Personalization in banking — and its eager cousin “hyper” personalization in banking — come up a lot in conversations about digital banking solutions. It makes sense. We are living in a world dominated by data, which drives incredible levels of personalization through services like Amazon and Netflix. This is pushing banks and credit unions to think hard about how they can deliver the same kind of experiences. But what if personalization in banking wasn’t only about crafting unique value propositions for customers or members? What if it defined your strategy?
Often, I am asked, “Where should financial institutions be prioritizing their investments?” This is the wrong question. It is the wrong question because the answer needs to be personalized for each institution. For example, I think most people would agree that artificial intelligence (AI) is a pretty big trend, but what that means for a particular bank or credit union may be very different. One may be using AI to automate workflows while the other is looking to improve efficiency in customer service. It depends on the problem at hand. Another good example is Banking-as-a-Service (BaaS). A few years ago, everyone wanted to talk about it, and everyone wanted in on it. But it turns out, BaaS doesn’t work for everyone. It works for those for whom it is a core part of their strategy, those who commit the time and resources to getting it right.
The idea is that, in today’s market, jumping on the bandwagon isn’t useful. Strategies need to be bespoke, institution specific, and well thought out. That is true of your business strategy, it is true of your technology strategy — and everything in between. The reason for this is that we’re operating in a highly competitive market, so understanding what your own unique value propositions are is key to delivering experiences for account holders that will keep them engaged. It comes back to the central question, “What kind of bank or credit union do you want to be?” Or, put another way, “What is your secret sauce?”
Sure, there are always going to be table stakes. Digital account opening for consumers is one, digital account opening for businesses will likely be one eventually. On the digital banking front, an integrated mobile and online experience is important. But beyond the foundations, the questions get a lot harder. You cannot craft a personalized experience for account holders without knowing who you are as a business first. And that requires real work and planning. As part of that work, banks and credit unions need to be talking with their customers and members, even surveying them. They need to conduct the research to understand what sets them apart. Maybe it is a deep relationship with the community, maybe it is an ability to extend credit in ways others cannot. Understanding what those unique attributes are and how they shape the identity of the institution will go a long way in helping to build a roadmap to the future.
A couple of years ago, I was talking with a bank for a research report I was working on about their story. They told me the bank had a very clear central strategy — it used low-cost deposits from its BaaS business to fund commercial loans, primarily to small- and medium-sized businesses. The bank focused on building differentiated underwriting capabilities that allowed it to reach businesses that might otherwise struggle to get financing, and its funding cost advantage allowed it to offer competitive rates and structures. This approach enabled the bank to go from around $500 million in assets in the early 2000s to over $7 billion.
It’s this kind of focus that leads to the desired personalization on the account holder side. If you are focused on your account holders, their needs, and how to serve them, delivering well-crafted experiences suddenly isn’t all that difficult. A clear, well-defined strategy almost tells you what to do and where to direct your efforts. For instance, the bank in my example has a comprehensive data and technology strategy to support its efforts, and it is pursuing several growth initiatives that stem from its overall strategy. As a result, it can grow stickier with customers and deliver more seamless experiences. But the decision to make those investments did not come from looking at trends, it came from looking at the bank.
In the end, each bank or credit union will have to decide for themselves how to compete in the current environment. But if we’re going to talk about personalization as a lever for that, we should really be talking about it more holistically. To personalize the user experience, you first need to personalize your strategy — have real conversations about direction, vision, and culture. Define the organization well and the rest should follow.
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