Digital personalized money management: Here’s the roadmap

Financial institutions of all sizes have the tools to provide personalized digital money management capabilities, but that doesn’t mean deploying an effective program is simple.

That is a key takeaway from a report on Jan. 31 by Personetics and Forrester. It discusses why money management should be vital to the digital banking experience.

Personetics’ president of the Americas, Jody Bhagat, said the study builds on an early report that surveyed 5,000 consumers about their experiences with their bank during the recent financial crisis.

Among its findings were that more than 40% said their primary bank should know them and be able to provide personalized guidance in a mobile app. More than 60% said they would switch banks if a more personalized money management option were available.

A similar number didn’t hear from their bank during the crisis. Roughly 20% felt their bank didn’t care. That led Personetics to investigate how effective digital banking solutions are in meeting customer expectations.

“The current engagement solutions, particularly traditional personal financial management solutions, while they look good from a user experience standpoint, the impact on the customer is fairly limited in terms of perceived value,” Bhagat began. “The adoption rates were often marginal. And as importantly, the impact and value for the institution are also limited.”

Eight of nine executives said less than half of their customers engaged with their tools. That doesn’t surprise Bhagat.

But it’s so unnecessary. The advanced data analytics capabilities allow institutions of all sizes to understand customer financial behavior better. That is the basis for delivering personalized insights to help them with their financial well-being.

Four steps to a better digital experience

How should financial institutions begin the journey to delivering that better personal experience? Do they build? Do they buy?

Start with speaking to your customers as you embrace a four-step path, Bhagat explained. The first step is foundational. Cleanse, categorize, and interpret your company and customer data. Understand their expense and income patterns.

Next up is personalized insights. Determine what is most relevant right now to your customers. Plot an action path.

Step three is understanding the customer’s financial goals. Are they saving for a special purchase? Are they managing debt? What will happen over the next three years, and how can your tools and insights help them get there?

The final part is developing the capability to deliver unified advice across channels.

Delivering clear value to SMBs with data analysis

Generating data is easy, but making sense of it and delivering value is more arduous. One area where older institutions can have value from that data is by focusing on the seven to nine % of their customers who run small businesses, Bhagat said. They can offer solutions for small businesses like foreign exchange services through transaction activity analysis. That is the foundation of more targeted and effective marketing campaigns where customers receive appropriate options. The bank also benefits.

Improving customer financial literacy

These capabilities mesh nicely with financial literacy’s growing importance, where providing educational content is insufficient, Bhagat said.

Many institutions fail in financial literacy efforts because they focus on traditional measurables. To be fully embraced, financial wellness should be part of the bank’s balanced scorecard.

Jody Bhagat headshot
Tying financial literacy efforts to measurable outcomes will improve success, Jody Bhagat said.

“There should be specific outcomes that you’re measuring and trying to achieve in your portfolio that should translate into a set of activities,” Bhagat said. “…As well as content, tools, and products that can help your customers. There are metrics that you should be sharing with the management team and the board.

“For something to be well-grounded, it needs to drive the outcomes for the customer and key outcomes for the bank. (The earlier study) found that customers only found marginal value. The bank only finds marginal value because they’re not tied to specific outcomes for the bank. Suppose you can blend the two, which is to have your financial wellness strategies drive not only value for customers improving financial wellness outcomes but also financial outcomes for the bank. In that case, you will have a much stronger intensity of effort from the bank side.”

If a customer has cash-flow problems, the short-term view would be to let it slide and wait for the penalty fee. Better to help them avoid that hit by offering a relevant product that delivers a different revenue stream. The customer is happier, and the bank avoids the operational cost of handling the call.

Developing an effective vendor scorecard

When plotting a digital strategy, deploy a vendor scorecard to help decide which technologies to use, Bhagat, advised. Identify your top internal capabilities and determine how they are best deployed. Promote them.

Look for vendors with proven capabilities that can help you quickly scale and deliver clear impacts. At the same time, combine them with your internal capabilities to determine where you can differentiate.

Where many digital efforts go wrong

Where did those many digital money management efforts that failed to engage the customer go wrong? In short, Bhagat said they could not provide personalized and proactive insights. They leave important decisions like how much to save each month to the customer. At best, they identify spending and savings patterns.

“It takes more intelligence, takes the ability to interpret that data, and then use a series of machine learning models to be able to say what’s important for that customer and here are the actions they should take,” Bhagat said. “That’s where we believe the entire industry needs to be quick. We believe the whole industry needs to have this capability by the end of 2024. You should either have it or be demanding it from your provider.

How data can change the banker’s role

The next frontier is using this intelligence to show the banker which customers need help in specific ways, Bhagat said. Perhaps they received a raise and can invest more. Maybe a spending analysis shows they must save for a child’s schooling. Arm the banker so they can better engage with the customer.

Use that intelligence to drive marketing campaigns, Bhagat said. Let customers know when you have better products. It improves those campaigns and lowers acquisition costs.

Digital banking to come

Customers will get their banking from different places. That means products must be built differently, Bhagat said.

Banks must deliver intelligence and insights on an Amazon level because that is their competition.

“It’s incumbent on the banks to leverage that data, to be able to get together insights to customers and invite them to have products with the bank, or elsewhere be able to experience insights in the relationship.”

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  • Tony Zerucha

    Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.