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March 3, 2016updated 05 Sep 2016 7:57am

How smart data and customisation can help banks appeal to generation selfie

Analysis: Banks and insurers need over a more personalised service to keep younger customers.

By Charlotte Henry

The race is on for retail financial services firms to begin offering the personalised, omni-channel experience that today’s customers are increasingly expecting. However, new research by Congnizant, Marketforce, and Pegasystems has found that current leading players are struggling to do this.

Graham Lloyd, Director and Industry Principal of Financial Services at Pegasystems, said: "It’s never been more important for financial services organisations in the retail sector to understand customers, and personalise services to meet their needs."

The firms conducted a survey of 500 senior banking and insurance executives, and found that under 4% of respondents said they had managed to achieve full omni-channel integration, with 79% agreeing that their organisations had to change during the next five years in order to keep up with 18-25 year old customers.

"We live in an age where ‘Generation Selfie’ is king," said Lloyd, "and the expectations of customers across all sectors are increasingly influenced by the experiences they get from digital leaders such as Amazon and Netflix.

"For this reason, it’s critical that those in the financial services sector invest in technology that enables them to mine the rich seams of available data that can help them truly recognise their customers as individuals and personalise their customer journeys accordingly. Those that don’t could find themselves falling a long way behind."

Tom Blomfield, co-founder of app-only challenger bank Mondo told CBR that big banks take an approach of selling "cookie cutter financial products," not one of genuine personalisation.

"They think in terms of financial products then they try and sell them to you as a customer after having acquired you very, very young by giving you a football or a student rail card or something. They then try and cross-sell and up-sell," he said.

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Blomfield explained that "Every time anyone opens the Mondo app it is totally, totally, personalised for them. It reflects where they’ve been shopping, what they’ve been spending, where they are in terms of budget for the month…all those kind of things, and that just feels natural to someone who has used the modern internet."

By 2020, 89% of respondents to the survey said that they expect that their organisation will have achieved full omni-channel integration.

Sophie Guibaud, Vice President of European Expansion at another challenger, Fidor Bank, told CBR: "we let [customers] reach out to us on a variety of channels including more traditional ones such as email or telephone, and more digital methods such as social media (Facebook, Twitter), or our very own online community, the "Fidor Smart Community"."

She said that "the main focus of our customer service is through this community channel. People can provide and receive financial advice from other customers, and we can then reward them for doing so – cash, improved interest rates and savings bonds are just some of the examples we can offer. Customers can also give feedback to Fidor directly on what the bank can improve, or talk with us about the services they’d like to see."

Data is clearly going to be integral to the move to an omni-channel and personalised environment, and 93% of those surveyed said that they agree that finding innovative ways to provide value-added services to customers based on data-driven insight will be crucial to having success in the long-term.

Blomfield though, describes big data as "overly hyped." "You can do some really intelligent things by applying common sense to the small amounts of financial data there is," he said. "Financial data is small, right? Our average customer makes about 2 or 3 transaction a day. It’s not big data in any sense, but it’s just being intelligent about it."

Video chat will be a key part of this transition, and 70% of respondents expect that video chat will largely replace branch appointments within five years. Furthermore, 73% expect to integrate wearable devices into their channel strategy over the course of the next five years. 64% believe a digital-only channel is viable.

Guibaud says it is not all about the latest tech. She said: "The technology is important to the extent that it contributes to a better customer experience (with smoother transactions for example) but an improved customer service is the key to a great customer experience. That is why it’s so important for us to listen to our customers through multiple channels – it forms the basis of why Fidor was founded."

IoT is also going to be one of the key factors according to the report: "The IoT could transform payments, enabling frictionless on-the-go payment. Or respondents predict rapid take-off as consumers embrace the convenience of payment-enabled wearables: 20% expect it to be common for consumers to make financial transactions using wearables within one year, 59% within two years and 91% cent within five years."

Furthermore, 38% expect that they will be using data from wearable devices in two years. This number reaches 68% when looking ahead five years.

The executives think the customers are on their side, with 86% saying that they agree that once consumers recognise the data potential available thanks to IoT, they will increasingly seek to benchmark their own behaviour against that of their peers.

Blomfield, thinks banks ultimately need to get the basics right first. The apparent embrace of wearables is "the same reason that a lot of big bank are so keen to be seen embracing blockchain" he said. "They need to fix their core stuff. There’s so much basic they can be doing that makes their customers lives so muchbetter. Wearable, sure, big buzzword. Internet of Things, great. But every time I go abroad they block my card. How about you just stop doing that? You don’t need to use blockchain for that, you don’t need to use wearables, get the basics right."

"Banking hasn’t just since the 1970s, so let’s try and get to the 1990s first," he said.

With new challenger banks like Mondo and Fidor, as well as Metro, Starling, and Atom, making waves, it is the traditional banks that are widely deemed to be under threat. However, insurance is also being pressurised by changing customer expectations.

"For the under-pressure insurance industry, the IoT will undoubtedly be a data shot in the arm," the report said. It continues: "data inflows from the IoT will allow insurers to position themselves as trusted partner of the policyholders, providing data-driven insights to better manage risk, identify unmet needs, charge by the minute while on-cover and work hand-in-hand with policyholders to improve quality of life."

77% of respondents said that they expect the majority of motor insurance to be dynamically priced within the next five years, whole over 50% expect this to be the case in health and home insurance.

The opinion was that this growing amount of data from IoT enabled devices was of benefit to customers, with 80% saying that they think that most insurers will regularly provide personalised risk information to their customers by 2020.

There is no doubt that banks are beginning to take seriously both the technological challenges, and the opportunities they may face. The hope is that it may actually make financial services better and more accessible to us, the customers.

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