During the recent Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, we heard from individuals who had suffered because of misconduct. Part of the problem it seemed was a disconnect between those implementing dubious practices, and the real people on the receiving end. The personal relationship with the kindly bank manager of yore – that inspired Eric Wilson to found Xinja – had got lost. The opportunity however as Xinja sees it is to (ironically) use technology to bring humanity back to banking through (jargon alert) hyper-personalisation. So how do we put the ‘personal’ back into ‘personal finance’? And how far do we want to? We take a look at the pitfalls and potential of personalisation; how we can use it to deliver increasing value to customers and how it can even become a service in its own right.
How do we define ‘personalisation’ exactly?
‘Personalisation’ could be as simple as a ‘Dear insert first name’ in an email or getting a pot of Nutella with your own name on it (top tip – this is a great licence to eat the whole thing yourself ;-). But we’re talking about the full spectrum – to the point where multiple sources of data specific to an individual customer – transactional, behavioural, demographic are analysed – in many cases in real time. Why? In order to give them the best possible message, experience or flow. So the customer gets true value; not a mindless, repeated cross-sell message, but something that’s actually useful, relevant in that moment. So who’s leading at doing this? Unsurprisingly the Big Four – by which I mean Facebook, Amazon, Google and Apple 🙂 Actually add Netflix to that and Alibaba and you’ve got a whole generation – of arguably the most successful companies on the planet? – who are built on the same fundamental premise; a platform through which they deliver value-added services to customers by manipulating large amounts of data.
So what’s happening with personalisation in banking?
When you read blogs on personalisation in banking, you’re still in the main given examples from Amazon and Netflix again….and the reality is they are still probably way ahead of banking. In a recent Breaking Banks podcast (entitled ‘the unfulfilled promises of personalisation’ – the clue’s in the name….) one of the participants complained that the examples of personalisation being discussed were from hotel chains – not banks; “This is called ‘Breaking Banks’ not ‘Breaking Hotels!’” The reason banking has lagged behind is partly because for a long time, email remained the prevailing channel for personalised messages, and this was fraught with security issues. This is less of a problem now that people can get messaging through apps instead. And in fact there are banks and neobanks around the world already using AI-powered decisioning to deliver ‘next best action’ messages through multiple channels including apps and chat (both bots and real people) in milliseconds. And we can expect this to become more prevalent – many are heralding it as ‘essential’ to banks’ long term survival. Why? Customer expectations and increasing competitive pressure.
Where are the customers in all this?
One of the main 6 frustrations we identified in our early research with customers was that banks failed to remember anything about them, tried to sell them products that were unsuitable and, despite holding vast amounts of telling data about them, rarely said anything relevant – see our blog on this: “Have we met?” But with the open data movement, the boot is shifting to the other foot. There is a focus on the customer owning their own data, and expecting to see it used to benefit them rather than the institution that holds it. Data is a key part of the ‘new trust’ in banking. Previously, it used to be “Do I trust you not to lose my money?” – something that is no longer relevant given the Financial Claims Scheme which underwrites every bank deposit – large or small – to the tune of $250,000 per customer should the bank fail. So you won’t lose your money. Now it’s more like “Do I trust you not to lose my data?” as cyber crime, privacy and data security become increasing points of concern. But also “Do I trust you to use my data in my interests rather than your own?” As D. Scott Andrick said on “The Financial Brand”: “[Customers] want and need to be understood as individuals, and they expect service based on their unique needs.” Open banking will be implemented in Australia over the next year, making it compulsory for banks to make customers’ data instantly available to other institutions on request. This will ensure that there is an increasing amount of data available for any bank to provide a personalised service, and a facility that allows a customer to move very easily to another bank if they fail to.
But hang on…..how personal do we want to get with our banks?
Again, it’s personal! As the FinTech guru Jim Marous says: “Individual lines will range from “all personalization is creepy to me” through to “personalization is incredibly useful and I don’t find it creepy at all.” “ Whilst pointing out what we’ve spent on a certain category might be really helpful for some (making them more mindful of where their money is going), others could find it intrusive, judgemental. A bit like those ‘ouch’ moments in dieting, when you decide to eat a doughnut and someone comments: “Should you be eating that?” – they’re likely to get a smack in the chops. Monzo (our neobank cousin in the UK) was both applauded and criticised for deploying a feature that allowed people to block themselves from spending on gambling sites and prevented them removing the block for 48 hours. Was this going too far? Stickk.com encourages you to set a goal and if you fail to meet that goal, it sends money to the charity you specify as one you hate! How far do we want to be saved from ourselves? There was a healthy debate on our community forum the other day about whether people should be given easy access to their pay early or to credit. There was a stark contrast between those that thought people should be allowed access but should discipline themselves, and others saying it would encourage bad behaviour. In the results from our recent survey (more on that soon!), there was a strong divide between those who want to be told their projected financial future (based on current data) and those that don’t want to know. So the answer? Let people set their own controls. And focus on encouragement, not reprimand. Banking has been too negative for too long – typically we’ve been scolded for going overdrawn, but rarely praised for saving.
What you can expect from Xinja is that we will accentuate the positive; ongoing messaging or nudging based on customers’ data that highlights progress and validates good financial behaviours, helping to turn them into habits. And making these behaviours fun. As Van Le, Chief Strategy, Innovation and Design Officer at Xinja said recently: “We fundamentally believe that if you make managing money engaging, people will get better at it.” So you can expect some gamification too 🙂
Personalisation as product
A lot of commentators on personalisation in banking fall short of calling it out as a service in and of itself. Whilst James Eardley (Global Director of SAP Customer Experience) comes tantalisingly close when he talks about “taking personalisation to the ultimate level” it’s still just highly tailored messaging. But as we called out in our recent blog on AI, just as we’ve got personalised insurance rates, wouldn’t it be great if you had a home loan that automatically adjusted the interest rate down dynamically as (based on your financial behaviours) your credit rating improved? Or increased your savings interest rate the more you saved? So the service you’re getting is not a traditional product like a credit card, but a way of improving your finances. D. Scott Andrick again: “In an era of hyper-personalization and competitive pressure, the experience banks provide consumers is the product — not a checking account, mortgage or credit card. Speed and convenience are important, but consumers are also seeking meaningful insight and advice on demand.” And as Brett King – Founder of Moven and Xinja Board Advisor says in the AFR, “The big shift … is that you are getting help when and where you need it.”– and we should be able to walk into our living room and say, “Alexa/OK Google (or whichever interface we’re into) can I afford to go out to dinner tonight? And where can I afford to go to dinner tonight?” Now, that would be cool.
What would you like to see in terms of personalisation and this kind of service? Join in the conversation on our community forum here.
Camilla Cooke is Chief Marketing Officer of Xinja.
XINJA™ (Xinja Bank Limited ACN 618 937 054) is authorised by the Australian Prudential Regulation Authority (APRA) to operate under a Restricted Authorised Deposit-taking Institution (RADI) licence until 16th December 2020. Under this licence we are not required to meet the full ADI prudential framework. We will only offer bank accounts to the general public when we become a full ADI. You can still apply for other Xinja products. More information about Xinja’s RADI licence is available at xinja.com.au/legal