AI-powered banking experiences

In the 21st century the customer journey needs to be frustration-free

Machine learning can help banks restore the personalised service they were once noted for, says Balázs Vinnai, president of W.UP.

Do traditional banks need to reinvent themselves to remain relevant in the 21st century? With four in five European consumers now regularly using their mobile for bank transactions instead of heading for their nearest branch, they must embrace digital banking. At the same time, they shouldn’t forget that they once provided a highly personalised service – a strength that has been eroded in the era of mass retailing.

Banks are generally still poor at understanding their customers and their specific needs. Legacy systems that most still have in place means that basic transactions such as money transfers and deposits can be carried out digitally, but they struggle to accommodate more complex products and services. Meanwhile, truly digital companies are focusing on customers and customer data; they are building their business onto it and are thus able to sell exactly what their customers need.

Similarly, a priority for banks should be to gain specific customer insights that can enrich their data – and fully utilising solutions that incorporate machine learning (ML) and artificial intelligence (AI) to gain maximum value from those insights.

We hear much about the customer experience or journey – produced by the interaction between any provider and the client over the duration of their relationship. Traditional marketing campaigns on banking digital channels will, for example, focus on mortgage products. They lose sight of the fact that it’s not the mortgage their customers dream about, but buying and setting up their new home.

Banks can, and should, play a more active role in making those dreams come true. The likes of Google and Amazon have thrived, thanks to their ability to personalise the customer journey, based on analysing customer data. Banks are equally capable of using their extensive knowledge and data about customers to aggregate it in digital channels, but it needs to be made contextual. Companies in the insurance sector have been far quicker and adept in personalising their products and services. Their sales machines are more efficient and they recognised much sooner than their banking peers the need to digitise.

In the 21st century the customer journey also needs to be frustration-free, an essential understood by services such as Airbnb and Booking.com. The latter’s popularity owes much to a particularly smooth online experience, so even older consumers aged 60 and over find it quick and easy to use.

Behaviour-based customer insights

Banking has its own success stories, but these tend to come from the disruptors. Take the example of Revolut, which doesn’t believe in branches and invites allows new customers to open an account within minutes via their mobile. Since launching in 2015, it has been particularly successful in acquiring new clients among a highly-educated younger generation, who are attracted by features such as cryptocurrency exchange and peer-to-peer (P2P) payments.

The European banking sector varies from country to country and the picture also differs in the Nordic countries, where digital penetration is much higher. Nonetheless, the basic challenge is the same everywhere; to transform the existing volumes of banking business into digital capability.

Trust is crucial as peoples’ money is at stake. Personalisation should ensure, for example that credit cards aren’t aggressively promoted to customers on a limited income, who may spend freely but struggle to meet monthly payments. Digital sales should include guidance and support for uncertain and indecisive individuals that means there is also a real person there able and willing to help.

The message is getting through to some banks, which are reducing their branch network but realise that the personal touch must also be central to their digital services.

Already, they can move from the traditional segmenting of customers by geographic location and demographic factors, such as gender, age, occupation and financial parameters. A more sophisticated segmentation method, psychographics, helps banks define them based on their personalities, lifestyles and social classes; thus providing a better understanding.

Behavioural segmentation extends this more subtle differentiation further; for example distinguishing between those customers in a specific segment whose preference is still to use cash for payments and those who opt for debit and credit cards. Appropriate marketing campaigns can then be devised for each segment.

Analysing multiple segments simultaneously, also known as cross-tabbing, enables banks to further fine-tune their targeting and by offering a more detailed view of the customer that may reveal new dimensions of a customer relationship

It takes time, effort and significant investment to make the changes needed, but tech companies are ready to help the banks move away from their legacy systems. If they fail to make that move, Amazon and Google are ready and able to move into their territory.

About the author

Balázs Vinnai is president of W.UP, which assists international banks with their digital sales.

He was previously VP and chief digital officer of Finastra.