When will personalized banking arrive for everyone?

In banking and in other industries, personalization is a hot topic. But here’s something you don’t hear much about: It’s difficult to get personalization right. Let’s look at why.

Say you’re hiring a web developer. You hear that your neighbor is looking for a job, so you send her the job description. If she’s a web developer, she’ll thank you for thinking of her. But if she’s a civil engineer, she’s likely to be offended. Don’t you know she’s not a web developer? She’s spoken to you regularly for years. It’s like you don’t know her at all or weren’t paying attention. Of course, you’d never offend your neighbor like that. Yet, many banks (and other businesses) regularly irritate their customers by sending them offers that aren’t relevant.

Today, businesses are racing to personalize customer service, offers, and digital experiences ahead of the competition. This effort is critical for two reasons. Firstly, customers are more likely to entertain relevant offers. The second—and I think more important of the two—is building stronger relationships with customers. Offers and communications that scream “I don’t really know you” make customers think that you don’t value their business.

In banking, personalization can help traditional banks keep their long-time customers from switching to digital-only upstarts. Those digital-only banks usually offer low fees, a good mobile experience, and responsive customer service. But traditional banks have the advantage of long relationships and trust. Effective personalization of the banking experience makes that tangible for customers. It tells your customers “I know you and value your business.”

Consumers expect personalized experiences

Customers—both businesses and consumers—have higher expectations of those they do business with than ever before. Banks are no exception. Many banks have responded by improving their online banking experiences and offline experiences. For instance, banks are investing in launching ever-more online features and new products, like saving tools and buy now, pay later options. But it’s not enough. People aren’t just comparing their bank to banking in the past or to other similar banks. They’re comparing their bank to Netflix, Google, and FinTechs.

If Netflix knows them well enough to suggest they might like a documentary about Vikings—why does their bank keep suggesting credit card rewards and other products that aren’t relevant? People enjoy a high degree of effortless personalization within many of the digital experiences they access regularly. Traditional banks need to keep pace.

Siloed data prevents easy personalization

Banks have a wealth of data about their customers. That serves to elevate people’s expectations. But it’s also at the root of the personalization challenge for banks. The data is siloed. Credit card, mortgage, brokerage, and other types of data are housed in different systems. It’s difficult to use the data to segment customers and offer them relevant products. The systems don’t “see” customers. A customer with five different types of accounts might as well be five different people. This makes gaining the 360-degree view of customers needed for personalization difficult.

Banks are trying to overcome this challenge—they have been for years. Many banks have made progress. For instance, banks can create data warehouses that let them analyze customer data in ways that would have been impossible just a few years ago. This approach demands significant compute power and IT resources. It turns every interesting product personalization idea into an IT project. But it doesn’t support the level—or speed—of segmentation needed to deliver the kinds of automated personalization needed to lead the market.