Data-driven personalization: A new basis of competition for regional and community banks

Regional and Community banks face a number of vexing trends including increasing share by the national banks, emerging challenger banks, and accelerating consumer behavior shifts to digital. These developments create pressure on the traditional local, relationship-based models regional and community banks enjoyed. In response, banks need to capitalize on their most valuable assets: customer data and understanding customer needs. Data driven personalization is emerging as a key basis of competition with the promise of helping banks understand customer needs, proactively engaging customers, and delivering advice at scale. This session will explore the roadmap that banks are taking towards implementing data-driven hyper-personalized digital banking and will cover:

What is data driven personalization and why will it be a competitive battleground?

What are customers expecting and what kind of benefits can be achieved?

What tools and capabilities are required to implement data driven personalization and how does it fit in the bank’s technology stack?

How can you differentiate your customer interactions and reinforce your brand promise?

What can be learned from the leading players globally?

Transcription:

Jody (00:06):

Hello everybody. It's too bad there's not that much interesting things happening in banking this year to challenge our thinking or for us to discuss. On the contrary, there is a lot of change that's happening in banking that we are all aware of changing in the industry, economics, customer behavior, advancements in digital and analytics capabilities. And yet throughout all of this change the fundamental tenets of what customers expect still prevail. And that's to know me, to value me and to advise me. But we are in a fascinating time, one which will clearly separate leaders from laggards. And there's four themes that really give rise to this outcome. One is the rising rate environment would put more money in motion. Second is the continued acceleration to digital activity. Customer behavior and digital capabilities is putting more pressure to deliver and invest in digital channels what seemingly sometimes just feels like it's a race to keep up. Thirdly, legacy technology stacks will hamper the ambition of some banks at the pace of innovation they'd like to achieve. And lastly, open banking will put more control in the hands of your customers, control over their data and control over the experience.

(01:42)

The challenge here is that the playbooks of the past aren't necessarily going to be sufficient to deliver in this kind of environment. So we'll have personalized or non-personalized marketing efforts that may deliver a bump in customer acquisition, but may not deliver the kinds of relationships that really endure. Secondly, many of you have invested in PFM tools, money management capabilities, but the ones that are static and backward looking haven't necessarily delivered the kind of customer value or adoption that you would hope or the kind of business impact that you might expect as well. And then lastly, most banks deliver some kind of marketing lead list to bankers, but they aren't necessarily based on actual customer behavior and they'll have low conversion rates as well. So what are customers looking for? We conducted some research and it said that two fifths of customers want personalized advice delivered in their mobile app about their finances.

(02:49)

Almost one third of customers said, my primary bank, my finances, you know my cashflow even better than I do. So you tell me how much I should set aside every month, in fact, do it for me. And almost three fifths of customers said, I'm willing to change banks for effective money management capabilities. So it gives rise to this common refrain of, yes, customer data is the bank's most valuable asset, true, but converting that data into actionable advice is what truly creates advantage. And not just for your best customers, but advice for all your customers. So I invite you to look at the battle around primary relationships through a different lens, and that is around personalized engagement. And it's made up of four pillars. The first is transaction data cleansing and enrichment. Second is personalized insights and advice. The third is journey delivery or the ability to deliver on behalf of jobs to be done for customers.

(04:06)

And the last is what we call connected channels. That is propagating intelligence regardless of where it's captured to not just digital channels, but to banker channels and into the marketing technology stack to improve banker productivity and marketing conversion all to benefit your customers. So let's spend a little bit of time on the first two transaction cleansing and personalized insights and advice transaction cleansing. And what I mean by transaction cleansing is cleansing the transaction by putting a logo, contact information, the capturing the geolocation contact information as well as subscription. And you could even put the sustainability impact of that. And ITE has said that effective transaction cleansing and enrichment can reduce your transaction dispute volume by 25%, as well as increase customer satisfaction. And this is really a foundational capability for the next stage, which is around personalized insights and advice.

(05:15)

And this is around insights that help customers manage the extent of their day-to-day banking. So for instance, cashflows, so you know what their scheduled activities or recurring activities or patterns of activities. So help customers understand when might they have cashflow issues, sensitive periods, and here's the evidence why or manage their subscriptions. These are the subscriptions you have coming up. Here are the ones that are coming off a free trial that you'll start paying for next month. And here are the ones that are, you've got three subscriptions in the same category and you may want to consider canceling one. Onboarding continues to be an area of opportunity, particularly digital originated accounts, and you're all familiar with this in terms of the lower profitability and higher attrition of those accounts. You can deliver more effective onboarding outcomes through tailored insights that drive better account quality over those first 90 days. And lastly around transaction monitoring. So monitoring deposit activity, bill activity, recognizing for customers that you may have an anomaly here, a duplicate transaction charge or a deposit that's lower than usual. Helping customers be aware of things that they should be alerted to and take action appropriately.

