Banking at the razor’s edge, by Doug Gross CEO of NGDATA

By Doug Gross, Chief Executive Officer, NGDATA

What can banks learn from the world of fast-moving consumer goods like razors or make-up? On the face of it, not much. But dig a little deeper and you soon realize that the financial services industry has a lot to learn from the way that FMCG brands are empowering their customers with new ways to order and choose their products.

The way we consume has changed beyond recognition in the last two decades. It’s not only that our supermarket shelves are groaning with foods from around the world, or that we can order any conceivable item online – we now have the benefit of subscription services that put the consumer even more powerfully in control. These services provide an important lesson for banks seeking to protect and grow their customer base.

Lessons for the banking industry

Subscription services enable customers to select a range of items from a retailer that are perfectly tailored to their needs or tastes. It’s the same principle that has long been common in B2B technology through the ‘as-a-service’ model, and in banking the notion of paying a monthly or annual fee for services is nothing new. But with the digital age, subscriptions have reached new heights of customer experiences (and expectations). Within the consumer sphere, businesses like Dollar Shave Club post monthly packages to subscribers with a selection of their preferred products.

More than a quarter of UK consumers are currently signed up to a subscription box service, according to research by Royal Mail. In fact, the market is due to be worth £1 billion in the UK by 2022 because they appeal to a monumental shift in consumer demand for autonomy, flexibility and convenience.

But if subscription services can shift shaving accessories and cosmetics, can it ever be applicable to the world of banking? The industry has experienced a seismic shift in recent years, with a slew of challenger banks entering the market and offering far more choice, improved money management features and tailored financial products to their customers on their favourite platforms.

We believe that it’s time for the industry to harness their data and technology and adopt the same personalised, ‘as-a-service’ approach that has helped to transform so many other businesses and sectors. Here’s how they can do it.

Increased convenience: Be Timely

Meeting customers on their own terms is paramount to engaging with digital-first shoppers. We no longer want a salesman on our doorstep, but relevant, consistent and timely content at our fingertips to help us create a compelling, customer-first experience.

The idea of paying a monthly fee for your bank account is nothing new. But the features and level of convenience customers are demanding is constantly increasing. From app-only banks such as Monzo and Revolut using push notifications, to the increasing use of audio phrases as passwords from the established banks, banking needs to happen on the channels that customers prefer. Harnessing new opportunities such as these enables banks to remove the friction of the banking process and make their customers feel valued by proactively providing services some customers may not yet know they need or qualify for, such as loans, insurance, or even opportunities to play the stock market through a smartphone app.

We can find a great example of this by looking across the Atlantic, where Bank of America recently launched a new AI-powered chatbot called Erica. This tool acts as a powerful personal financial assistant, helping customers to manage their money and get advice on different financial products. What’s more, Erica provides access to BoA’s enormous library of financial resources, helping users to improve their financial literacy. As you’d expect from a modern app, Erica can understand voice or text commands, providing an intuitive (and friendly) experience that makes a real difference to the way that customers engage with the bank.

More personalization: Be Relevant

Years ago, we had an individual relationship with our bank manager, who knew provided relatively impartial advice and knew us by name. Those days might be long gone, but technology now affords banks the opportunity to rekindle this intimate connection with each customer. Mobile apps can deliver a truly personalised experience, but this is something conventional banks struggle to achieve. By clever use of data gathering and allowing customers to lead the process, banks can create truly unique and personalised communications each time.

For example, London-based banking giant HSBC has been using artificial intelligence (AI) to give US credit card customers a personalised shopping experience. They’re in the process of creating a rewards program that processes customer data to predict how clients may redeem their credit card points, so they can market offerings, including travel, merchandise, gift cards and cash more actively. The technology recommends a redemption category to promote to each credit card holder. HSBC sent out emails based on these recommendations earlier this year and also emailed a random category to a control group. About 70 per cent chose rewards in the AI-recommended category while the number of opened emails rose by 40 per cent.

Better experience: Be a Frictionless Adviser

In today’s age of customer empowerment, every business needs to be a customer-first company to compete, and banking is no exception. One of the best ways to improve customer experience (CX) is to give customers sight of products and services that they don’t know exist, making them aware of a huge range of choice – including bespoke offerings.

To do this, banks need to see beyond typical marketing segments and understand the connections between similar customers and predict what they might like – subject, of course, to local laws and regulations. Having true customer DNA / customer 360 gets you past the trial phase and becoming a trusted adviser on products. Banks are already trusted data custodians since they must adhere to a range of stringent regulations governing information security. This makes them uniquely positioned to begin extracting more value and deeper, more trusted customer relationships from the data they hold.

If banks can get a handle on their data, generate real-time and customer-centric recommendations, they will find that an almost limitless choice of new ways to engage with customers with more relevant products, services and communications. Done intelligently, such services will place banks at the “razor’s edge” of their industry.