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Panoptic Personalization in Banking

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Across the globe, each household does financial transactions almost daily. It's part and parcel of every family's life. Though a large population is still unbanked, many families have used banking services in the last decade.

But the moot question is whether all these banking services are tailored to that household's needs. Many times, it's a one-size-fits-all approach.

In many cases, the Bank's customers are segmented as platinum segment, gold segment, silver segment or Ultra HNI, HNI or corporate customer, and retail customer.

These segments were necessary so customers who belong to a segment (say Ultra HNI) can be treated as per their needs. For banks, they were forced to prioritize as catering to all the segments (and hence all the customers) was not profitable.

But now, technology has democratized things. Everyone can be catered to as per their needs.

What does Panoptic personalization entail within the realm of banking? 

It encompasses a strategy that combines data analytics, artificial intelligence ,and machine learning to deliver a personalized banking experience.

Unlike approaches to personalization that rely on data or predefined customer segments, panoptic personalization is dynamic and operates in real-time.

At its core, panoptic personalization involves gathering and analyzing customer data.

As part of Panoptic personalization, one collects and utilizes all types of data related to a customer. Comprehensive consumer data includes demographic data, behavioral data, and various interactions and transactions with banks and other entities.

The bank uses this data to provide customers with personalized offerings as part of Panoptic personalization. This will be the future of customer engagement, where all experiences meet individualized customer needs.

This data encompasses a range of information, such as transaction history, spending patterns, social media interactions, and lifestyle choices. Advanced algorithms then process this data and extract insights about preferences, behaviors, and financial goals.

What sets personalization apart is its ability to provide a 360-degree view of each customer. Banks can better understand their customers' financial lives by integrating information from touchpoints like apps, online banking platforms, and offline interactions.

Need for Panoptic Personalization 

1. Need of GENz: Though many of us have seen physical bank branches and later moved to Online banking, GENz started with online banking only.

Also, they are accustomed to getting personalized treatment and offers from various social media platforms. They get movie recommendations or the latest offers per their earlier browsing history.

Banks also need to provide that experience. At the moment, they have just digitized their physical banking processes. Imagination has not happened.

2. Driving insights and actions: Banks need to understand a customer's needs.

One repeated example is that once a customer comes to the Bank for a home loan, the Bank needs to know that the customer is looking for a home and that getting a loan is a means to achieve that. Hence, the Bank should look holistically and help the customer buy his dream house.

That means explaining to him the cash demands of the loans and making sure that the customer's cash flow matches those demands. Also, if the customer wants to do interior decoration for his house, the Bank should help the customer here. In my opinion, this much Bank has to offer anyhow.

This example is more of a push model. That is, the customer has decided to come to the Bank for the required financing. 

Banks now need to work on the 'PULL' model.

If one customer says that he likes movies about a person, it tells many things about that person. It may mean that a person likes watching movies, like that actor, and one also finds the language in which that person is comfortable. That is based on the language of the movie or the industry where that actor works.

If the Bank can tie up and provide offers for movie premieres, that customer will be happy.

I had come across cases where a bank was a sponsor for one sporting tournament. But they never reached out to their customers, who would have loved watching the matches of that sport happening in their city.

Think of the delight a customer will get if the Bank, who is the official sponsor of that sports tournament, can arrange tickets for matches.

Panoptic personalization will be real differentiator : 

Panoptic personalization led customer experiences will be a fundamental differentiator in the coming years. Bankers will increase touchpoints with customers and agents and leverage data and analytics, IoT, and AI to deploy tailored offerings, especially in personal lines.

1. Moving Beyond Standard Banking: Panoptic personalization takes banking services beyond the one-size-fits-all approach. It delves into your behavior, preferences, and goals to offer tailored experiences that align with your unique financial profile. Imagine a bank that provides checking accounts and crafts personalized financial plans for your dream home, education, or retirement.

