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Why banks must move now to adopt an AI-driven customer experience

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A study by A.T. Kearney in May indicates that as many as one in ten European banks may close its doors over the next five years due in part to the increasing competition posed by agile digital challengers.

Despite the acceleration of tech adoption in many sectors, in March, a Capgemini study revealed that only 40 per cent of financial institutions feel they have the necessary digital capabilities to deliver on customer experience transformation.

Today’s tech-savvy consumers are demanding banking services tailored to their priorities, preferences and requirements. They see financial services as an enabler for other aspects of their lives, and they want their banks to deliver the products and advice they need in an efficient, timely and contextually relevant way – in much the same manner that their other everyday services engage with them.

Challenger banks have been leveraging their digital nativity to provide contextual banking since their founding. They plan to exploit the dissatisfaction of customers with their banks to help consumers improve their financial lives with personalised experiences and products. Established banks with legacy systems, organisations and cultures – have so far found it difficult to provide the same level of contextual services with the digital banking report finding that 94 per cent of banks say they can’t deliver on their ‘personalisation promise’.

PSD2 now marks an important crossroads in the fintech vs brick and mortar battle. This regulation, coupled with the ever-rising demand for more personalised digital customer experience, makes 2019 a watershed moment for those financial institutions which have not already adopted AI-driven strategies that truly embrace the competitive advantages that meaningful personalisation can bring.

While fintechs could, until now, only dream of the kind of customer data boasted by traditional banks, PSD2 will level the playing field, increasing the threat of disintermediation and giving fintechs an important competitive edge. This regulatory change will give fintechs the opportunity to increase their services speed, security, accessibility, coverage, and massively accelerate their client base.

Understanding customers

Challenger and neo-banks can be built quickly and easily from scratch using cloud-and API-based technology. As digitally native, customer centric propositions, these disruptors already have the agility to keep online customers engaged through gamification and rapid adoption of new CX innovations. Banks and other financial institutions on the other hand remain largely bound by legacy technology and therefore naturally slower to adopt digital technologies such as AI. Adding to this competition will be the eventual entry of tech giants Google and Amazon into the banking space, on the back of securing e-money licenses, which will create a whole additional level of competition for traditional banks.

Traditional banks however, possess a winning hand - the kind of data needed to make true personalisation a reality. However, this requires cross-channel and cross-enterprise collaboration and the innovative mindset to find workarounds for legacy IT systems, which are unable to measure customer responses or make recommendations based on those responses.

Consumers want relevant information, content and recommendations in real time. It saves them time and makes the whole experience easier and more enjoyable. Giving your customers the power to streamline their content consumption and purchase processes, for example but they also feel connected and engaged with a brand that “gets” them is a powerful thing building customer satisfaction and trust. With a customer centric focus and personalisation strategy you can create scalable experiences that will drive retention, loyalty and revenues.

Customer-centric banks are those that truly understand each customer at an individual level, and can therefore form a mutually beneficial relationship with that customer.

In recent years efforts have been made by a number of banks to integrate personalised customer experience capabilities, but without the full support of organisational structure, technology and investment behind it, banks will miss the strategic opportunity, true ROI and point of differentiation of personalisation.

Understanding personalisation

Thus far, banks have been using customer microsegments to personalise offers to customers, but in this era of 1:1 personalisation these practices are increasingly becoming redundant and if not changed will only leave their institution at a competitive disadvantage.

To overcome this, banks much leverage their resources to focus on delivering meaningful and powerful personalised experiences in a customer-centric strategy. Too much of the conversation around personalisation in banking focuses on marketing offers and is measured by increases in sales. The true potential of personalisation lies in using an organisation’s data and analytics to transform their customer interactions by allowing them to anticipate their customers' needs and deliver contextually relevant and valuable experiences to customers, improving customer satisfaction ratings and building even greater brand loyalty to forge deep relationships that stand the test of time. Customers want their banks to understand them and provide tailored solutions at the right time. This is something the challenger banks have succeeded with largely due to their flexibility. In order to survive, legacy banks will need to re-strategize in order to focus on consumer centricity. In order to build customer loyalty, banks need to match the kinds of digital experiences customers are receiving with challenger banks and in a host of other sectors.

To make this happen banks need to first ensure that they are fully aware of what personalisation is and that this strategy becomes a real focus - right throughout the organisation. It is only then that banks can take the necessary actions to compete and win against high-tech disruptors.

Only the banks that adopt and embrace this new digital era will survive. The canary in the coalmine is already here as, despite strong volumes, banks are showing dramatic decreases in income per customer (-1.1 per cent 2018 vs 2017; -11 per cent 2018 vs 2008). Branch closures and other cost saving measures are just short-term fixes but will not be enough to fend off increased competition in this new era for banking. For traditional institutions it is imperative that they immediately shift their focus to implement meaningful strategic transformations that place a profound emphasis on providing customers with timely, contextually relevant service and personal end-to-end experiences across all channels and at each touch point. Personalisation isn’t a panacea for banking’s digital woes but it is a huge help and one that is a self-sustaining investment—as you build stronger relationships with your customers, you gain more data about their behaviours that allow you to present them with relevant, engaging prospects and information.

Dave O'Flanagan, CEO & Founder, Boxever (opens in new tab)

Dave is CEO of Boxever, a data science andpredictive marketing platform. Founded in 2011, Boxever employs over 50 people and is headquartered in Dublin.