The customer shopping experience for banking products continues to evolve. As more sales go online and through aggregators, banks and their branch offices have considerably less influence over the buying decisions than they did in the past. The days of brand loyalty, regardless of the product and price, have come to a screeching halt.

Today’s consumers are more selective and demanding than ever before. With so many options available, consumers shop around to find the offer that precisely fits their needs, regardless of who the provider is or whether it’s even a bank.

This presents a number of challenges for banks. There’s no negotiation online, so every offer needs to be right first time around or the customer will quickly move on to the next provider.

Product offerings, including the product features and price, need to be just right for each customer. And they need to be presented to the customer at just the right time, which means banks need to be proactive while understanding their customer’s precise requirements. Finally, the entire offering must enable banks to meet their own targets for sales volume and profitability.

The Journey to Personalized Banking
To address the challenges, they face and achieve a win-win scenario for the customer and the bank, banks need to implement a journey towards personalized banking. And, given its importance, I recommend that they focus on personalized pricing first.

Although this is only one aspect of product personalization, it is one of the most important when considering a digital banking experience and one that will have an immediate impact. Time and again consumer research proves that price is key in purchase decisions.

As well as this, today banks need to deploy an end-to-end pricing infrastructure that enables them to address the significant issues caused by siloed banking, problems that have been talked about for many years with a lack of significant progress.

Having a cohesive pricing infrastructure across the bank will allow for relationship-based pricing. Pricing that can be personalized for the specific customer across all products offered by the bank. This maximizes the likelihood that products such as mortgages, home improvement loans, credit cards and over drafts will appeal to the customer. In turn this will lead to increased loyalty, another key contributor to customer profitability.

Most banks have had the desire to implement analytical pricing (such as: bank loan portfolio analysis) that, as well as other key capabilities, would enable relationship-based pricing, but today they have much more powerful technology solutions available to help them actually bring the concept to life. In fact, some of leading banks are on this journey already.

Machine learning is the breakthrough technology that enables advanced analytics to become integrated into real-time production systems, which can feed channels such as online sales with highly personalized product offers and pricing.

An Example of the Step-by-Step Approach
The journey to personalized banking will not happen overnight. The leaders of this movement will need to prioritize key business lines and deploy a strategy that enables subsequent lines of business to be added year on year.

A good example of how this is being achieved comes from an Earnix client, which is one of the top banking groups in Europe, offering a number of consumer banking products and services.

The bank had a strategy of one price per product, regardless of the customer but wanted to achieve differentiated pricing within each product. Branches had been giving discounts irrespective of the loan amount or other relationship criteria, and the pricing department was delegating the ability to differentiate prices on a discretionary basis at the branch level. This led to sub-optimal overall profitability.

Using the Earnix pricing platform, the bank was able to manage pricing centrally and deploy relationship-based pricing. It was able to gain additional profitability potential in customer segments that were not yet identified by its branches. By deploying modern analytics technology to support this new pricing strategy, the bank was able to see numerous benefits including a significant increase in net revenues.

Earnix clients are successful because they often opt to start by focusing on a single business line, proving the financial benefits, and then rolling out change across the entire bank.

What Comes Next
After implementing the above pricing changes, banks are ready to expand personalization to wider product traits and implement the ability to detect the best timing of offers. For instance, winning banks in the future need to have the ability to offer a correctly priced loan well before the customer knows they actually needs the money, to beat the competition for the lending product. Companies such as Amazon and Netflix have made it their mission to know their customers and what they want. It’s part of their core existence. Banks will need to follow this vision if they expect to succeed

The new approach to banking, where personalization is at the center of the relationship between the bank and customer, reflects the broader trend of how businesses are relating to buyers in what we call the Customer Centric Digital Transformation.