UX Researchers. Banks can gather customer feedback through:

• Customer feedback surveys
• Analyzing email marketing using analytical tools built into CRM tools;
• Interviews
• Encouraging customers to provide reviews

This feedback can then be analysed to identify patterns and trends that can be used to make informed decisions and implement actionable improvements. Moreover, user needs research and data analysis can significantly improve the client/user experience.

Continuous improvement is crucial in personalized banking. It allows banks to consistently improve service processes based on customer feedback and to identify and provide value in line with customer needs and expectations. Banks can cultivate a culture of continuous improvement by engaging employees across all levels of the organization to stimulate innovation and elevate the customer experience.

The prospects for personalized banking appear promising. It involves continuous innovation and collaboration between traditional financial institutions, credit unions, and fintech startups. We can also say that banking, like other industries, is facing hyper-personalization. It is also worth noting that in the era of climate change, modernizing and taking care of mainframes has a significant impact on sustainable development. Data centres are responsible for 1% of global energy consumption – modern mainframe computers use less energy.

We should also expect increasing automation of processes using AI technology to optimize time and costs. According to McKinsley, development will be most dynamic in such areas: "robotic process automation (36 percent) for structured operational tasks; virtual assistants or conversational interfaces (32 percent ) for customer service divisions; and machine learning techniques (25 percent) to detect fraud and support underwriting and risk management."

What is personalized bank?

A personalized bank refers to the process of creating unique customer-centric experiences during the use of bank services, often through online channels. This innovation allows customers to access unique deals and experiences tailored to their needs.

What are the benefits of personalized banking?

Personalized banking offers tailored financial advice, including personalized investment strategies based on individual income, risk, and goals. This can lead to improved customer satisfaction and an increased likelihood of achieving financial goals.

What is the evolution of personalized banking?

Personalized banking has evolved from a one-size-fits-all approach in traditional banking, and the digital age has further enhanced this shift, allowing banks to offer tailored and innovative financial services to their customers.

How can banks measure the impact of personalized banking services?

Banks can measure the impact of personalized banking services through KPIs, customer feedback, and continuous improvement, ensuring a comprehensive assessment of their effectiveness.

1. David Benskin, Breaking down silos: The crucial role of data unification in financial institutions, BAI
2. Deborah Nas, How technology is changing customer expectations, Medium
3. Glance, Enhancing digital banking experiences
4. IBM, What is a mainframe?
5. InterSystems, WBR Insights, Empowering Line of Business Users Through Data Democratization
6. Leah Leachman, Don Scheibenreif, Using Technology to Create a Better Customer Experience, Harvard Business Review
7. McKinsley & Company, Building the AI bank of the future
8. McKinsley & Company, Integrated channels: The next frontier beyond omnichannel distribution
9. Microsoft, Microsoft Inclusive Design
10. Zendesk, CX Trends 2024