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Brian Stone
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Although it may seem counterintuitive, as financial institutions push further into the digital realm, the human element of banking is all the more important.
Digital is becoming the go-to method for managing finances; in fact, 79% of consumers use their mobile device at least once a month to manage their bank account, according to research from the American Bankers Association. So, it is important for FIs to not overlook the human aspect of the profession when planning for digital expansion. While we may not immediately think of digital banking as human and personal, human relationships are irreplaceable when it comes to creating a superior customer experience. What’s more, human guidance remains critical for ensuring banks get the most out of the technology they use.
Digital-native FIs and those that are expanding their digital offering need not sacrifice the human relationships and decision-making that are at the heart of successful banking to make technological progress. In fact, the institutions that prioritize unifying technological advancement with human connections and intelligence will create personalized customer experiences that separate themselves from the pack and benefit all parties. There are several areas where FIs that are making a digital push should consider the importance of human skillsets.
What’s perhaps most critical to tying together human expertise and digital innovation is ensuring that the right team is in place within the financial institution. Importantly, financial institutions making a digital push should not restrict hiring to those within the banking industry; new, valuable insights and ways of thinking can come from many different sources beyond bankers.
Assembling the right team is the crucial first step, and from there, the group can go about finding and implementing the right technology stack that improves the customer experience and automates much of the day-to-day banking operations. Freed from the daily tasks that would otherwise use up large amounts of time and energy, a skilled team can focus both on the customer experience and the factors that have a direct impact on the FI’s bottom line, such as unit economics and exploring how to reduce costs while increasing revenue. In this way, tech and talent form a combination that has benefits for customers and the overall business health of the financial institution.
Building a strong customer experience underpinned by human relationships creates a number of benefits for financial institutions and customers alike. For any digital product to be truly successful, there needs to be a team of specialists and other resources available to make the process run smoothly to the benefit of the client. Having trained industry experts on staff to advise businesses on loans, real estate purchases, and other important decisions can create an environment where customers feel their FI is acting more as a guide than a salesperson.
Personalized customer experiences should resonate throughout the banking journey through a mix of digital tools and inclusive, human support. In addition to having professionals on staff to support the long-term financial well-being of customers, digital programs like banking-as-a-service (BaaS) and virtual cards can help businesses manage and generate revenue.
As financial institutions become less likely to interact face to face with customers, creating a customer experience that blends digital with human is imperative. Using automated chatbots as a first line of customer support can help remove the burden of answering FAQs and performing simple tasks. According to research from Userlike, more than half of customers are willing to talk to a chatbot initially in order to be transferred to an agent. This means that using chatbots to answer basic questions and ensure customers are connected with the right support staff that can offer guidance can be a successful strategy. Furthermore, chatbots reduce the amount of work agents have to take on, allowing them to more efficiently help customers: at Radius Bank, we saw chatbots reduce chats sent to a live agent by 20%.
As research from Insider Intelligence shows that only 42% of consumers trust their financial institution to provide them with banking services — a 6% drop from 2021 and lower than the percentage of consumers that trust PayPal to provide those services — having a team of professionals available to assist customers supplanted by automated solutions can forge a mutually beneficial partnership, where the customer trusts that their FI has their best financial interests in mind.
The human element of digital banking extends beyond having a team of professionals ready and able to assist customers. Personalized technology requires human decision making to be most effective. The use of data in banking has exploded: research from Alkami shows that 86% of banks and credit unions are using data to drive better customer experience. However, using customer data to create a personalized experience still requires human guidance. Technology can sift through and analyze data to provide automated recommendations, but having humans advise customers on which banking solutions best fit their needs creates an added layer of trust. For example, institutions that serve small businesses can use digital integrations to gain a clearer view of these customers’ financial outlooks and combine that data with industry expertise to produce clear recommendations that benefit the business.
Data can be used for more than just cross-sell opportunities, though. Other important use cases include reducing fraud and keeping clients’ finances and personal information safe in the digital world. Here, too, human guidance works hand in hand with technology to create superior results for financial institutions and customers alike: automated programs sift through mountains of data to produce alerts regarding possible fraudulent behavior and security risks, so that human security professionals can respond accordingly.
Hyperpersonalized banking technology also yields broad insights into customer patterns and behaviors as well as the trends driving the markets. In this instance, the human element becomes critical for driving a financial institution’s business plan and path forward. Through human analysis of the data they collect, financial institutions can determine the risks and rewards of different strategies and reach decisions that meet their business goals while satisfying customer needs.
Blending innovative technology and human relationship management creates a virtuous cycle for financial institutions and customers, where FIs can drive revenue and deposits as customers’ financial needs are satisfied with personalized solutions. This strategy not only wins business, but also establishes meaningful connections that develop into loyal relationships.
