Modern consumers demand tailored services that meet their unique needs, making personalized banking a critical strategy for retention and satisfaction. As banks and credit unions determine how to win the modern consumer, they should consider the preferences of millennials, who are anticipated to be the nation’s future wealth holders. 

In Alkami’s 2024 Generational Trends in Digital Banking Study, the report revealed that millennials are up for grabs – their financial relationships are equally split fifty-fifty between major national banks and regional and community financial institutions.

 

For millennials, the price of entry is an exemplary digital banking experience, where the digital banking channel is equal parts sales and service. The path to differentiation will compel banks and credit unions to leverage data to deliver increasingly personalized offers, thereby evolving into the data-informed digital bankers of the future.

 

– Allison Cerra, Chief Marketing Officer, Alkami

 

While banks and credit unions want to deliver personalized banking experiences to remain competitive in the digital age, it can be easier said than done. How can financial institutions get started?

Understanding Personalized Banking

Personalized banking has quickly become another buzzword in the industry, but what does it really look like in application? Here are the elements that comprise a successful personalized banking experience:

• Customized Financial Products: This includes products tailored to individual financial goals, such as personalized loan terms or investment advice.
• Tailored Communication: Financial institutions send relevant information and offers based on their account holders’ data, like spending insights or reminders.
• Proactive Service: Financial institutions anticipate consumer needs and provide timely advice or products before they are requested.
• Enhanced Support: Artificial intelligence (AI) in banking can be used to provide personalized assistance, learning from each interaction to improve service quality.

Personalized banking empowers consumers with more relevant products and services – improving convenience and financial outcomes. Additionally, financial institutions can benefit from higher rates of satisfaction, increased loyalty, and a sharper competitive edge. 

The Role of Technology in Personalized Banking

Technology plays a pivotal role in personalized banking by leveraging data analytics in banking to gather and analyze insights on consumer behaviors and preferences. Artificial intelligence (AI) in banking and machine learning algorithms can help financial institutions leverage this data to predict future behaviors, personalize offers, and automate marketing efforts and interactions – enhancing operational efficiency for teams. 

AI excels at analyzing large volumes of data quickly and efficiently. Financial institutions can use AI to sift through transaction activity, account information, and digital banking interactions to gain deep insights into individual preferences and behavior. This data-driven approach allows financial institutions to understand the unique financial needs of each account holder.

With the insights garnered, AI can help financial institutions tailor banking services and products to individual users. For example, if an account holder frequently makes monthly transactions to an external high-interest savings account, the financial institutions might send that individual an offer for a certificate of deposit with a competitive rate.

Strategies for Implementing Personalized Banking

To successfully implement personalized banking, banks and credit unions should prioritize ethical data gathering and analysis, as well as adhere to the latest regulations to ensure consumer privacy and security are at the forefront. This transparency will ensure consumers feel their data is being protected by the institution and used in a meaningful way – building trust and confidence in the banking relationship.

Leveraging data analytics in banking can uncover patterns and insights that inform personalized recommendations and services. Customized financial solutions involve developing products that address individual needs, such as flexible loan options or tailored savings plans, and offering personalized advice based on the user’s financial situations and goals. 

Effective communication includes using data to craft personalized marketing campaigns that resonate with individual consumers and sending real-time notifications relevant to their current financial activities and needs. 

Additionally, by offering 24/7 support via virtual assistants or AI-driven chatbots, banks and credit unions can exceed expectations for instant, personalized assistance through the digital banking platform. 

Streamlining Call Centers with Artificial Intelligence in Banking

To balance automation with a human touch, institutions can adopt a hybrid service model that combines AI for routine tasks with human support for complex issues, train staff for personalized interactions, and tailor services based on account holder segmentation. 

Banks and credit unions can enhance support interactions with AI-driven tools like chatbots and virtual assistants that provide account holders with 24/7 responses to inquiries and support needs. By integrating AI, financial institutions can streamline customer service processes by identifying and categorizing issues quickly, guiding consumers to the right solutions, or escalating issues to human agents when necessary. This evolution of the call center allows operational teams to drive business goals of reducing wait times and improving overall customer or member satisfaction.

This application of AI not only enhances the user experience by providing personalized and timely services but also helps financial institutions operate more efficiently. The ability of AI to adapt and learn from data ensures that personalization only improves over time, helping banks and credit unions build stronger relationships with their customers and members.

Overcoming Challenges in Personalized Banking

Artificial intelligence in banking is poised to transform everything from customer service to strategic decision-making. Banks and credit unions face the dual challenge of leveraging generative AI’s (Gen AI) potential while navigating an increasingly complex regulatory environment. Despite initial hesitancy due to security concerns and regulatory scrutiny, the growing maturity of AI technologies promises significant improvements in service delivery and operational efficiency, pushing financial institutions to find ways to integrate these advancements responsibly.

Adopting AI in banking introduces a myriad of legal challenges, especially regarding data management and the regulation of AI-generated content. Financial institutions must address heightened risks of fraud and cybersecurity threats amidst an evolving legal landscape. Efforts are underway to establish a regulatory framework, such as the 2023 Executive Order from The White House focusing on AI safety and cybersecurity, and the Algorithmic Accountability Act addressing biases in AI applications. 

As regulations evolve, banks and credit unions must proactively implement comprehensive risk assessments and internal AI governance frameworks to ensure compliance and maintain account holder trust. Partnering with technology providers also requires careful attention to regulatory obligations, ensuring a balanced approach to harnessing AI’s benefits while managing its risks.

The Future of Personalized Banking

Looking ahead, technological innovation will only continue to accelerate, creating an opportunity for financial institutions to take advantage of deeper personalization and predictive banking services. AI algorithms could predict future account holder behaviors based on past actions, enabling financial institutions to proactively address needs. For example, a bank could suggest a customer make a transfer from their savings account to avoid overdrafting their account.

Additionally, banks and credit unions could use AI to set up customized alerts for their customers and members. These could include fraud warnings, spending pattern notifications, and reminders for bill payments, all tailored to the individual’s habits and historical data – enhancing the user experience. 

Personalized banking is crucial for winning primacy with modern consumers. By maintaining a consumer-centric approach, financial institutions can ensure their adoption of artificial intelligence prioritizes the account holder’s needs and delivers true 1:1 personalization across the digital banking platform, while creating greater efficiency for back-office teams.

Ready to take the next step towards delivering personalized banking experiences?

With contributions by Director, Product Management (Data & Marketing) Mark Leher