(PoV) Driving value from ongoing, continuous card product personalization
Continuous personalization is the new benchmark in meeting consumer expectations. Banking is no exception. In our latest PoV, we explore what continuous personalization looks like across 3 key phases of the consumer card lifecycle
Continuous personalization is the new benchmark in meeting consumer expectations. Amazon, Netflix, Apple and others have set the bar. These companies use vast amounts of data to personalise their services to make sure that content is relevant, to drive long lasting relationships, and to enable their customers to easily make product and services choices when and how they choose.
In contrast to Big Tech, banks offers very little product personalization for their customers. In the few cases where banks do provide ‘personalized insights’ via data analytics, their customers generally cannot do much with these insights because banking products are mostly ‘static, set in stone’ and not personalizable. This is particularly noticeable in cards and payments, which is where most interactions between consumers and their bank occurs.
Features and benefits of card products are mostly locked to the initial design of the card product itself and – once issued – cannot be changed or customized by the consumer to meet their changing needs . From this, it is abundantly clear that rich transaction spend data – which should provide banks with highly predictable analytical insights into customers’ changing needs – is not leveraged nearly enough to drive more relevant product features and benefits, including individual customer-specific value-added services. Banks are missing an opportunity to learn from Big Tech and drive genuine value for customers.
“1 in 5 consumers are willing to pay a 20% premium for a personalized product“Deloitte
All of that leads to a very homogenous and commoditised card offering by banks globally. Differentiation plays out around the fringes of these products and has very little to do with meeting the ever-changing needs and requirements of consumers.
This provides an interesting perspective as to why Neo-banks and specialised Fintechs have become attractive banking alternatives to consumers. It also highlights why banks should be worried about the entry of large tech players (e.g. Apple, Google) into banking and/or card payments.
So, what is the call to action for banks?
Customizable and personalized products enable banks to provide personalized experiences across the full card lifecycle, which ensures continued use of card products and importantly, drive greater revenues.
Some aspects where hyper-personalization can play a uniquely differentiating role are:
- Onboarding: Consumers can personalize card functions, offers and benefits at the moment of card product selection. Data shows that 1 in 5 consumers are willing to pay a 20% premium for a personalized product. This can represent a significant improvement for banks who have traditionally issued ‘static’ card products with little to no personalization;
- Engagement: Payment transactions (especially on debit, credit or prepaid cards) are the primary way consumers engage with their bank on a daily basis. Banks that want to delight their customers and differentiate from the competition need to orchestrate experiences that leverage the ‘moment of payment’ in new ways. For example, leveraging transaction data to offer targeted merchant offers, providing advice to drive savings, and making recommendations on different benefits that will meet the needs of that specific individual customer. The level of innovation and personalisation that can occur in this stage is really up to the imagination of the experience designer and is no longer limited by technology;
- Retention: Retention is a function of value. Customers leave banks in the absence of perceived value. Whilst loyalty programs have traditionally aimed to do this, many programs are ‘set and forget’ and do not deliver to the levels expected. As such, banks need to revise their loyalty programs and look at how they better reward customers based on behaviours and profitability of the relationship. For example, banks can give their customers the ability to continually choose what is most of value to them – is it having their Netflix subscription paid for in April, a $ discount at Amazon around Black Friday or is it frequent flyer points during travel planning season?
Banks who can deliver personalized benefits and services to their customers will stand out from their competition, increase the usage of their products and will retain customer relationships longer. Research data shows that this can translate into a 30-40% increase in transaction volumes with the potential to achieve a 20% revenue uplift over 3 years. Over the next few articles, we will be exploring personalisation in greater detail and look at how banks can deliver this effectively.
The technology and solutions finally exist for forward-looking banks to deliver personalizable card experiences that caters to consumer’s unique and changing needs – and to do so quickly and cost-effectively without replacing their legacy issuing systems.
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BCG – What does Personalization in Banking Mean? https://www.bcg.com/en-au/publications/2019/what-does-personalization-banking-really-mean;
Deloitte – Made to Order: The Rise of Mass Personalisation: https://www2.deloitte.com/content/dam/Deloitte/ch/Documents/consumer-business/ch-en-consumer-business-made-to-order-consumer-review.pdf;