There’s a stark truth in banking: the better your customer experience, the more successful you will be. Recently, McKinsey found that highly satisfied customers are two and a half times more likely to open new accounts or buy new products with their existing bank than those who are merely satisfied. In one Accenture study, 77% of respondents said they were happy to share more data with their bank, but 66% demanded faster and easier services as a result. To be successful, the bank has to use the data to create the digital connection points but to understand the context of what the customer is doing and engage appropriately.
Contextual banking offers the potential for deeper, more rewarding customer engagement, but the latest Digital Banking Report finds there’s still work to be done.
Putting personalization in context
New digital channels allow the customer to engage at every step in their journey without ever directly connecting the bank. This means moving beyond targeted marketing and ‘next-best’ offers to create far more customized, relevant end-to-end experiences based on a contextual understanding of customer behaviors and activities.
The Boston Consulting Group (BCG) believes the true power of personalization is “in transforming all of an organization’s customer interactions by using data and analytics to anticipate individual needs, target segments of one, and build deep relationships that stand the test of time…It’s about providing service, information, and advice, often on a daily basis or even several times a day.”
This is the crux of contextual banking. Integrating customer insight with environmental factors, transactional data and social engagement means leveraging all the data available to the bank – from multiple sources and channels – and gaining real-time insight from them.
In the Digital Banking Report, which identified challenges for delivering contextual banking successfully, Jim Marous, Owner and CEO said, “The key to success in a digital ecosystem requires the combination of data, advanced analytics, an innovative culture and leadership willing to disrupt legacy business models for an exceptional customer experience.”
Leading through AI and analytics
Creating contextual customer experiences requires the dismantlement of information silos that have built up over generations within some banks. AI and advanced analytics technologies now allow organizations to break down the silos and deliver insight from data. The combination of technologies can set customer relationships in context to deepen customer relationships, improve operational performance and create entirely new business models.
According to the Digital Banking Report, one of the biggest differentiators between ‘pioneer’ and ‘laggard’ in banking innovation and digital transformation is the commitment to data management, advanced analytics and AI and the preparedness to deploy solutions based on these disruptive digital technologies.
However, the report also demonstrates that banks have a long way to go to realize the full potential of these technologies. When asked which digital technologies would have the greatest impact on the banking industry in the next twelve months, 76% of banking professionals felt that AI, machine learning and analytics would have a high or very high impact. Yet, only 31% felt their organization was ready to leverage these technologies.
This result was reflected in questions about the progress being made with digital transformation with only 17% of respondents indicating that digital transformation had been deployed at scale. However, new digital technology is not the only barrier banks are facing.
The rise of Open Banking
Open Banking is quickly becoming one of the biggest disruptors with the Financial Services sector. As regulators worldwide begin to define Open Banking APIs and gateways, banks are opening up their systems to share or exchange data with other providers as required by their customers. In Japan, for instance, virtually all banks are set to meet the 2020 deadline set for by their government to publish their Open Banking policies and contract with at least one Third Party Provider (TPP).
The Digital Banking Report found that 73% of respondents thought Open Banking APIs would have the greatest impact on their business over the next 12 months. However, only 35% said they had a high or very high level of readiness for Open Banking. This is leading an increasing number of banks to investigate ‘platformication’ where business models and Open Banking technologies are aligned to let providers and customers to connect, interact and share data.
Is your culture ready for digital transformation?
The challenge for some banks is that they don’t just have a legacy technology infrastructure, they have a legacy culture as well. Introducing the ‘fail fast’ attitude to innovation of Fintechs and new, smaller entrants is difficult for many organizations where risk has to be minimized and ROI ensured prior to the commencement of any large-scale change.
The report finds the need for a ‘digital bank culture’ to be created and reinforced from the top down and the bottom up to combat these issues. This new digital culture must be built around constant innovation and business agility, and banks must find new ways of working with employees and business partners to foster collaboration and innovation.
Underpinning all this is the need to deliver data-driven insight when and where it’s needed. Only by deploying AI and analytics can organizations enable the digital banking culture that will drive better context-driven experiences for customers.
Read more in the Digital Banking Report.