2. Predicting with Precision: Panoptic personalization goes beyond reacting to your transactions. It utilizes AI and advanced analytics to anticipate your needs and proactively offer solutions. Picture a bank that displays your balance, predicts upcoming expenses, suggests savings targets, and even pre-approves loans you may require.

3. Ethical Considerations: While personalization brings convenience and customized solutions, it raises concerns about data privacy, algorithmic bias, and potential manipulation. Addressing these dilemmas is crucial to ensure inclusive implementation of panoptic personalization in the banking sector.

History of Personalization in Banking 

The history of personalization in the banking sector dates back to the 21st century when financial institutions began recognizing the potential benefits of leveraging data for personalized customer experiences. One notable pioneer in this field was Wells Fargo, who started experimenting with data-driven personalization strategies in the mid-2000s. However, it was in the 2010s that advancements in intelligence and machine learning triggered a transformation.

Around 2015, JPMorgan Chase emerged as a player by investing in technology to enhance customer experiences. Their efforts laid the foundation for what we know as personalization.

Influential leaders in the financial technology industry, such as Square and Stripe, have also played a role by introducing solutions that have paved the way for the widespread adoption of comprehensive personalization across the sector.

How Panoptic  Personalization Works:

Panoptic personalization operates on a framework that seamlessly integrates technologies to provide a unified customer experience. The process can be divided into stages:

1. Data Collection: Panoptic personalization starts by gathering various data from sources. This includes records, social media activity interactions with customer service, and even location information. The ultimate goal is to create a profile that captures the customer's behavior and preferences.

2. Advanced Analytics:

Once the data is collected, advanced analytics powered by machine learning algorithms come into play. These algorithms analyze patterns, identify trends, and make predictions based on real-time customer data. This enables the system to anticipate needs and preferences effectively.

3. Real-time Adaptation:

The dynamic nature of personalization means that insights are always evolving. The system constantly adapts to changes in customer behavior and market trends. For example, if a customer shows interest in a product, the system can tailor recommendations and offers accordingly.

4. Multi-Channel Integration:

Panoptic personalization goes beyond one channel; it extends across touchpoints. Whether customers engage through an app, website, or in person at a branch, the system ensures personalized experiences throughout their interactions. Achieving this level of integration requires communication between banking systems facilitated by APIs.

5. Security and Privacy Measures: Considering the aspect of information, it is crucial to have strong security and privacy measures in place for comprehensive personalization. Banks allocate resources to implement encryption authentication protocols and adhere to data protection regulations, all aimed at ensuring the safety of customer data.

Features of Panoptic Personalization in Banking

1. Proactive Financial Planning:

Comprehensive personalization goes beyond reacting to insights. Enables anticipatory financial planning. The system can predict financial needs by analyzing data and identifying patterns, helping customers plan for significant life events or expenses.

2. Notifications Tailored to User Behavior:

The system utilizes notifications tailored to behavior, alerting customers based on their actions. Whether it's an overdraft, a bill, or an investment opportunity that matches their preferences, these notifications enhance financial awareness and decision-making.

3. Interactive Virtual Assistants:

Incorporating intelligence comprehensive personalization introduces virtual assistants. These AI-driven entities engage with customers quickly, assisting, answering questions, and offering personalized advice.

4. Dynamic Credit Assessment:

Conventional credit scoring models are static. Comprehensive personalization introduces credit assessment. Creditworthiness is recalibrated dynamically by evaluating behavior to reflect the most accurate and up-to-date evaluation of an individual's financial well-being.

5. Automated Tracking of Financial Goals:

Comprehensive personalization automates the tracking of goals to ensure customers stay on track. Whether saving for a home or establishing an emergency fund, the system delivers real-time progress updates and suggest adjustments, when needed. 