(06:32)

And also card benefits and rewards. Help customers see that they're on track to achieve their acquisition bonus for their card or based on their transaction activities, suggest what kind of rewards they can use that actually might be really valuable for them. We know that customers that engage with rewards are better value and see better value from the bank as well. Now these are not just one way insights, these are actionable insights. So you're not just making customers aware of a situation, but advising them on what kind of action to take. Perhaps that's ameliorating the cashflow issue or that based on the transaction activity they should be in a different product, one that will suit them more effectively and help them save money. We've also found that you can have gamification that is that helping customers with quizzes to better engage around their finances and it actually creates higher levels of engagement and also user input as well. So there may be some situations, for instance, understanding a customer's goals or if we see a transaction that looks like a new salary, but you want customers to verify that, asking the customers for input and capturing that as well. And all of this can be delivered as part of a quarterly recap of these are the insights around your day-to-day banking over the past quarter, thereby increasing the confidence and transparency around your personal finances, all of which are intended to reinforce the bank is looking out for you.

(08:07)

Now, DBS is a bank based in Singapore. It's one of the leading banks globally in a very innovative digital bank. I'd like to share with you how they've brought personalized insights, not just as part of their experience as a feature, but they've built it in as part of their brand promise to enhance the brand promise for their customers. So take a listen.

Advertisement (08:40):

What if banking could be more intuitive and it could learn what matters to you? So when something looks unusual, it lets you know fast.

Advertisement (09:01):

It keeps an eye on things. So you can just, exactly, because an effortless day is living more and banking less tap into a world of effortless banking.

Jody (09:22):

We have the benefit over 140 million end customers on a platform, and there's been some very valuable data to show the impact and the value that it has for customers. In fact, the average deposit balance for customers that are engaged with insights is 21% higher. Average number of accounts is 8% higher and average monthly income is 18% higher. So these are your better customers that are engaging in finding value from insights. So I'm really pleased today to be joined by Tim and Ankit, really leaders in the field of driving innovation and customer value and bringing the power of personalization to their customers. And they've done it in the mobile channel, the web channel, as well as push across honest accounts and linked accounts for consumer small business and evolving to wealth as well as delivering journeys for customers to help them better save and help them better manage debt. So please help me in joining and welcoming Tim to the stage.

Tim (10:22):

Thanks very much, Jody. Thank you for the kind introductions. Great to be with you and great to partner with you in this, as Jody was describing the power of personalization, I want to provide the context for US Bank because we didn't actually start this journey thinking about personalization. We started it where we start all discussions at US Bank, which is our purpose. And this is what shows up when you turn on your computer every morning at US Bank, this is what it says, we invest our hearts and minds to power human potential. Now, I know many of you're sitting there thinking, yeah, I've seen those kinds of things on posters or other people's computers. We talk about this, I talk about this all the time. In fact, if I joke with my wife, if I haven't said it five times a day, it must be a weekend.

(11:19)

She's not going to put up with me saying this five times a day, right? But this is where we start everything. We ask ourselves, how can we be helping families live the lives they want to live? How can we be helping businesses prosper that is powering potential of our clients? We also talk about powering the potential of our colleagues because we all have to be learning and growing together if we want to power the potential of our clients. And then finally, we talk about our communities because if we're powering the potential of our colleagues and our clients, were helping strengthen communities. So that's where we start. That was the core of our strategy. And we said, look, we're going to build our consumer and small business strategy around this sense of purpose to make sure that we are living up to what we try to do to this every day.

(12:10)

Okay? She says, all right, well, conceptually that sounds nice to him, but what does that actually mean in terms of a strategy? Well, what it means is, first of all, if we're going to power someone's potential power, the potential of our clients, we need to become central, what we call being central to their lives. What does it mean to be central to somebody's life? Think about things in your life that are important to you, things that matter. If all we are is a mortgage bill that you get once a month and we deduct money out of your account, we're not powering your potential. We're annoying you because we're reminding you that you have to pay this bill. Our approach was to become central to people's lives. We wanted to do this through a combination of human plus digital. So our view, and Ankit is going to elaborate on this in a few minutes.

(13:05)

Our view is that you must be the best at digital that you can be, right? Who knows what the 10th best music app is? Nobody has any idea what the 10th best music app is because nobody uses it, right? So you've got to be at the leading edge of digital, but you also have to connect that to a human because for so many people, finances is a very personal thing. And they want to know when they're about to buy that house that it's all going to be okay that they can in fact afford these payments. They want to look across the desk from somebody and ask if it's all going to be okay. So human plus digital, very powerful combination. Ankit is going to elaborate on that in a second. But what we realized, if you were going to become central to people's lives through a combination of human plus digital, we needed to figure out a way that our clients would interact with us frequently.

