Retailers have successfully harnessed tailored recommendations to enhance customer experience. In contrast, financial institutions (FIs) have struggled to replicate this success due to the unique challenges they face in the industry. Here we explore the untapped potential of recommendation strategies in financial services, offering insights into why FIs should leverage recommendations and how they can do so effectively.
1. Personalisation for digital banking is no longer a “nice-to-have”
As customers increasingly shift towards digital banking, the decision-making process for financial products has grown more complex. The multitude of options available, combined with the digital landscape, necessitates education and guidance for customers. The scope for offering recommendations within the industry is vast – beyond product recommendations, FIs can leverage recommendations to provide valuable financial advice, educational resources, and personalised content that empowers customers to make informed decisions about their financial well-being. Indeed, a 2023 Forrester report highlights the importance not only of tailored product offers, but easier product discovery, and proactive information sharing in the financial industry.
However, many FIs have failed to leverage personalisation to facilitate learning and discovery effectively. Where eCommerce has the “guided selling” concept, which aids users in discovering products, FIs can adopt a similar approach to offer personalised, relevant, and seamless customer engagement through product and resource recommendations based on user behaviour.
The evolving landscape of the financial services industry, with technological advancements, changing customer preferences and emerging fintech players reshaping the way Fis engage with their customers, means that recommendations can serve as a powerful tool to differentiate Fis from their competitors. By harnessing data analytics and machine learning algorithms, FIs can unlock deeper insights into behaviours and financial goals, enabling them to deliver highly personalised recommendations that really resonate.
2. Choosing the right recommendation strategy
To derive value from recommendations, FIs should consider various factors when crafting their strategy:
Goals: Define key performance indicators (KPIs) for personalisation efforts, such as open account clicks, application starts, or mobile app downloads. These goals guide the choice of recommendation strategies and their placement on digital platforms.
Audiences: Segment the audience into distinct groups, focusing on 3-4 primary segments based on factors like engagement level, customer lifecycle phase, or product attainment. Each segment’s unique needs dictate the type of recommendations they receive.
Data feed: A well-structured data feed is essential to power recommendations effectively. Proper metadata tagging, based on product categories, attributes, customer status, and engagement levels, ensures that recommendations are meaningful and relevant.
Strategy: Select recommendation strategies that match various user segments and preferences. These strategies could involve suggesting items based on user interests, recently viewed products, similar choices, or items frequently viewed together. Tailor these recommendations to suit specific user profiles and enhance their overall experience
On-page location: Recommendations’ relevance varies depending on the page location within an FI’s website. Tailoring recommendations to the expectations and intent of visitors on the homepage, blog pages, and account overview pages improves their effectiveness.
3. Examples of recommendations in financial services
In financial services, recommendations play a pivotal role in enhancing user experience and driving engagement. By providing tailored suggestions, financial institutions (FIs) can effectively guide their customers towards relevant products and resources. Here are two effective ways FIs can utilise recommendations within their services:
a. Chatbot recommendations
Integrate chatbots seamlessly with the product catalogue to offer personalized recommendations to both new and returning visitors. This not only expedites content discovery and ensures quick answers around the clock for consumers but also significantly reduces the operational workload for the financial institution on the backend. By leveraging direct inputs from conversations, this approach influences conversion rates and steers users toward pertinent educational resources, offers, or content, creating and tailoring results in real time based on their preferences
b. Article recommendations
Use article recommendations to enhance engagement and pageviews, especially for users who require more information. Recommendations can be based on the “Viewed Together” or “Similarity” strategies, helping users advance in their journey by suggesting relevant blog posts and articles.
4. Recommendations for improved customer acquisition and lifetime value
In today’s competitive financial landscape, FIs must incorporate personalisation throughout the customer lifecycle to acquire, engage, and retain customers effectively. Recommendations, when implemented with a holistic approach encompassing not only products but also offers and educational resources, can instil confidence in customers’ financial decisions. This, in turn, leads to reduced acquisition costs and increased customer lifetime value, driving positive business outcomes for financial institutions.
5. The importance of data governance
To fully unlock the potential of recommendations, FIs must prioritise data governance and data quality. A robust data governance framework ensures that customer data is accurate, secure, and compliant with regulatory requirements. It also enables FIs to effectively manage data from various sources, including transactional data, customer profiles, and behavioural data.
Additionally, data governance plays a crucial role in maintaining customer trust. Customers are increasingly concerned about the privacy and security of their financial data. FIs that demonstrate a commitment to protecting customer data through strong data governance practices can build trust and credibility in the eyes of their customers.
A path to enhanced personalisation, customer engagement and business metrics
By embracing recommendation strategies tailored to their unique needs, FIs can unlock the power of personalisation in the digital age, adapt to changing industry dynamics, and position themselves as trusted advisors in their customers’ financial journeys.
Stay Ahead of the Financial Curve with Our Latest Fintech News Updates!
Harry Hanson-Smith, VP Sales, Dynamic Yield by Mastercard
Harry is the RVP at Dynamic Yield, a Mastercard Company. He is the regional lead for the teams across the UK & Nordics and is based in London. He has been in the Personalisation & Optimisation space for over 10 years and has helped many leading brands strategise and implement their personalisation programs.
