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How banks can help customers with their finances

The new generation of money management tools enables the development and deployment of tailored solutions that serve highly specific individual needs.

A majority of banking customers in North America would consider switching banks for better money-management support and personalized advice, according to a recent industry survey. They want to spend smarter, budget better, save more and are increasingly looking to banks for personalized advice on their finances.

As the cost of living surges, personalization in banking matters more than ever. We’ve also seen fintech companies have a transformational impact on an otherwise traditional and slow-to-change industry. These two factors are among the top drivers of personalized banking.

Banks and credit unions are actively working to provide more personalized financial wellness and money management solutions. However, for many of these institutions, digital money management tools are still the most underutilized opportunity to prevent customers from switching to competitors.

Although most banks and credit unions already provide digital money management tools, their adoption and engagement remain disappointingly low. According to a recent report from Forrester, 88% of respondents say less than half of their customers actively use these tools. That is in part because many tools follow a one-size-fits-all approach and require too many steps to gather insights. Even then, the capabilities fall short.

To keep their customers from switching, banks and credit unions need to invest in the right tools and ensure they are providing tailored insights and recommendations that customers need and when they need them.

This requires a set of data-driven tools that improve a customer’s financial wellness with cash flow analysis, transaction categorization, smart budgets, automated savings tools, and personalized advice and recommendations. Financial institutions need to embrace these advanced money management tools and deliver predictive, intelligent interactions that customers value. These interactions drive higher engagement and perceived value, leading to more satisfied customers and stronger business outcomes.

Financial wellbeing programs are complex and require advanced tools to be successful. Investing in the right technology or partner collaboration is essential for banks and credit unions to execute these programs successfully and cost-effectively.

Another challenge is leadership and organizational misalignment while considering whether to build in-house or buy a customizable solution. The competing visions for digital money management and personalization programs lead to an increase in costs and delayed implementation, making it difficult to demonstrate ROI and build a compelling business case for money management.

As a result, banks and credit unions often have to rely on outdated solutions unable to support their business objectives because they don’t have analytics models to access and analyze financial data and create timely, contextual insights and recommendations. And, more often than not, these tools are not linked to external data sources to better understand the entirety of customer financial behavior.

According to the same Forrester report, banking executives acknowledge lacking quality data and data standardization (40%), which impacts their ability to perform analytics (51%), optimize personalization (44%), or create insights, advice and digital experiences (42%).

Financial institutions that implement better money management solutions that incorporate these capabilities can expect to have stickier customer relationships, driving repeat engagement and loyalty over time.

The new generation of advanced money management tools enables the development and deployment of tailored solutions that serve highly specific individual needs. They are forward-looking and provide actionable insights in perpetuity, based on financial data.

With their automatic predictive analytics, guidance, holistic financial analysis, and calls to action, they should be at the center of the customer’s banking experience. This establishes the bank as a trusted advisor, there to promote financial wellness and proactively help customers control their financial lives.

Jody Bhagat is president of Americas at Personetics.


Originally published on  BAI, 7 June 2023: https://www.bai.org/banking-strategies/how-banks-can-help-customers-with-their-finances/

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