Data to delight: Navigating the complexities of personalisation in Financial Services

This article is part of a wider series on personalisation, want more? Click here to get the Hi Mum! Personalisation Playbook

The digital transformation of financial services is accelerating, and at its core is personalisation. By harnessing AI, machine learning, and open banking, institutions have the opportunity to offer customised services that resonate with today’s tech-savvy consumers. In this article we highlight three key factors driving that acceleration and how to tackle three common challenges that threaten to derail attempts to build personalised products.

Factor 1: Infrastructure advancements like Open Banking continue to grow

The rise of open banking has transformed the landscape of financial data. Consumers now have the ability to consolidate their financial information across multiple accounts, creating a more comprehensive picture of their financial lives. This shift allows for richer, more accurate personalisation of financial services, but penetration still has room to grow? - only 1 in 7 digitally active UK consumers are using open banking as of January 2024 (2).

Factor 2: Cultural shifts caused by a younger, more personalisation-happy customer base

With Gen Z entering the workforce and making meaningful decisions about their finances, and younger millennials hitting their stride - we are witnessing a significant cultural shift. Both groups have grown up in a world of algorithm-driven recommendations and digital experiences, leading to heightened expectations for personalisation, including within Financial Services.

Hi Mum! research shows that younger consumers are not only more receptive to personalised services, but also over 40% more likely to switch providers for a more personalised experience than older cohorts (3). The opportunity to offer those personalised services is increasingly exclusively digital. Financial service providers need to be prepared to adapt to this demand, or risk losing relevance.

Factor 3: AI and Machine Learning are creating new opportunities

Is it really a 2024 LinkedIn thought piece if we don’t mention AI? Artificial intelligence and machine learning have the potential to revolutionise the way FS providers process data. In the past, companies relied on traditional data analytics or product recommendation methods, limiting our ability to create dynamic, nuanced user experiences.

Increasingly, sophisticated AI models can analyse vast amounts of data in real-time, allowing financial institutions to tailor their services and offerings to individual users. This opens the door to responsive, nuanced and empathetic user experiences that help users not just to check their account balances, but to understand and take control of their financial lives - whatever they may look like.

Challenges in FS Personalisation

While the importance of personalisation is clear, several challenges persist that can make it difficult to know whether and where to start:

Challenge 1: Building around legacy systems

Many financial institutions still operate on outdated systems, which can hinder their ability to deliver effective personalisation. Aspirational vision projects where every integration is assumed to ‘just work’ have their place, but just as much attention must be paid to the more immediate steps on the path to get there if those visions are to stand any chance of becoming reality.

What to do:

• Modernise gradually: new propositions and data sets are a ripe opportunity to build in future-proof, potentially AI-compatible technologies, so it makes sense to experiment in these areas before ripping out the digital foundations of the core banking functions.
• Collaborate discerningly: Ally or buy decisions can help businesses get a leg up without the need to develop capabilities or features fully in-house, such as leveraging third party providers to market-test propositions without fully replacing legacy systems.
• Building a lasting advantage: While technology can move in fits and starts, FS businesses that make consistent, targeted investments in personalisation stand to benefit by building smarter, more scalable offerings that help customers with digital products that understand their whole financial context.

Challenge 2: Incomplete and fragmented data

Many UK FS providers struggle with fragmented data silos across different areas of the business or even across other businesses. This limits their ability to create a unified view of the customer, which is essential for delivering personalised services. Without comprehensive and accurate data, personalisation efforts can feel disjointed, incomplete, or irrelevant to customers. Younger bankers are also more likely to hold multiple bank accounts (4), amplifying the importance of giving them an overall view of their finances. Open Banking can help here, but if a bank only uses it to try and sell their products more effectively, customers are unlikely to give us that data.

What to do:

• Centralise customer data: Invest in centralised data platforms to bring data together across different platforms, departments and systems to build a broader picture.
• Incentivise connection: Give users real value for connecting other accounts, including from other providers, to get a fuller picture of their financial life.
• Good-enough Personas: Asking a user to fill out a lengthy form of details for every personalised feature will often add more friction than it’s worth to users. Experiences that can make quick, educated guesses about users allow us a chance of delivering meaningful value to customers, versus static feature sets that treat all users as identical.

Challenge 3: Earning and respecting trust

As much noise as rightly gets made about enthusiastic demands for personalisation for young audiences, established institutions can’t forget their legacy customer bases. 45+ year olds are over 4 times more likely to be distrustful of companies using personalisation data responsibly than 18-24 year olds (3). Financial services have strike a balance between offering value to those who are receptive to personalisation, without getting in the way of seamless, trusted journeys to those who are more wary.??

What to do:

• Give users options: Empower users to add as much or as little data to your experience as they feel necessary e.g. “Tell us why?” follow ups when a user dismisses a message can help us to understand whether they might be interested in that product later on.
• Communicate the value of personalisation: Be transparent about how you’re using data e.g. privacy by design, so users know what they’re signing up for, and can make an informed decision.
• Use dynamic segmentation: Use dynamic micro-segmentation techniques to fill in the blanks of different personas and identify what state a user is in at any given time. The same person may behave and feel very differently about their money around the end of the tax year, just after payday or after a big spend - their digital experiences should reflect that.

Moving Forward: Intelligent Personalisation

A clear strategy on personalisation is not just a nice-to-have; it could prove essential for survival in a rapidly evolving market in the face of repeated waves of disruption. Personalisation winners will be able to lead in adopting key technologies without getting swept up in the hype, to leverage a ground-up understanding of cultural shifts and user attitudes, and to better navigate the challenges of data fragmentation and legacy systems.?

The future of Financial Services is personalised - by creating intelligent, flexible experiences that cater to the unique needs of customers without alienating more transactional customers. We believe that through user-centred design, FS providers can create more valuable personalised products that exceed the expectations of even tomorrow’s pickiest customers.

Personalisation got you in a pickle? Reach out to Erin Gibbons , [email protected]?

References

1. Statista, 2023: UK: open banking penetration 2023 | Statista.
2. Open Banking, 2024: Latest Impact Report shows strong growth and the power of payments - Open Banking.?
3. FSTech, 2019:? Millennials and Gen Zs lead ‘multi-account’ trend - FStech Financial Sector Technology
4. Hi Mum! Said Dad, 2024: Personalisation Playbook