Contextual banking - How to get started

Imagine a bank customer, Maria, planning and researching to buy her first home. On a Saturday morning, while exploring new biking trails with her friends, she passes through a neighborhood she really likes. She quickly asks her phone mounted on the bike, “Hey Bank, can I afford this neighborhood?” The Bank App replies, “Sure Maggie, increase your budget by $80k…” and then sends a detailed note on the suitability of that neighborhood based on factors such as schools, crime, walk score, taxes and weather.

This is contextual banking. The customer experience is being re-imagined to be context-aware, seamless and secure through the innovative use of technology. The personalized experience caters to the expectations of digital natives as they blend these technologies naturally into their lifestyle.

Some key data:

• 40% of customers would consider switching banks due to the lack of personalization available (https://blog.strands.com/the-future-of-sme-banking-is-contextual)
• According to Forrester, a one-point increase in the CX index for a retail bank can yield an additional $7.93 in revenue per customer annually. Even banks with a modest client base could end up seeing significant revenue uplift by embracing a customer-centric approach.
• According to research from the Boston Consulting Group, if done well, personalization at scale can lead to annual revenue uplifts of 10%.

What is Contextual Banking?

Contextual banking is the foundation to providing a personalized, ongoing, omnichannel, unique, and seamless experience desired by consumers and talked about by bankers and credit union executives. It includes current data and historical data, providing you with an overarching view of who your customers and members are and where they are in their customer journey. The insights derived from this data and the analytics that follow provide the basis for response to any consumer action or request – across all channels.

This may include routing calls made to a call center to the most qualified agent based on contextual data, or delivering a text message at the exact time of a consumer’s need.

Some of the most basic components of contextual banking include:

• Time of day
• Channel preference
• Location
• Product usage history (including payments)
• Past behaviours
• Device(s) based data

Web search history (when and where)As devices become smarter, our interactions with them change. Devices don’t just respond to our actions; they can initiate conversations and actions when they learn that their users are active and can be approached. This provides a unique opportunity for banks to interact with their customers in ways not previously imagined. This always-on mode allows banks to be more vigilant on behalf of their customers. They can prompt on certain activities, send them reminders, and keep their customers abreast of everything happening financially.

These new digital solutions can be an on-demand, in-context financial advisor. When banks become their customers’ friend and engage them on social media, they can get to know their preferences. This gives banks an opportunity to tailor their services to each customer’s taste and financial needs. How interesting would it be to have a bank obtain a solid, deep understanding of your financial situation and life goals and then create a path to those goals, perhaps encouraging you each day to work toward them?

3 key suggestions to kick off a contextual banking strategy:

1. Product based versus. experience based approach - in the world of today we reason in verticals e.g. cards, loans, etc. however, those are complex products for consumers which might need 3 things at the same time. For example, someone buying an appliance would like to know whether they can split their payments in instalments, have it insured and if their card will give them a discount or allow them to accumulate double points for instance. This means for a bank that 3 silos: cads, lending, loyalty/insurance have to work together. If banks want to establish an experience based approach, they have to rethink their approach by focusing on the customer life meaning investing more in UX and creating products that are interconnected through a simple platform that can interact with the different verticals. Imagine this new experience when you can detect that Gina would like to buy a new TV, its banking app suggests her a 10% discount at a local mall and with few click Gina can buy the desired TV, insured it and get a BNPL over 4 months.
2. The power of the ecosystem - when I played professional water polo, I learned one thing:you cannot be the best in all positions, but you need some focus. The best way to enable your contextual banking strategy is to bring onboard the right partners, not only the technical ones, which are going to enable your platform, but also the business ones. It’s important to partner with fintech or established companies that can offers their services through the mobile app channel giving your customers the best experience and product available.
3. Build agile organizations - this is very obvious, but yet many banks are failing at it. In the world of today banks need to connect their team together to make them successful. I still see very siloed organizations. The key to unlock it is to blend technology with product teams in order that they can advance and actually produce “stuff” together. This has been proven in the field banks such as BBVA adopt this model, they call this team “tribes” and Chinese banks adopt even a more sophisticated team structure where they are able to create, launch, test and reiterate a product in less than 10 days.

In summary

Contextual banking is going to be the next big trend over the next few years. I see this as the only way for banks to be relevant and to not get eclipsed by big tech giants that are entering the FS market. If Banks do not evolve by leveraging contextual banking they will end up being a piece of infrastructure by losing the interaction with the customers. In a similar fashion as Citi is doing with google pay or Goldman Sachs with Apple card. Over the next 2 to 3 years the experience will be become so critical that we are going to see all banks enabling those types of experiences?