Personalization in Fintech: A must have and not a nice to have

Given the growing significance of personalized customer experience within the fintech ecosystem, companies that have embraced technology and implemented customized services on a broad scale are at the forefront of enhancing customer engagement, fostering loyalty, and increasing conversion rates.

A recent Forbes research reveals that 86% of financial technology consumers confirms personalized experiences foster brand loyalty. In contrast, 66% of consumers indicate they would discontinue patronage if the experience lacked personalization. Unfortunately, a significant perception gap exists between brands and consumers as only 15% of customers agree with the belief held by 46% of brands that they excel in personalizing their offerings.

According to Sage UK’s report on improving customer service and sales in 2014, providing a superior personalized experience can result in customers being willing to pay more (86%), buy more (40%), and become loyal customers worth up to 10 times their initial purchase value. However, failing to do so carries significant risks: 78% of consumers have abandoned purchases due to poor service; 50% expect brands to respond within one week or they will take their business elsewhere; and 89% of those who had a negative experience with a brand switched to a competitor. Increasing customer retention by just 5% can lead to profit increases ranging from 25-95%. As McKinsey & Company reported in 2021, nearly half of all buyers made impulse purchases after receiving personalized attention. Given that retaining customers is far less expensive than acquiring new ones, organizations must decide whether they want to be average or exceptional.

What Personalization in Fintech Entails? 

In the world of fintech, personalization goes beyond a simple “hello, Mr. Delali Kotoka.” It is about crafting tailored financial experiences that cater for individual needs and preferences. Such experiences must build deeper relationships, and boost customer satisfaction. In addition, personalization has become a key strategy across various industries with the aim of tailoring experiences to individual users or customers. Several factors and drivers contribute to the rise of AI- and ML-powered personalization in creating a powerful synergy between technology and consumer experience that drives trends, and influences businesses to adopt and refine their personalization efforts. With the above submission, it is clear that personalization can have a significant impact on the design and adoption of financial products and services, influencing drive, use, access, and inclusion in many ways. Overall, personalization in fintech involves shifting from a one-to-many approach to a one-to-one relationship, offering customers a tailor-made financial journey that empowers them to make informed decisions and achieve their financial goals. Here is a breakdown of what personalization in fintech entails;  an outline of factors categorized in two broad areas and their intended impacts on personalized services for great customer experiences:

• Understanding Customer DNA: Gathering and analysing data such as spending habits, income levels, financial goals, and risk tolerance provides a comprehensive picture of each customer. In addition, grouping customers based on shared characteristics and needs allows for targeted offerings and messaging.
• Tailoring products and services: Instead of a one-size-fits-all approach,  fintech companies suggest investment portfolios, savings plans, insurance products,   and loan options that align with individual financial situations and goals. Personalized dashboards and interfaces can prioritize information and features relevant to each user,  simplify navigation, and improve the overall experience.
• Enhancing communication and engagement: Fintech companies can deliver personalized, promotional, educational content and financial advice based on each customer’s specific needs and interests. Alerts about unusual spending patterns, upcoming bill payments, or investment opportunities can help customers manage their finances more effectively.
• Leveraging Technology: Machine learning and AI are tools that analyze massive amounts of data to predict customer behavior, identify potential risks, and personalize communication accordingly.

FACTORS/DRIVERS OF PERSONALIZATION

1. Technological Advancements 

 Data Abundance and Processing Power: It is interesting to note that we are generating and storing more data from various sources such as online interactions, purchases, and social media activities. Once processed by powerful AI models, this information provides insights into individual preferences and behaviours, making personalized experiences possible.

• AI and ML algorithms: Advancements in these fields have led to powerful algorithms that can analyse vast amounts of data and identify patterns and relationships. This ability enables the creation of personalized experiences tailored to individual preferences.
• Computing power: The increasing availability of powerful computing resources,  such as cloud platforms, makes it possible to run complex AI and ML models in real time and   deliver instant personalization

2. Economic and Business Factors 

• Customer Demands: Modern businesses thrive on understanding their customers better and catering to their individual needs. Today’s consumers expect personalization and feel frustrated by their generic experiences. AI and ML offer a way to meet these expectations by offering products, services, and content tailored to specific preferences, leading to increased engagement and satisfaction. For instance, Netflix recommends shows based on viewing history and preferences, making your browsing experience more engaging.
• Competition and Market Saturation: In crowded market, personalization differentiates businesses and helps them stand out. Tailored offerings can increase conversion rates, customer loyalty, and brand affinity. Personalization through AI gives businesses a competitive edge by delivering experiences that resonate with individual users and differentiating them from generic offerings. For example, Amazon suggests products based on past purchases and browsing habits, which increases the likelihood of conversion.
• Cost-effectiveness: While initial investment in AI and ML infrastructure might be high, personalization often leads to increased sales, reduced churn, and improved operational efficiency, translating into cost savings in the long run.

Impact of Personalization 

• Enhanced Customer Experience: By considering individual needs and preferences, personalized products and services can feel more relevant and valuable, leading to increased satisfaction and loyalty. Imagine receiving investment recommendations tailored to your risk tolerance or budget alerts based on your spending habits.
• Improved Business outcomes: Personalization can drive higher conversion rates, sales, and revenue. It can also optimize marketing campaigns and resource allocation.
• Operational Efficiency: Automating certain personalization tasks can free up resources for other activities and improve overall operational efficiency.

Conclusion 

Personalization is key to high customer satisfaction and loyalty. The combination of personalized financial solutions, enhanced user experiences and real-time data processing means more opportunities for Fintech businesses to meet user needs on a very customized and dynamic basis. Personalization in fintech can enable a number of benefits, including cost reduction and enhanced revenue opportunities, and higher customer engagement and loyalty. Overall, personalization holds immense potential to improve the financial lives of individuals and communities. However, it is crucial to implement such in a responsible manner; addressing data privacy concerns, avoiding biases, and ensuring inclusivity. By striking the right balance, personalization can be a powerful tool for driving financial wellbeing and access for all.

About the Author

Delali X. C. Kotoka (PMP) is a project and business-oriented person with over 14 years’ experience in Fintech, Banking Operations and Tourism. At PayInc Ghana Limited, (t/a PayAngel), he is a Business Development Manager in driving and delivering financial technology solutions for business growth. Delali is a certified Project Management Professional (PMP) from PMI and currently pursuing another certification as an Agile Certified Practitioner (ACP) and coach. He is a well-organized individual, a servant-leader and enjoy working with diverse groups to achieve corporate goals and growth. Delali enjoys meeting people and building relationships, watching football, writing articles, music and travel adventure, with a vested interest in Technology and Innovations.