29 Feb 2024

| By

Sreedhar Tatavarthi

The strategic imperative of personalization in banking: Navigating the future

This article is part of our series Gen Z Banking Trends, where we uncover the ins and outs of Gen-Z banking preferences.

Personalization has become ubiquitous, permeating every facet of our digital lives. From the curated playlists on music streaming services to the product recommendations on e-commerce sites, personalized experiences have become the norm, shaping consumer expectations across industries. In this environment, the banking sector is no exception.

Not convinced?

A staggering 82% of Gen Z users are willing to switch their financial institutions for a superior digital experience. According to BAI 2024 Banking Outlook, lack of personalization is identified as one of the top 3 biggest frustrations with digital banking.  

Personalization in banking is not just about enhancing customer experiences; it's about leveraging this paradigm to unlock new levels of engagement, loyalty, and financial performance.

Personalization is a force multiplier:

Banks leading in personalization maturity can see a 20% uplift in customer satisfaction, a 10-15% increase in sales conversion rates, and a 20% rise in employee satisfaction.

Personalization should be viewed as an ongoing process rather than a final goal. Initiating even at the "basic" level can lead to revenue increases of 5-10%. As organizations progress to an "Enhanced" level of maturity, they can anticipate revenue boosts of 10-20%, and reaching an "Advanced" stage can drive gains of 25% or more. Mckinsey

In what significant ways can personalization contribute to business success?

Improve customer acquisition ROI:

The increasing trend towards digital-first banking is transforming customer acquisition in two significant ways: the importance of a bank's physical presence has diminished, and consumers now face an overwhelming array of choices more than at any previous time, such as neo-banks.

This shift has resulted in higher expenditures on paid media initiatives and referral strategies, driving up the costs of acquiring customers (CAC) without adequately addressing the growing demand for personalized experiences among new, first-time, or repeat visitors.

Optimizing experiences after the click presents a substantial opportunity for improvement. For instance, visitors who are not current customers will see the site's most popular and locally relevant offers, while those who already have a credit card with the institution receive offers tailored to their specific type of credit card.

Boost customer engagement:

Enhancing engagement throughout the customer journey, personalization extends beyond acquisition to foster ongoing interaction. It plays a crucial role in immediate goals like activation, early interactions, digital wallet additions, and reducing customer turnover. 47% of bank consumers who received effective advice going on to open a new account JD Power. For example, by targeting customers at pivotal moments with personalized communications, such as emails or notifications for account activation or encouraging the use of mobile wallets, banks can significantly influence customer behaviors.

Increase loyalty and customer lifetime value:

Given that 78% of consumers are more likely to refer friends and family to banks that personalize (Mckinsey), personalization is an effective tool for turning customers in to ambassadors. Proactively providing tailored financial information, offers, and educational advice can transform disengaged customers into loyal ones. Consider the impact of offering products or services tailored to a customer's shown preferences, like travel rewards or high-end credit cards, alongside instant social proof messaging to bolster their confidence in making choices.

Conclusion: Time for Personalization is now

The case for personalization in banking is irrefutable. In an era where personalized digital experiences are everywhere, banks must adapt to meet these evolving customer expectations. The benefits, as highlighted in this article, range from improved customer acquisition and engagement to enhanced loyalty and increased revenue. As the banking industry continues its digital transformation, embracing personalization is not merely a competitive edge—it's a critical strategy for future success. The time for banks to act is now, leveraging the ubiquitous power of personalization to chart a sustainable path forward in the digital age.

Want to unlock the power of personalization for your financial institution. Book a consult.

Are digital hurdles slowing your deposit growth? Symphonize helps banking institutions elevate their digital customer experience to match Gen Z's expectations. Click here to book a quick 30-min discovery call and let's tackle it together!

About the Author

Sreedhar Tatavarthi

Sreedhar Tatavarthi is an accomplished IT executive with a robust 20-year career, predominantly in the banking sector. He specializes in leveraging technology to revolutionize banking experiences, particularly for Gen Z customers. His work encompasses digital transformation, enhancing customer service, and implementing strategic tech initiatives to foster growth and innovation in the banking industry.

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