The why and how of hyper-personalisation

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The why and how of hyper-personalisation

Future of retail banking

Due to the ever-changing technological landscape, consumers are increasingly expecting a highly-personalised service based on their individual needs. Not merely in industries such as retail and transport, but also in (retail) banking. Adopting hyper-personalisation offers many advantages as well as challenges. How to overcome these obstacles and prepare for the future of retail banking?

Responding to customers’ manifest and latent needs

Over the past decade, banks have developed personalised offerings to increase customer loyalty and build a competitive edge. However, progress in other industries, from retail to hospitality, along with advances in FinTech, are raising customers’ expectations of the banking sector. More and more, banks are expected to anticipate customers’ needs and make relevant suggestions even before the first contact. Banks that are the first to seize this opportunity and deliver true end-to-end hyper-personalised products and services will create a significant advantage over their competitors.

The future of retail banking: The hyper-personalisation imperative

Hyper-personalisation as an imperative for banks

This is where hyper-personalisation comes in: harnessing real-time data to generate insights by using behavioural science and data science to deliver services, products and pricing that are context-specific and relevant to customers’ needs. Rather than being an option, hyper-personalisation is becoming an imperative for banks, not merely because of technological developments, but also because governmental and regulatory expectations have translated into a need for banks to play a more extensive role in meeting society’s financial needs – for the “haves” and “have nots”. Also, there is a strong revenue and valuation argument. As our report shows, a firm’s revenue tends to increase after a certain level of hyper-personalisation.

The obstacles of adopting hyper-personalisation

Banks are particularly suited to adopting hyper-personalisation, as they enjoy both large customer bases, and a high amount of data per customer. However, there are three major challenges. First of all, due to legacy technology and conduct regulation it is difficult to access their potential goldmine of data. They do not need more data, but will need to derive more insight from the volumes of data they already have. Secondly, they have difficulty meeting customer needs. Customers believe that banks do not address customer challenges and improve the customer experience. Last but not least, banks currently lack customers’ trust. Integrity, benevolence, and competence have been eroded since the Financial Crisis that started in 2008. This is a serious problem, as it is vital to be a “trust protector” of your customers’ data across different platforms.

Overcoming the obstacles

In order to overcome the obstacles mentioned above, banks need three ingredients: 1. Infrastructure building blocks: a combination of data analytics, behavioural science, and ethnographic research capabilities will enable them to derive pivotal insights from their data. 2. Product functionality innovation to improve the existing products and services in terms of costs, tailoring, simplification, and risk methods. 3. Product design innovation to build an emotional connection with their customers, which will enhance trust. Banks that are able to master these ingredients will make significant progress in terms of differentiating their brands and multiplying their revenues.

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