W&F Issue 12 2018

www.wealthandfinance-news.com 24 Wealth & Finance International - Issue 12 - 2018 With the rise of challenger banks and increasing focus on digital services, it’s safe to say that the UK’s banking landscape is changing. Current reforms are encouraging innovation and competition in the market, but for challenger banks, they present both serious opportunities and risks. Last year, KPMG’s Challenger Banking Report said that Open Banking, the Second Payment Services Directive, and the GDPR were all areas of potential risk and reward for banks. In order to keep one step ahead of the big players, challenger banks need to find ways to attract and retain the best customers. The key to doing this? It’s all about getting personal. Historically, the focus on data within the banking industry has been on security – naturally – and narratives on security have dominated discussions in recent years. But data isn’t something to be locked away – it should be leveraged. The Turn of the Millennials It’s no secret that, dare I say the word, ‘Millennials’ do things differently than the generations that came before them. The most important change for banks is that that they don’t have the banking loyalty that their parents do. Yet. Why? Increasingly financially squeezed and bombarded with more marketing messages than any generation that came before, Millennials have developed a savviness that withstands the tactics employed by the big banks for decades. They need a bank that understands their varied lifestyles, personal financial situations, and differing spending and saving habits, so a blanket approach isn’t going to cut it. Yes, they want messages of consistency and security that have been employed previously, but they also need these to be balanced by modern methods and technologies that will support them in their individual lifestyles. So what does this mean for challenger banks? All banks are sitting on endless strings of valuable data, but the ability to provide successful personalisation depends on one crucial factor which plays to the challenger banks’ strengths: flexibility. Legacy systems, as we know, are the albatross clinging to the the necks of big banks, so the ability for challenger banks to act quickly in providing personalised services and making this a key part of their USP is key in attracting new customers – and keeping them. The possibilities of personalisation But personalisation goes beyond simply replacing an account number and sort code with a name. Luckily, the flexibility afforded to challenger banks means that the possibilities are potentially endless. Imagine a bank that understands your needs – that knows at what point in the month you typically go overdrawn and offers a proactive solution. Imagine a bank whose apps are so secure they can only be opened by your face or your voice. Imagine a bank that offers you personalised tips to help you save money by analysising your spending habits. A bank that tracks your cash withdrawals and lets you set limits on how much you can take out. Or a bank that helps you set a monthly budget and automatically adjusts your allowance when you make a purchase that will affect your budget. These new approaches to personalisation are key to inspiring a renewed sense of loyalty within younger generations. Challenger banks are trialing these things as we speak and are having huge successes. Digital-only Starling Bank, who let you open a savings account just by snapping a picture of your driver’s license, have over 210,000 users in the UK, their current accounts going like ‘hot cakes’, according to a recent Telegraph article. Monzo, whose main feature, apart from being mobile-only, is that it provides you with real-time spending notifications, hit 1 million users this September. These banks are using personalisation to put the customer first – and it’s working. Connexica’s Mike Streeton looks at how personalisation is the key to keeping customers happy – and keeping challenger banks one step ahead. This Time It’s Personal: Why Personalisation is the Biggest Weapon in a Challenger Bank’s Arsenal Putting it into practice Putting this vision into practice relies, of course, on the data. The quality of it, the visibility of it, and – crucially – the coherence of it. Data and BI solutions help to democratise data across the organisation, pulling in all of the bank’s data to create a single version of the truth, making personalisation possible across every customer touch point. When customers are interacting with their banks through a variety of ways (apps, online, on social media, or even in-branch), an omni-channel approach is key – and making sure that the personalised interactions are consistent and seamless across all channels is even more so. As banks push into new territories, creating this single version of the truth will be more and more important. The benefits for banks For challenger banks, the ultimate goal for success is to cut into the market share held by the big players, ensuring that they attract and retain new and younger customers by building trust and developing relationships. But there are other huge benefits to be had by investing in a strategy for personalisation – pre-empting customer needs means you can more easily upsell products. Accessing and using data properly means that banks can target promotions and products to particular customers, or even gain invaluable, accurate insight to help develop new products for the future. All in all, it’s about providing a better service for customers to help encourage loyalty. And that’s just the tip of the iceberg – challenger banks are slowly pushing what’s possible in the realms of personalisation, and it’s clear that we’re at the start of a significant shift in the way banks interact with customers which will have an impact for decades to come. My advice to the challenger banks who haven’t yet invested in a data strategy for personalisation? It’s your biggest weapon, so you’d better use it. Mike Streeton is Technical Director of Connexica, the developers of self-service data discovery platform CXAIR.