6. New products and services for all customers: Banks can offer various new products and services by imagining. For example

a. Can one do a Systematic Investment Plan in mutual funds or stocks daily with one dollar?

b. Can an individual get a ten-dollar loan for 6 hours?

c. Can someone get a five-dollar loan every Monday, which he can repay by Friday, or a ten-dollar loan for the weekend? Many customers need help with the working capital cash flows. This offering will surely go a long way in strengthening the bond between a customer and the Bank.

d. Based on the gourmet habits of customers in a locality, can the Bank tie up with that restaurant and make sure that those customers are delighted by delicious food from that restaurant at a discounted price?

e. After obtaining consent from the customer, based on his various interactions on social media, the Bank can help its customer buy the product, guide him, or connect him with the shop that can deliver the product or services desired by the customer.

The vital thing to note is that the product or service is not from the Bank. The product can be good furniture for the customer's drawing room. If the customer is interested in attending a cultural program, music show, or performance by an artist, the Bank can help the customer avail of that service.

f. One important thing to note here is usually, all goods producers or companies providing services in various functions must have a bank account or banking relationship.

These product manufacturers or companies organizing music shows spend much money and time marketing those products or services.

Both the producer of the goods and the consumer of the goods may belong to the same Bank.

It will be a tremendous win-win for all stakeholders if the producer and consumer connect directly.

g. Banks can play an important role here as banks understand a producer's niche offerings and the consumer's needs. 

As per the steps of panoptic personalization, the Bank has collected 'all data' of the producer and the consumer. Now, it's only a question of correct mix and match.

For a long time, companies have made products and spent a lot of money on marketing and advertisement to reach their 'target customer.' They often spend significant time here before their product finds the correct audience.

h. Similarly, many customers are looking for products or their specific needs. Think of a family that requires some equipment related to the unique needs of one of their family members or that can fulfill the needs of the older member. Some retro items.

The family will be delighted if they get the required equipment here. 

Benefits of Panoptic Personalization in Banking

1. Enhanced Customer Experience:

Panoptic personalization creates a personalized banking experience that caters to individual customer needs and preferences. This leads to levels of satisfaction and increased customer loyalty.

2. Improved Decision Making:

By utilizing analytics, banks can make decisions based on data. This benefits customers by providing recommendations and enables banks to optimize their product offerings and services.

3. Increased Operational Efficiency:

Panoptic personalization, automation capabilities, and real-time adaptability contribute to operational efficiency. Banks can streamline processes, minimize intervention, and provide more responsive service.

4. Tailored Financial Products: By understanding the objectives and behaviors of individuals, panoptic personalization empowers the creation of customized financial products and services.

This personalized approach enhances the relevance of offerings, making it more likely for customers to engage with them.

Using machine learning algorithms, panoptic personalization can analyze a customer's risk tolerance, history, and financial goals to provide customized investment recommendations. This ensures that investment strategies are aligned with preferences and objectives.

5. Smart Budgeting Assistance:

Panoptic personalization enables real-time budgeting assistance by analyzing a customer's spending habits and financial objectives. It offers tips and alerts for overspending and suggests adjustments tailored to financial situations.

6. Proactive Fraud Detection:

Panoptic personalization improves fraud detection by monitoring transaction patterns in time and identifying any unusual activities. This proactive approach adds a layer of security, safeguarding customers from fraudulent actions.

Before the introduction of personalization, banking services were limited to a fixed menu with choices. In contrast, panoptic personalization is comparable to having a chef who understands your taste preferences and creates a menu tailored just for you.

These additional features demonstrate the flexibility and depth of personalization beyond customization to provide a dynamic and forward-thinking banking experience.

Using analytics and machine learning, panoptic personalization relies on these technologies to analyze data sets, identify patterns, predict future behaviors, and offer personalized recommendations.

Ensuring security and privacy is an aspect of personalization. Banks invest in encryption authentication protocols and compliance with data protection regulations to safeguard customer information confidentiality and integrity.

Important Technologies in Panoptic Personalization in Banking:

Assume that bankers can discard their old-fashioned strategies and envisage the future of the banking industry devoid of obsolete limitations, stagnant platforms, and worn-out methodologies.