(14:14)

Because think about the things in your life that are important to you. Think about the things in your life that are central. My guess is that there's an app on your phone that you use often multiple times a day because it's important to you and that there's a human being somehow associated with that thing that you also talk to. So this was the puzzle. We said, huh, if we want to power human potential by becoming central to the lives of our clients through a combination of digital plus human, how do we get that level of engagement? And the answer was personalization. We had to come up with ideas that connected meaningfully to our clients in ways that were genuinely helpful. Just pop-up ads that say, Hey, here's an interesting finding for you was not going to be relevant. It had to be perceived as genuinely in the interests of our clients. They had to see whatever information came out in the app, whatever information a banker talked to them about, they had to see it as genuinely in their interests, not genuinely in our interests. And that's where personalization really came in, was a way to engage frequently with our clients in ways that were perceived as helpful. And what we then did was once we had that concept, I'm going to turn it over to Ankit, who's with his team, made magic out of this.

Ankit (15:47):

Thanks, Tim, and thanks Jody for your partnership as well. So I tell colleagues at the bank that I have the best job at the bank, but I'm actually going to say something controversial here in the room. Knowing there's a lot of folks from banks and financial services, which is none of our customers, none of our clients wake up in the morning and they say, I can't wait to use that amazing banking app. So the reality is when we started this digital transformation at the center of our transformation was to really, as Tim articulated, design an experience that brought purpose. There was a purpose behind it, which was the power human potential. And the reality is as this chart states that a large percentage of people in the United States struggle with personal finance, there was a survey done. It's the number one stress source of stress.

(16:45)

And actually, if you look at the survey number two to 10, most of it relate to money. Things like personal health, et cetera. So personal finance and concern around that is really at the center of the stress that's provided to the customer. So when we set on this journey, this digital transformation journey, as Tim articulated, really it was really important for us to base everything based on who the customer is and what are their needs. And it sounds pretty simple, but it's very easy to kind of get distracted by technology, by data. There's a lot of conversations the last two days on ai, but at the end of the day, we're here to help our customers and to solve our client's needs. So if you think about what are their needs? So someone looking to buy a home, they're going to worry about their credit score and their affordability.

(17:39)

So really using that information, what we know about our customers and helping them achieve or accomplish whatever it is that they're trying to achieve. The other thing we learned through this journey was it wasn't just sufficient to personalize an experience, right? Customers literally told us when we co-created with them, Hey, so much about me, you should be able to anticipate my need. So our entire digital experiences based on how do we use information about who they are, how they transact, what their personal financial situation looks like, their goals, their aspirations, and try to anticipate their need. And what's exciting is, as you see on the right hand side, not only do we have a lot of scale, but it's actually our most engaged experience that we have in our digital property. And by the way, close to 90% of our customers find these insights very, very valuable.

(18:33)

So as we think about the concept of customer needs, we are thinking about both how do we help them in their everyday life, but also how do we help them really achieve financial security Here? The example here is really highlighting simple task of helping customers understand their spending, but in the context of helping them understand their spending, we're providing really valuable, what I call individualized experience, not just personalized. So this customer can say, Hey, based on my spending my activity, I could save a little bit more this month. Or, Hey, based on the card that I'm using to purchase, if I had this other card, I would earn extra in rewards. So really at an individual customer level, presenting these insights with the idea to create value for them. And we do know that these everyday banking things are important, but at the end of the day, our clients have aspirations, they have goals.

(19:36)

And by the way, these goals and aspirations, they change over time as they experience different life events. So not only are we presenting insights, but also all the tools, all the content, all the capabilities that we have today, they're all really geared towards starting with understanding who the customer is, then what are their needs, and really tying those solutions and those capabilities and tools to help them really achieve whatever it is that they're trying to achieve. The final thing I want to state here is, as Tim mentioned, our strategy at US Bank is digital plus human. And if you think about it, customer lives are complex, right? And generally when we talk about personalization in the industry, we talk about, Hey, customers that look like this or cohorts of customers, and then we have something that we offer them. But every individual has different needs, different life events, different expectations, and we believe that the combination of digital plus building out capabilities that connect that customer to a human being is the right answer.

(20:43)

So we've spent a lot of time on really building and launching capabilities are integrated into our digital experience. So an example here is our co-browse capability, which just really industry leading, which not only gives customers an ability to co-browse with a banker at any time that they want, but also takes the context of the conversation with a customer, and the banker can collaborate with the customer. They can literally see what the customer is going through. So capabilities like this that extend beyond the day-to-day transactions transacting are really central to what we're really focusing on and really will help deliver the great experience that we reside. So with that, I'm going to hand it over to Jody.

