As interest rates rise and the retail housing market cools down, lenders are bracing for an uncertain environment.
While banks cannot control the market, they can control how they respond and future-proof their business. Successful navigation in these unchartered waters requires institutions to reassess traditional product, service and industry boundaries in order to capture and create new sources of value. Digital transformation and innovation will remain an important strategic priority in 2023 and beyond — however, it is now equally important for institutions to provide lasting value to customers through personalized, highly tailored services.
The slowing housing market creates a unique opportunity for financial institutions to revisit and refresh these fundamentals, including exploring how they can deliver a more personalized experience. As banks remain focused on their roles as financial intermediaries, this time of challenge can also be a time of opportunity to strengthen existing relationships and expand loyalty with customers. Lenders can also take advantage of a slower market by implementing new automation strategies to further streamline their mortgage loan process. Successful institutions will recognize that this slower pace enables them to recharge, rethink and renew their focus on providing customers a superior experience.
Accelerating personalization and building loyalty is critical in today’s increasingly competitive financial services market. The answer isn’t just faster, more automated technology; financial institutions must adapt a hyper-personalized approach. According to a recent NCR study, 60% of U.S. banking consumers want their primary financial institution to provide personalized financial advice. Many Americans are facing an uncertain financial future and don’t believe their financial institution is providing the necessary support.
To successfully deliver that personalized experience, institutions must leverage data to provide more relevant, timely support. That means more effectively gathering and analyzing data to yield insights that ultimately help the bank connect with the customer. Banks should have the most accurate and complete picture of their customer’s economic health, which allows them to make meaningful suggestions and provide impactful advice. Consumers can then look to their data enabled and informed banker as a guiding force helping them build a more stable financial future.
Anticipating customer needs and catering to them with personalized offerings allows banks to generate increased revenue, all the while meeting customer expectations around personalized experiences. According to the 2019 Accenture Global Financial Services Consumer Study, one in two consumers wants personalized banking advice based on their circumstances. They want an analysis of their spending habits and advice on handling money. Additionally, 48% of respondents indicated that personalized banking data, such as spending, would help them change how they used their money.
A 2021 Capco research report found that 72% of customers say personalization is highly important in today’s financial services landscape. This number increases for younger generations: 79% of Gen Z customers say it is critical their financial institutions provide more personalized offers and/or information to help them reach their financial goals.
Customers provide banks with a lot of information about themselves across their interactions. Banks can use this data carefully, employing technology like artificial intelligence to anticipate customer needs. Anticipating and then proactively acting on those needs is crucial to creating an effective, personalized experience. Banks can also position products with sensitivity, effectively demonstrate their understanding of their customer’s unique needs or suggest curated products that demonstrate a knowledge of that customer’s specific financial needs and ultimately, build lasting loyalty.
Banks should also consider the way they approach economic distress in a manner that doesn’t weaken customers’ future foundation. Institutions should examine their interactions with both the rental market and the single-family ownership market. Banks need to think in terms of households, not consumers. Consider the household and heads of households instead of thinking of them as consumers.
There is an opportunity in this moment for institutions to create more personalized offers that are relevant to their customers. To succeed, banks must take operational steps to authentically personalize offerings to their customers, using technology in a way that’s fair and compliant.