The Personalized Finance Myth—And How Banks Achieve Personalization #NewsUnitedStates

Alex Kreger, UX Strategist & Founder of the financial UX design agency UXDA, designs leading banking and fintech products in 37 countries.

In an era where personalization is the buzzword of digital banking, many financial tools promise a tailored experience but deliver something far less impressive. They might know customers’ names and track their spending habits, like how much they splurge on takeout, but is that true personalization?

As we navigate through AI-empowered 2024, I think it’s high time that companies prioritize making financial tools genuinely personal. From customized offers to AI-driven financial advice, the promise of personalized digital banking is alluring. Yet, the reality often falls short.

The concept of personalized banking should transcend beyond surface-level interactions. Unfortunately, many banking apps today are just scratching the surface when it comes to true personalization.

The Illusion Of Personalization

At first glance, many banking apps appear personalized. They use customer names, track spending habits and send notifications. However, this level of customization is often surface-level at best. True personalization goes beyond these basic functions, requiring a deep understanding of individual needs, behaviors and preferences.

I’ve found most apps use algorithms that categorize users into broad segments based on general financial behaviors. This approach, while a step in the right direction, is far from being personalized. It often results in generic advice and offers that don’t address the unique financial situations and actual life context of users.

Data, Data Everywhere, But Not A Byte To Think

Banks have access to a wealth of data, from transaction histories to credit scores. However, the sheer volume of data can be overwhelming. The challenge lies in filtering this data to extract meaningful insights. Many digital banking platforms struggle to leverage this data effectively, resulting in generic insights that lack the depth needed for true personalization.

Moreover, privacy concerns limit the extent to which data can be used. Users are increasingly wary of how their data is collected and utilized. This caution also restricts banks from fully leveraging the available data to create genuinely personalized experiences.

Lack Of Contextual Offering

One significant drawback of many current banking apps is their inability to provide contextual offerings. Many banks provide generalized solutions, and even if they filter out customers by hundreds of criteria, their offerings remain limited and do not fit real customers’ needs and desires. This results in mismatched financial advice and irrelevant product recommendations.

For example, a customer planning to buy a home may receive generic mortgage offers that do not consider their specific financial situation, location or long-term goals. Similarly, a young professional looking to start an investment portfolio might be presented with broad investment options that do not align with their risk tolerance or future plans. The lack of context in these offerings undermines the effectiveness of personalization efforts.

Limited Scope Of Personalization

Many banking apps focus on short-term financial goals, such as budgeting and saving. While these are important, they represent only a fraction of an individual’s financial journey. True personalization should encompass a broader range of financial aspects, including long-term goals like retirement planning, investment strategies and wealth management.

Moreover, personalization should adapt to the evolving financial landscape of the user. Life events such as marriage, buying a home or starting a business significantly impact financial needs and goals. I’ve noticed most banking apps fail to adjust their personalization strategies to reflect these changing circumstances.

The Path Forward

For banking apps to achieve true personalization, I suggest adopting a more holistic approach. This involves empowering advanced data analytics with AI to ensure a deep understanding of individual user needs, behaviors and preferences.

Here are a few key steps to get there:

1. Take advantage of AI-driven data utilization.

Banks can invest in advanced AI-driven analytics to filter and interpret the vast amounts of data they collect. This may require a cultural shift toward data-driven decision making in the team.

2. Balance AI and human interaction.

While AI can provide valuable insights, human advisors should remain an integral part of the personalization strategy. Combining the strengths of both can create a more nuanced and effective personalization model.

3. Offer comprehensive financial planning.

Personalization should extend beyond short-term goals to include long-term financial planning for customers. This requires a broader understanding of the customer’s financial journey and the ability to adapt to changing circumstances.

4. Provide contextual offerings.

I suggest banks go beyond generalized solutions and provide offerings tailored to the specific context of each user. Start by identifying and understanding the unique needs and desires of customers and designing products and services that align with those needs.

For example, for a businessman buying a ticket to travel abroad, consider providing advice on financial security in a foreign country, offering automatic insurance, and offering a virtual payment card for secure NFC payments.

5. Prioritize user-centric design.

Apps should prioritize user experience, making it intuitive and engaging. Focus on creating a clear and customer-friendly design to ensure that users feel in control of their financial decisions.

6. Make continuous improvements.

Personalization is not a one-time effort but an ongoing process. Gather regular feedback from users, coupled with continuous updates and improvements, to stay relevant and effective.

7. Create an integrated financial ecosystem.

I recommend banks aim to create an interconnected financial ecosystem that unites all financial services and products. This includes linking all banking services, allowing users to see the complete picture of their financial health and get a truly personalized experience and offers based on it.

The promise of personalized banking is compelling, but the reality is that many apps fall short. Achieving true personalization requires a deeper understanding of individual needs, better data utilization and a balanced approach that includes contextual offerings. By addressing these challenges, banking apps can move closer to delivering the genuinely personalized experiences that users seek.

Because the end goal is not just to personalize digital banking but to make a meaningful impact on the financial well-being of each user. This is the true essence of personalized banking, and I think it’s a goal worth striving for.

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