Unfortunately, many bankers continue to navigate uncharted territory using obsolete maps.

What novel opportunities might emerge, if banks can do honest blue sky thinking, which is not constraied by any limitation. 

Ingenuity is crucial for the survival of the banking industry. What is required is willingness and imagination to provide 'panoptic personalization.'

The domain of the possible encompasses an immersive metaverse wherein customers can peruse products and services, informed virtual assistants that provide personalized guidance throughout the entire customer journey, and predictive analytics that tailor offerings according to individual characteristics and actions.

The current technological infrastructure of bankers is a critical obstacle that hinders, if not renders, integration with distribution channels and partners.

Many bankers assert that their current architecture hampers them. They agree that the advent of new digital business platforms presents a substantial opportunity for sector repositioning.

The simplification of business models and architecture will significantly aid the evolution of banking. Still, true simplicity requires eliminating redundant data entry via integration and digital tools.

Banks need to focus on the ABCD of the technology. That is Artificial Intelligence, Blockchain, Cloud, and Data.

Combining data analysis, predictive modeling, and customer behavior evaluation has allowed banks to gain insights into individual preferences and requirements.

To further advance the development of personalization, cloud computing has been adopted to handle datasets effectively in real-time. Additionally, application programming interfaces (APIs) are increasingly being used to integrate with banking systems.

Blockchain Technology:

Implementing technology can bolster the security and transparency of transactions within personalization. Its decentralized and immutable nature ensures that customer data remains intact, minimizing the risks associated with fraud and unauthorized access.

Natural Language Processing (NLP):

Integrating NLP into personalization systems allows for analysis of customer communications, providing insights into their sentiments and preferences. This enriches the system's ability to comprehend and respond effectively to customer needs.

Biometric Authentication:

To ensure both security and convenience for customers, biometric technologies like fingerprint or facial recognition can be employed for authentication within the personalization framework. This additional layer of security enhances protection.

Examples of banks, which have started this journey 

Many banks have understood the importance of panoptic personalization and started the journey. 

Some are 'Capital One,' 'Bank of America', 'Ally Bank,' 'Charles Schwab'..etc. 

These banks have strategically embraced personalization by integrating technologies to deliver personalized solutions to their customers. They utilize cutting-edge data analytics and machine learning to offer customers a highly personalized banking experience, resulting in an individualized and satisfying customer experience.

RIPE for Panoptic personalization: Real time, Instant gratification with Personalized Expereince 

Retail Banking:

Traditional retail banks are incorporating personalization techniques to create customized customer banking experiences. Retail banking is at the forefront of this transformative trend, from providing product recommendations to delivering tailored advice.

Fintech:

Fintech companies leverage personalization strategies to disrupt and revolutionize the financial services landscape due to their agility and focus on innovation. Fintech firms are reshaping customer expectations by offering customized solutions driven by technology.

Wealth Management:

In wealth management, comprehensive personalization is utilized to develop investment strategies based on risk profiles and financial objectives. This approach enhances the services provided by wealth management firms.

Conclusion:

Panoptic personalization in banking represents a shift beyond approaches to engaging with customers.

With its features, countless benefits, and real-world applications, this groundbreaking approach is reshaping the industry. As banks continue to innovate and harness emerging technologies, the era of banking experiences is on the verge of becoming the new standard.

Combining data analytics, artificial intelligence, and customer centricity signals a future where banking goes beyond being a service to becoming a tailored journey for each person.

As we navigate this changing landscape, we must recognize comprehensive personalization's role in fostering more robust customer relationships and driving innovation across the entire industry.

Banks must realize their competition is not with other banks or financial entities. Competition may come from a social media platform or online marketplace that caters to all customer needs and provides required financial assistance.

Banks need to own the all customer journies. To stay relevant, surive and win, banks need to adopt panoptic personalization.

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This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.

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