Efficient data handling and processing is an opportunity to offer users customized, flexible products 

An impending challenge for banks is to tailor their product offering to the needs of each customer, drawing on proper data analysis in order to identify the demands and provide hyper-personalized answers.  

Thanks to digital channels and their extensive reach, it has never been easier to connect with customers. But in the same, hyper-connected context of multiple financial players such as banks, fintechs and bigtechs, assuring customer loyalty is becoming more difficult. 

As a result, the personalization of experiences is critical to maintaining satisfaction levels. The good news is that banks now have a wealth of data upon which to base their user research.  

Consequently, one of the main challenges that the financial industry will have to address in the coming years will be to identify, filter and segment information efficiently. 

ON-DEMAND BANKING?

The hyper-personalization of financial products suggests that banks should provide their customers with relevant, flexible offers. And that begs the question: Why not have the customer build products at his or her convenience, using on-demand banking? 

Under this premise, the bank can give the user options to choose from—for example, which benefits to add to his or her credit card—instead of deciding between pre-established service combinations for each product.  

Last year, Banco Santander introduced in Mexico a credit card with digital registration that allows customers to customize the related benefits, insurance and assistance. In addition, it introduced six card designs that each support different social projects according to the user’s preference. 

In fact, choosing flexible payment due dates, interest-free months and mortgages with double installments are some of the options that can already be configured on banks’ web sites nowadays. 

But the strategy would be even more effective if, thanks to proper data management, the bank was able to suggest products and add-ons, thereby anticipating the customer’s needs and creating a better digital experience.    

THE POTENTIAL OF ALTERNATIVE DATA  

Limiting credit evaluation or calculating interest rates based solely on credit bureau ratings is a strategy that ignores the complexities of the Latin American market, where just 51% of adults have bank accounts, and of those, only 28% use them to make payments directly, according to Deloitte data published in August 2021. 

And in the US, the numbers also show that at least a quarter of the population is underbanked while 10% are unbanked, limiting their opportunities to access student loans, mortgages or capital to start a business, according to a study by Morning Consult 

In this context, digital banking emerges as an opportunity for institutions to adapt to the market and expand their offering by taking into account other sources of financial information that show a person’s income and outgoings. 

For example, Mibanco, the microfinance institution belonging to Peru’s Credicorp, formed a partnership with Uber to access the driving history of drivers and turn it into a database with which to evaluate their creditworthiness 

User evaluations, driver punctuality and even the frequency with which they use the app play an important role in the assessment. 

Customer data allows the bank to get to know the client and therefore better meet their needs, such as credit. 

E-wallets, which are becoming increasingly popular in the region, also play a key role here. They record users’ transactions and can potentially be customized to offer everything from quick-approval loans to financial investment tools.    

These e-wallets are a gateway for introducing a greater share of the Latin American population to the financial system, especially considering the region’s high smartphone penetration rates. 

HYPER-PERSONALIZATION WITH OPEN BANKING

An emerging trend such as open banking represents another opportunity for offering users customized and flexible products.  

If the customer allows it, the bank can access their history of financial interactions with other companies in order to cross-check information and offer better them terms for financial products.  

In Mexico, the BBVA group has partnered with the employment platform Zolvers so that, through the use of APIs, thousands of domestic workers can open savings accounts on this popular site.   

Brazil leads the way in the region in the implementation of open banking, followed by Mexico. Some other countries, such as Chile and Colombia, are close to approving their own legislative proposals.  

These open banking projects expand the amount of data available to banks as they serve their customers and thereby improve their ability to customize services. 

Open banking and financial institutions’ quest to offer better products leads to an obligatory next step: efficient data processing for hyper-personalization, where the bank adapts to its customers and not the other way around.   

Andy Tran