Going all-in on digital banking doesn’t mean sacrificing the human element that’s long been central to success in the industry. On both the customer experience and business operations fronts, the institutions that meld innovative, personalized technology with human expertise will emerge as leaders and create solutions that will power the future of banking.
Chris Tremont is the chief digital officer at Grasshopper Bank. He will join the panel discussion “Automation and the pursuit of efficiency: A frank discussion on cost/benefit” at the Bank Automation Summit U.S. 2023 on March 2. Learn more about Bank Automation Summit U.S. 2023 and register here.
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Chris Tremont
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Amazon has selected fintech Stripe to assist with payment processing across its numerous businesses. The partnership is an expansion of a 2017 deal and will see Stripe help with volume across Amazon Prime, Audible, and Amazon Pay as well as other businesses of the e-commerce giant. Stripe will expand its use of Amazon Web Services […]
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Brian Stone
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Grasshopper Bank is partnering with finance automation platform Ramp to provide virtual and physical corporate cards with a host of features to its business clients. The $606 million digital bank and fintech worked together over the last six months to provide the bank’s small- and medium-sized business clients with digital tools using Ramp’s automated platform, […]
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Brian Stone
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Financial institutions today are teetering into a Nash Equilibrium.
A Nash Equilibrium, named for mathematician John Nash, occurs when players in a game can fully anticipate the choices of other players. When all players’ actions are considered, everyone is able to achieve their objectives. Every player wins.
The concept was a groundbreaking contribution to game theory study and continues to be widely used by economists — but it also has practical applications. In the banking industry, financial institutions can benefit from Nash’s work by adopting a holistic approach to personalization, better understanding individual customer needs in order to make business decisions based on real market demand. This strategy is proving to be an effective way to connect with customers and win business.
The expansion and adoption of digital banking has unlocked the opportunity to create a highly individualized customer experience known as “hyperpersonalization.”
Deloitte defines this as “using real-time data to generate insights by using behavioral science and data science to deliver services, products and pricing that are context-specific and relevant to customers’ manifest and latent needs.”
Personalization powered by real-time data and analytics to serve each distinct customer has quickly become an expectation. A Salesforce survey found that 56% of customers expect banks to anticipate customer needs and make appropriate recommendations even before initial contact.
Banks are using automation to serve individual clients by tracking transactional activity and extracting unique data. They use the information to provide services that best fit specific customers’ needs. Based on customer expectations, banks are aggressively pursuing these strategies. HSBC executives expect hyperpersonalization will become a new standard of service, and JPMorgan Chase is investing $12 billion in cloud and AI technologies to strengthen the customer experience.
Financial institutions understand that technology is the gateway to achieving hyperpersonalization.
In a survey conducted by information technology services company Wipro, industry leaders listed “improving the user experience with greater personalization” as the most valuable use of AI technology. However, most financial institutions are not equipped with the infrastructure to collect and process data, conduct pertinent market research and retain qualitative feedback from customers.
To bridge the technology gap and advance the integration of hyperpersonalization, banks are partnering with fintech companies like Plaid, MX and Alloy, which provide the mature and future-ready technology that banks need to foster a custom experience and better connect with customers.
With access to the right technology, the potential for hyperpersonalization is infinite. Leveraging automation and machine learning technologies gives banks an opportunity to connect with potential customers, solidify existing customers and serve as a differentiator in an increasingly diverse marketplace.
At its core, this strategy is simply a means of better understanding customers and the market. Technology can reveal subtle insights into customer patterns and behaviors and the trends shaping the market to deliver individualized solutions. Banks are able to use data to assess the risks and rewards, and make a decision that is best for the organization’s goals.
The strategy should also include an analysis of competitor activity, including niche submarkets and emerging specializations. Information about other industry players will reveal market gaps or unmet needs as well as overserved demographic groups or areas of the market with the potential to become overheated. Digital banks can use this information to decide which market areas to pursue and where the company’s product lines and expertise best fit within the existing market dynamics.
Banks are not the only beneficiary of a hyperpersonalized strategy. SMBs will benefit from individualized analysis, intelligent insights and personal communication. The strategy will not only win customers but establish a meaningful connection that will evolve into a trusted and loyal relationship. According to research from Deloitte on hyperpersonalization in banking, “emotionally connected customers are more than twice as valuable as even highly satisfied customers.”
To achieve a human connection, a personalization strategy should include progress reports for customers tracking financial performance, support and consultation, and education about how a company’s financial objectives are linked to broader economic, social and environmental trends. This is where customers will see the qualitative benefits of a bespoke platform.
With hyperpersonalization, the digital banking industry is playing a positive sum game, one where both banking customers and financial institutions win. The trend is redefining competition in the financial services industry and delivering better banking to small businesses. That truly is a victory.
Mike Butler is the chief executive of digital bank Grasshopper which offers small businesses products and services for specific industries such as commercial real estate lending and yacht financing.
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Mike Butler
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