How AI helps banks on Main Street compete with banks on Wall Street
Modern bank marketing depends on a deep and personal understanding of customer demands and preferences, along with the ability to act quickly and effectively on that knowledge. We all know, too, that it’s about five times more expensive to acquire a new customer than it is to keep one. Because of its tremendous upsides in enhancing a community bank’s marketing strategies – its ability to make real-time, data-driven decisions – AI continues to gain traction among bank marketing stakeholders.
According to Science Direct, “Many firms are already using AI to personalize their websites, emails, social media posts, videos, and other materials in an effort to better respond to customer demands, power up their risk management, give themselves a greater competitive advantage, and make smarter marketing decisions.1
Enhanced CX (Customer Experience)
What does AI do best? It gathers, analyzes, and reports on vast amounts of data. Given that 80% of the data available to banks – and there truly is a vast amount of it – is unstructured, AI is the powerhouse data organizer that can provide bank marketers with insights into customer preferences, behaviors, and needs. Those insights then become the keys to optimizing the personalization that is so essential to community bank marketing.
Using algorithms, (a set of instructions that teach a computer how to perform tasks, make decisions, and analyze data independently), AI can efficiently segment banking customers into different groups based on various factors such as spending habits, life stages, and financial goals. With these insights, bank marketers can create highly personalized marketing campaigns that do more than speak to each customer. They can create messaging that makes that much-needed emotional connection. For example, AI can help tailor messages about mortgage options to the “ideal” mortgage customers by gathering and analyzing data such as current dwelling type, accounts held, recent interest in a home, family size, age, and income …? and in doing so, increasing exponentially the likelihood of engagement and conversion.
But, while the digital experience offers tremendous opportunities for banks, on the flip side, it also makes a banker’s life just a bit more challenging. Data shows that 80 percent of bank customers will switch banks if a competitor offers a better customer experience, while 56 percent of customers who leave a bank say those institutions made no effort to retain their business.2
No matter the power of a bank’s marketing, it cannot succeed without a customer experience that, at the very least, meets expectations. In fact, nothing does more damage to a brand than a promise unkept; ergo, when a community bank spends money to market its trustworthiness and care for its customers, the customer must experience that … or, they’ll go elsewhere.
AI-powered chatbots and virtual assistants can make significant contributions to a financial institution’s CX. These tools can provide customers with immediate, 24/7 support, learn from previous engagements, and handle a wide range of inquiries, from simple questions about balances to more complex issues like loan applications. They can also use their ability – via Machine Learning and Natural Language Processing – to learn from previous customer interactions and use that learning to be more efficient … and more human.
Just how much of a role should chatbots and virtual assistants play in serving bank customers? The American Bankers Association (ABA) tells us that, “AI’s sentiment analysis and natural language processing are invaluable for helping financial services support agents interact empathetically with customers. AI can guide agents through difficult conversations, offering prompts to agents that enable them to meet customers’ informational and emotional needs.3? Obviously, meeting those needs is essential to a bank’s customer service. So,, just how much of a role should AI play in customer service? Are customers ready for a totally AI-powered engagement with their bank?? I don’t think so. It seems like this is a difficult balance for banks to strike and they’re working on finding that balance as we speak.
Predictive analytics
There’s an old adage that tells us that no one can tell the future. Well, that’s not entirely true, thanks to AI. With its amazing data collection and analysis capabilities, AI can predict the future; and, importantly for bankers, future customer behaviors based on historical data. Let’s look again at customers and the ease of switching banks. As mentioned above, it has never been easier for consumers to close their accounts and switch to a competitor, making customer retention more difficult than it has ever been. How does AI help? AI’s predictive analytics provides a method to analyze customer behavior and transaction history. By doing so, AI can predict those customers who are at risk of churning, giving the bank the opportunity to take steps to make sure that customer doesn’t leave.
Improved lead generation and conversion
By evaluating various factors such as online behavior, interaction history, and demographic information, AI can prioritize high-quality leads, along with assigning scores based on an individual’s likelihood to convert. This enables the bank marketing team to focus their efforts on prospects with the highest conversion potential, improving overall efficiency.? AI can also automate follow-up communications with leads and customers. So, for example, if a customer expresses interest in a bank’s credit card through, say, an email campaign or social post, an AI system can pull that data and automatically send that individual detailed information and reminders to complete the application. The likelihood of conversion is increased, with no human intervention necessary and no unnecessary marketing costs incurred.??
Enhanced fraud detection and transaction security
“A survey of IT executives in the banking sector reveals that fraud detection is the top application of AI by banks. Banks are reaping the benefits of such applications, not only via reduced losses and more efficient use of resources, but through customer experience, too.”
- The Economist. Banking on a game-changer: AI in financial services. 2022.
Leveraging behavior analytics, AI can monitor customer behavior patterns to detect unusual activities that may indicate fraud. For example, if a customer’s account shows transactions that deviate significantly from their usual behavior, AI can flag these transactions for further investigation. By incorporating these security features into marketing communications, banks can reassure customers about the safety of their accounts and build trust.
AI also enhances the security of marketing-related transactions, such as online sign-ups or application submissions. Advanced AI algorithms can verify the authenticity of customer inputs and detect potential threats, ensuring that only legitimate interactions are processed. This security focus helps protect customer data, maintains the bank’s reputation, and reduces the chances of regulatory agency fines.
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Competitive Advantage
Trend Analysis and product development
AI can analyze market trends and competitor activities to provide insights that inform marketing strategies. By staying ahead of industry trends, banks can develop innovative, more cost-effective marketing campaigns that differentiate them from competitors. Leveraging AI’s ability to identify gaps in the market through its ability to analyze customer feedback and behavior, banks can also focus on developing products and services that evolve with the changing needs of the market.
Optimized marketing spend
AI tools can continuously monitor and analyze the performance of marketing campaigns in real time. This allows banks to make data-driven adjustments on the fly, such as:?
Such agility ensures that campaigns remain effective and relevant throughout their duration.?
Conclusion
The integration of AI into bank marketing strategies offers numerous benefits, from enhanced personalization and improved customer experience to optimized marketing spend and competitive advantage. By leveraging AI – and its ability to identify trends, manage risk, predict behavior, detect fraud, and enhance security – banks can streamline their marketing processes and optimize their marketing spend, ensuring that marketing dollars are spent more efficiently and ROI is maximized.
Bank Marketing Center
Here at bankmarketingcenter.com, our goal is to help you with that topical, compelling communication with customers — developed by bank marketing professionals for bank marketing professionals — that will help you build trust, relationships, and revenue.?
Our web-based platform puts our client partners in complete control of their marketing message production, as well as their enterprise-wide compliance approval processes. We’re also proud of the fact that we currently work with hundreds of financial institutions.?
Want to learn more about what we can do for your community bank and your marketing efforts? You can?start by visiting bankmarketingcenter.com. Then, feel free to contact me directly by phone at 678-528-6688 or via email at [email protected]. ?As always, I welcome your thoughts.
1Science Direct. Artificial Intelligence Applications for Marketing. 2022.
2The Economist. Banking on a game-changer: AI in financial services. 2022
3ABA. How AI-enabled customer support can work for banks. August 29, 2023.