From Transactions to Transformations: How Data is Rewriting The Banking Playbook
By Jody Bhagat: President of Americas at Personetics, a global leader in data-driven personalization & CE for financial institutions.
Picture this: You open your banking app and see a message: “Hey Alex, looks like you may need to move money into your primary checking account to cover upcoming expenses. Can I transfer in $3,000 from your external savings account at XYZ Bank?” This isn’t a far-off dream—it’s banking’s next chapter, where artificial intelligence (AI) and data analytics take center stage.
I recently was a panelist at a conference, sharing insights with other industry leaders about this very future. Our panel discussion highlighted how AI and automation are completely reshaping banking efficiency and customer engagement, while data-driven personalization is setting new standards for customer satisfaction and loyalty.
Addressing The Pain Points In Modern Banking
The banking industry is at a crossroads. Customer expectations are soaring, the battle for deposits is fiercer than ever, and there’s relentless pressure to cut costs. At the same time, there’s an urgent need to leverage AI and data effectively. The industry is seeing a massive, continued shift to digital, creating both challenges and opportunities on how to engage customers.
This perfect storm is creating a widening gap between industry leaders and laggards. The key to bridging this gap? A deeper understanding and more effective use of customer data. Banks that can harness their data to win deposits, deepen customer relationships and drive efficiencies will come out on top.
For example, by analyzing transaction data, a bank might identify customers with regular high balances in low-interest checking accounts and proactively offer them higher-yield savings products. To deepen relationships, banks can use AI to spot life events—like a customer starting to make baby-related purchases—and offer relevant products such as college savings plans.
The Role Of Digital Banking Platforms
Digital banking platforms are proving to be key differentiators across the industry spectrum. Interestingly, their role varies depending on the size of the institution. For community banks, these platforms are lifelines, allowing them to innovate and keep pace with industry leaders despite limited resources. Regional banks are taking a hybrid approach, utilizing digital platforms to tailor interactions and capabilities that align with their brand. Meanwhile, super-regional and national banks are leaning into customer-driven innovations, using platforms to strengthen their internal capabilities.
But the true power of these platforms lies in their ability to shift the banking paradigm. We’re moving from a product-centric model to one that helps customers better manage their day-to-day banking and improve their financial outcomes. Advanced AI algorithms can analyze spending patterns, income frequency and recurring bills to forecast potential cash shortfalls weeks in advance, allowing banks to proactively offer solutions.
The Exciting Future Of AI And Data In Banking
We’re still at the beginning of our journey in leveraging data and AI analytics. It’s both exciting and slightly intimidating to consider what the next three to five years might bring.
One area that particularly excites me is the potential for banks to help customers take better actions today while also accomplishing long-term financial goals. We’re moving toward a world where virtual agents and human bankers will be far more informed on customers’ needs. For instance, they might recognize that a customer is in a home improvement cycle based on increased spending at home improvement stores and reach out with relevant advice or products.
What’s more, the way banks market to customers is set to undergo a dramatic shift. Gone will be the days of generic preapproved offers plastered across websites and mobile apps. Instead, we’re moving toward demonstrating personalized benefits based on each customer’s unique financial situation and goals.
The Promise Of Open Banking And APIs
The increasing availability of data through application programming interfaces (APIs) and open banking initiatives is opening up new possibilities for creating fluid customer experiences. However, it’s crucial to remember that the competitive advantage doesn’t lie in the data itself but in how it’s used.
The key for banks is to move from simply complying with open-banking regulations to creating an advantage. This means using both internal and external data to benefit the customer, which will ultimately create a competitive edge.
Challenges And Opportunities Ahead
In this new era of data-rich banking, financial institutions are navigating uncharted waters, where hidden reefs and promising treasure troves lie beneath the surface. On one hand, there’s the need to build rigorous data governance and security frameworks to protect customer information. On the other hand, there’s the potential to use this data to offer hyper-personalized insights and recommendations across a customer’s entire financial portfolio.
Conclusion: A New Era Of Banking
As the financial landscape continues to evolve, one thing is becoming crystal clear: tomorrow’s banking leaders will be those who can weave AI and data into the fabric of every customer interaction, crafting experiences that are as unique as fingerprints and as valuable as solid-gold advice. The technology is here, and it’s evolving rapidly. The question now is not whether banks will adopt these technologies but how quickly and effectively they can apply to practical use cases that benefit customers.
In the years to come, banks that can turn raw data into tailored financial wisdom will not just survive the industry’s tides of change—they’ll ride the crest of the wave and enjoy the benefits of enduring customer relationships.
First published on Forbes by Jody Bhagat, 26 September 2024: https://www.forbes.com/councils/forbesfinancecouncil/2024/09/26/from-transactions-to-transformations-how-data-is-rewriting-the-banking-playbook/
