Maturity of customer data in banks and insurance companies

'In the context of the rapidly developing digital economy, the last decade has given companies the opportunity to diversify their business model and their customer relationships, due to a better understanding of their needs. The personalization of customer journeys has become a major stake for companies in a wide range of sectors. For example, Netflix offers personalized content based on user’s data, Starbucks’ app sends personalized advertisements to its customers based on their preferences and Spotify uses customer data to create personalized playlists. Personalization is defined by all the methods used to make the customer feel they are considered distinctive and special by the bank/company throughout the customer experience. This personalization is made through the offerings, user interface, interactions across all channels, range of operations and transactions, etc. Personalization is constantly managed and measured through KPI such as NPS, multi equipment, LFTV or client satisfaction.

At present, the market trend for personalization is accelerating and it can be explained by various factors.

First, we see a change in customer expectations that are increasingly demanding. Being able to offer a real unique experience for a customer is a strong competitive advantage. For example, customer engagement with their brands improved by 14% in 2021, and 90% of customers now spend more with a brand that offers a personalized experience.

Then, competitiveness is intensifying. Strategic decisions can deeply disrupt the standards of a given economic sector, as we see more and more new entrants acquiring a significant market share in a very short amount of time thanks to their agility. Uber, for example, has brought such changes to its market. In 2018, the revenue of the American company reached $11.3 billion, 23 times higher than in 2014 ($495 million). During the same period, the cab industry's market share decreased by 5 to 10%.

Finally, data is becoming easier to access and analyze, and corporations are driving their investments towards enabling data usage. The amount of digital data created or replicated globally has increased more than 30 times in the last decade, from 2 zettabytes in 2010 to 64 zettabytes last year, and is expected to reach 180 zettabytes by 2050.

“With the booming availability of information and advancements in IT, banks today are sitting on vast amounts of data, which if amalgamated with the power of analytics can unleash a world of opportunities that vastly improves decision making. Making use of extensive data to extract relevant and practical insights is extremely crucial in a customer-oriented space.” ―  Sachin Chandna, Head of Customer Intelligence & Engagement at Emirates NBD.

Those dynamics imply that companies now need to move towards a strategy of hyper-personalization. They need to create value out of their data to be able to offer unique experiences to their customers. It’s a huge change in the way of thinking about customer personalization – usually companies use segmentation to personalize their customer’s journeys. Segmentation creates groups of customers based on their common preferences and activities, while hyper-personalization digs deeper into tiny differences that can be used to target customers individually. Hyper-personalization therefore allows for much greater granularity and refers to the notion of “segment of one”. It requires moving from the value represented by customers to what a customer really values in the relationship with the bank, which are usually the main elements used to personalize interaction, such as level of expertise, cost to serve, consideration and interaction history, range of products and services, etc.

The financial services sector is certainly not immune to this current trend. But most banks and insurance companies have not yet translated it into their operational strategy and hyper-personalization can still be leveraged to improve customer engagement. As a matter of fact, 52% of customers find banks "not fun", 48% are not "emotionally connected" and 44% do not find them "personalized enough". This observation is the same from the banks and insurance companies’ perspective.

"75% of customers are willing to pay more to shop at a business with a great customer experience, and 53% said they would leave permanently if the experience was poor.” ―  Sachin Chandna, Head of Customer Intelligence & Engagement at Emirates NBD.

Given those findings, we will now take a look at the current trend regarding usage of customer data for personalization in the financial services sector, the maturity level of the sector and the changes implied, and how those changes are being implemented in practice.