Remember when commerce was a “trial and error” affair? That is to say, when multiple products were swiftly implemented for general consumption in the hopes that one or two would catch on.
At that time, marketing operated according to a “one-size-fits-most” mentality. Consumers bought products adherent to generalized need-based narratives, i.e., online banking applications, rewards programs, and digital investments.
No one knew ATMs were necessary until they were implemented, nor how badly they needed mobile access to their banking accounts until smartphones encouraged banking applications. Banks were reliant on the “demand on delivery” dynamic until now. With the advent of hyper-personalization, though, that philosophy is changing.
What is Hyper-Personalization?
That same smartphone technology that enabled banking, investment, and reward apps has opened the market to digital upstarts who promise greater simplicity and utility without the need for traditional banking software. Indeed, the rise of third-party financial technology (or fintech) startups makes old-school banking seem antiquated by comparison.
Now, if financial service providers are to remain competitive in the modern marketplace, they must accept that customers demand diversity and personalization in everything from banking to online shopping. And, what they want, they want now.
Hyper-personalization is essentially the process of, as explained in a recent Deloitte report, “harnessing real-time data to generate insights by using behavioral science and data science.” These insights can be used to deliver services and products in a context-specific manner that is relevant to “customers’ manifest and latent needs.”
The chatter around hyper-personalization has been making the rounds throughout the financial landscape. However, many institutions are struggling to accept the hype as an imperative. Are they right to be wary? Or, are they just behind the curve?
Customization is King
Make no mistake, customer experience and personalization is the number one driver behind the push for hyper-personalization. Many established fintech companies have achieved stellar success by focusing on their star player: the customer.
Innovations like embedded finance (“buy now pay later”) options, Web3, AI and machine learning software, and the ease of cross-border commerce are all integral here. All facilitate an improved customer experience across a broad range of financial ecosystems. Many even invent solutions for issues consumers aren’t fully aware they have.
In many cases, these technologies offer incredible go-to-market speed and low cost-to-benefit ratios. This dedication to innovation and customer satisfaction is the propulsionary force behind the fintech takeover. Each app and platform is more customizable than the last, offering consumer options in an ever-expanding array of conveniences that banks have thus far failed to match.
Will it always be like this, though? Well, unfortunately there’s no guarantee of that.
Personalization vs. Privacy
There is one opportunity that many fintech companies tend to skirt or outright ignore in pursuing financial innovation: the importance of privacy.
80% of consumers prefer to purchase from brands with enhanced personalization features. However, there is a point at which personalization can become downright undignified or slightly “creepy.” To avoid such a pitfall seems like a daunting task for companies eager to provide effective marketing that is both timely and beneficial to their customers.
Here is one example where banks might excel over fintech companies in this regard, as banks are better poised to make relevant offers in less-intrusive ways. For instance, by expanding affiliate partnerships that are only available when a consumer is accessing a regulated account or by increasing search options in their banking app to include relevant promos. Here, banks can appease consumer demand and make that exchange less intrusive.
At this stage in the game, global markets are demonstrably stuck between the demand for greater personalization and the need for improved privacy. However banks decide to intervene, investing in innovation that promotes personalization, increases privacy, and reinforces personal agency would be a smart move.
It’s Time to Get Busy
Banks and financial institutions are well within their means to quash fintech disturbance at any time. No fintech startup can boast the capital, workforce, or industry knowledge to upset a legacy institution like a Chase or Barclays bank. So why are many traditional institutions allowing upstart competitors to take the initiative?
While it is true that financial institutions are encumbered with complex legal regulations that many fintech companies lack, is the truth really so simple? Are banks failing to innovate because the law hinders them? Or, is it because they have forgotten the central factor of enterprise: the needs and wants of their customers?
Whatever the cause for the lack of innovation in banking up to this point, the subject has outpaced its narrative. Fintech is here, and quite happy to pick up any slack. The faster banks get on board with the innovation of personalization, the better their odds of withstanding the next great revolution in payments.