Financial institutions today are teetering into a Nash Equilibrium.
A Nash Equilibrium, named for mathematician John Nash, occurs when players in a game can fully anticipate the choices of other players. When all players’ actions are considered, everyone is able to achieve their objectives. Every player wins.
The concept was a groundbreaking contribution to game theory study and continues to be widely used by economists — but it also has practical applications. In the banking industry, financial institutions can benefit from Nash’s work by adopting a holistic approach to personalization, better understanding individual customer needs in order to make business decisions based on real market demand. This strategy is proving to be an effective way to connect with customers and win business.
Creating a tailored platform
The expansion and adoption of digital banking has unlocked the opportunity to create a highly individualized customer experience known as “hyperpersonalization.”
Deloitte defines this as “using real-time data to generate insights by using behavioral science and data science to deliver services, products and pricing that are context-specific and relevant to customers’ manifest and latent needs.”
Personalization powered by real-time data and analytics to serve each distinct customer has quickly become an expectation. A Salesforce survey found that 56% of customers expect banks to anticipate customer needs and make appropriate recommendations even before initial contact.
Banks are using automation to serve individual clients by tracking transactional activity and extracting unique data. They use the information to provide services that best fit specific customers’ needs. Based on customer expectations, banks are aggressively pursuing these strategies. HSBC executives expect hyperpersonalization will become a new standard of service, and JPMorgan Chase is investing $12 billion in cloud and AI technologies to strengthen the customer experience.
Leveraging partnerships to meet goals
Financial institutions understand that technology is the gateway to achieving hyperpersonalization.
In a survey conducted by information technology services company Wipro, industry leaders listed “improving the user experience with greater personalization” as the most valuable use of AI technology. However, most financial institutions are not equipped with the infrastructure to collect and process data, conduct pertinent market research and retain qualitative feedback from customers.
To bridge the technology gap and advance the integration of hyperpersonalization, banks are partnering with fintech companies like Plaid, MX and Alloy, which provide the mature and future-ready technology that banks need to foster a custom experience and better connect with customers.
With access to the right technology, the potential for hyperpersonalization is infinite. Leveraging automation and machine learning technologies gives banks an opportunity to connect with potential customers, solidify existing customers and serve as a differentiator in an increasingly diverse marketplace.
Knowing your customers inside and out
At its core, this strategy is simply a means of better understanding customers and the market. Technology can reveal subtle insights into customer patterns and behaviors and the trends shaping the market to deliver individualized solutions. Banks are able to use data to assess the risks and rewards, and make a decision that is best for the organization’s goals.
The strategy should also include an analysis of competitor activity, including niche submarkets and emerging specializations. Information about other industry players will reveal market gaps or unmet needs as well as overserved demographic groups or areas of the market with the potential to become overheated. Digital banks can use this information to decide which market areas to pursue and where the company’s product lines and expertise best fit within the existing market dynamics.
Banks are not the only beneficiary of a hyperpersonalized strategy. SMBs will benefit from individualized analysis, intelligent insights and personal communication. The strategy will not only win customers but establish a meaningful connection that will evolve into a trusted and loyal relationship. According to research from Deloitte on hyperpersonalization in banking, “emotionally connected customers are more than twice as valuable as even highly satisfied customers.”
To achieve a human connection, a personalization strategy should include progress reports for customers tracking financial performance, support and consultation, and education about how a company’s financial objectives are linked to broader economic, social and environmental trends. This is where customers will see the qualitative benefits of a bespoke platform.
With hyperpersonalization, the digital banking industry is playing a positive sum game, one where both banking customers and financial institutions win. The trend is redefining competition in the financial services industry and delivering better banking to small businesses. That truly is a victory.
Mike Butler is the chief executive of digital bank Grasshopper which offers small businesses products and services for specific industries such as commercial real estate lending and yacht financing.