As a community bank, nothing is more important to your success than understanding your customers and delivering value. What’s different today? There was a time when understanding your customer’s needs and overall financial behavior was, well, easy. Unfortunately, that’s simply not the case anymore.
For a long time, community bankers achieved this customer insight by interaction. If you’re old enough to be reading this and grew up in a small town, I’m sure you remember. I do because that’s how I grew up.
You’ve seen “It’s a Wonderful Life,” right? Remember when Potter questions the loan that George has approved for Ernie, the cab driver? “I can vouch for his character,” George tells Potter. Having grown up in a small town, not terribly unlike Bedford Falls, I had a very similar experience myself, many of them, in fact. When I was ready for my first car loan at age 18, Mr. Jepson, the kind gentleman who ran our local community bank, didn’t need me to fill out a loan application, survive a host of credit checks, or have a bunch of agencies confirm that I wasn’t a criminal. He knew my parents, my grandparents, and all my family. He knew I had a steady job at the IGA grocery store, was headed off to college and was in church on Sundays and Wednesday nights; he knew all about me.
Those days are gone. Vouching for someone’s character just isn’t an option anymore. With online and mobile options, customers no longer walk into their local branch and do all their banking there. The insights that bankers need, that they used to get through interaction, are tough to get. Instead of that personal cooperation to gain those insights and act upon them, bankers now rely on Data, Artificial Intelligence (AI) and Machine Learning (ML) technologies.
This past January, Business Insider talked about the tremendous impact that AI can have on a bank’s customer experience. “Banks can use AI to transform the customer experience by enabling frictionless, 24/7 customer service interactions.” The Insider goes on to say that banks can, and are, “using AI to deepen customer relationships, and provide personalized insights and recommendations.” Thus, artificial intelligence is now gathering and analyzing the data that a banker’s “real” intelligence once gathered and analyzed in order to know the customer. Today, without personal interaction, that customer is a “persona,” an AI/ML-generated individual who can be used to predict behavior and personalize an experience.
Creating personas is nothing new and, unfortunately, in a pre-AI/ML world, have been developed using assumptions and/or simply on past actions such as purchases. The drilled-down insights that AI/ML provides can help bankers develop a far more accurate picture of their customer’s identities and behaviors. In the article, 10 Ways AI Can Improve Digital Transformation’s Success Rate, Forbes states, “using AI to better understand customers, personas need to be the foundation of any digital transformation initiative. The most advanced uses of AI for persona development combine brand, event and product preferences, location data, content viewed, transaction histories, and, most of all, channel, and communication preferences.” In short, you not only know the “what” about your customer, but the “when, where, why, and how,” as well.
Despite its necessity, the implementation of these technologies in banking is still something that most banks are “planning for.” Why has this transformation in customer data management taken so long? The legacy data solutions so pervasive in today’s banking industry cannot be transformed quickly, easily or inexpensively. As a result, a growing number of community banks have looked to multiple core and edge systems for gathering, analyzing and reporting. The integration of these systems, though, is time-consuming and costly. So time-consuming, in fact, that it’s quite possible the data gathered can be obsolete by the time the integration is complete.
Through these advanced consumer profiles and AI/ML’s predictive analytics, you’re far better equipped to reach the right customer in the right place at the right time with the right message. It’s almost a return to those Bedford Falls days when you knew the cab driver well enough to approve a loan application based on knowing his character, but not quite. Unfortunately, “personalization” through technology will never be the same as personalization through personal interaction. But, this is the world in which we now live.