Jody (21:26):

Thank you, Ankit. It's really impressive what US Bank has accomplished, and Tim and Ankit are not just great executors, they're also quite visionary as you've seen. So I want to spend just a moment, and I'll turn this to Tim around looking around the corner. I think all of us want to try and understand what's coming. So Tim, what do you see in the context of US Bank or even the industry more broadly? If you were to look around the corner, what are the things that we need to do to better meet customers, evolving needs moving forward?

Tim (21:56):

It's a great question, Jody, and I look forward to your perspectives on this as well. But when I think about what's around the corner, I don't start with banks. I start with our clients, and I want to take two groups of clients. I first want to talk about the group of clients that Anket referred to, just typical consumers. He said something very important. How many of those consumers wake up every morning, rush to their phone, open the US bank app and say, what are the new features? How many of them do that? None of them do that now. It's not meant to be difficult for our digital teams to accept. It's the reality that our clients are consumer. Clients are thinking about their life. They want to own a home, they want to go on vacation, they want to send their kids to college, whatever it is that they're trying to do.

(22:46)

And so I think from a consumer perspective, Jody, this is about how do we make that absolutely as easy as possible for them so that they can come in, talk to one of our bankers and say, Hey, here are the things that I'd like to do. Or they can type into their app, which they're doing right now, literally thousands every month saying, I'd like to have this goal. We then should take all the information we have about them, and we should make it really easy for them to achieve that goal so that all they have to do is check back in with us just periodically say, we got you covered, Jody, your bills are being paid. We're saving for your trip to Disney World, whatever it is. I think the same thing IMP applies on the small business side. I talk to small businesses every week. How many of them started a business? They loved banking. None. They started the business because they love making pasta or whatever it is that they do. So the same principles that apply to consumers apply to business clients. How do we make it so easy that they can simply say, here's what I'm trying to achieve. And we can be so personalized that we say, we got you. We got it covered. So I think that's part of what's around the corner. How about you? What

Jody (23:56):

Do you think? That's great. Thanks. So my perspective, I've broken it up into three horizons out of the old structure to it. And so this first horizon, which is this year and next year, we see that personalized insights will not just become a feature, but it'll be part of the brand promise. And leading firms will really lean in around this. The second thing was what Tim just alluded to, which is this idea about capturing customer information, let's say, about their goals, and then being able to automate those journeys, not just, here's what you should do right now, but here are the things you should do to achieve your goal over the course of the next two years, three years, and how you're tracking against that as well. So that's what we see in Horizon one, horizon two, just to be a little bit more provocative, might as well.

(24:46)

I got the stage, basic insights, a basic version of what we talk about, what we talked about today will become ubiquitous. That means offered by all 5,000 banks in credit unions, a basic version. But leading banks such as US, banks and others will really lean in and create differentiated experiences as a result of that. And then bringing to life what Ankit and Tim just talked about, which is this digital plus human connection, using the intelligence to not just drive better digital experiences, but to enhance the way the bankers interact, to give them more informed intelligence about the behavior of the customer and why they should engage them, as well as to improve the marketing conversion based on transactional behavior as well. And that is the last horizon, not to offend any CMOs that are in the room, but the days of you're pre-approved for a credit card or a loan will go away. It'll give rise to advice or offers that are delivered as part of an insight. Why? Because we will share with the customer what we understand about their situation and their need and advise them that we think you should be in this product. This is how much you will benefit from being in that product and why we've put that forward.

(26:07)

And then lastly, open finance will really have a, will redefine how both banking products are constructed as well as the distribution model. So just to recap, we talked about more specifically cleansing and enriching data, personalized insights and how that can drive enhanced digital experience, making more informed interactions for the banker to engage and deliver value to customers, and also to improve the way that marketing is done based on transaction and behavioral intelligence. And all of this is to come together and show the customer that the bank is looking out for them. They know me, value me and advise me. Thanks very much. So we've got about three minutes for questions. If anybody has any questions for Tim or Ankit or myself, we also have, Megan has a microphone if anybody needs one. Yep. There's a question here on the there.

Audience Member (27:24):

Thank you for the presentation. I was going to ask a question along the lines of the other side of the audience you serve at the bank, so there's obviously the consumer side, but how do you think about this in a similar lens from a business perspective for the SMBs and enterprises you serve?

Tim (27:46):

Yeah, sure. I'll answer a few thoughts. So we are trying in the same way to provide personalized perspectives for businesses. It comes across in different ways. So give you an example. One of the most important things that a small business is concerned about, of course, is managing cash and making sure they don't run out of money. And so we introduced in October a tailored cashflow forecasting tool. So using all of the data that we have about their business, receivables, payables, etcetera, and using that to forecast what their 90 day cashflow is. So that's obviously highly personalized to them and allows them to see their various expenditures. So that's just an example of how we're trying to apply the same digital plus human and highly personalized approach to small businesses. Does that help? Is that get at what your question is.