Personalized banking offers are becoming a new way for banks and credit unions to use customer transaction data to strengthen their mobile banking relationships. Because financial institutions can see where and how customers spend, they have an opportunity to deliver targeted discounts and promotions based on actual purchasing behavior rather than broad demographic assumptions.
The strategy could also help financial institutions encourage greater adoption of mobile wallets and other digital services while creating new revenue opportunities. However, success will depend on striking the right balance between relevance and privacy. Offers that are timely and useful can add value to the customer experience, while excessive or poorly targeted promotions could make customers uncomfortable or cause them to tune out altogether.
Banks and credit unions are starting to use the data they have on their customers’ spending to send them offers and coupons on their mobile phones, Bloomberg Technology reports.
Transaction Data Creates New Opportunities for Personalized Offers
Banks have a big advantage in this era of hyper-personalized marketing: They know every spending habit of every customer. For example, a fast-food chain can send a coupon to someone who actually bought a fast-food meal using his debit card in the past month, rather than one who dines once a week at an upscale restaurant.
Some banks and credit unions see this as a way to increase adoption of their mobile wallets. They are drawing lessons from companies like Starbucks, that have had great success in getting customers to adopt closed-loop mobile wallets. Some even see it as a revenue opportunity, which may make up for lost interchange revenue and lost revenue from fees.
Of course, financial institutions face risks pursuing this strategy. First of all, customers may feel like the bank is spying on them if their mobile apps are suddenly filled with offers every time they check their balance. Second, customers may worry that the app is less secured if third parties seem to be watching them. Finally, customers may end up feeling so overwhelmed by all the offers that they just start tuning them out, leaving the offers to be just so much more clutter on the app. Personalization is not just matching offers to history, but making sure that the matching is done with the right timing and frequency.
For banks and credit unions, transaction data provides a powerful foundation for delivering personalized banking offers, but simply having access to customer spending information does not guarantee an effective marketing strategy. Financial institutions must determine not only which offers are relevant, but also when and how frequently they should be presented.
The opportunity extends beyond delivering coupons. Well-executed personalization could encourage customers to engage more frequently with mobile banking apps and wallets while helping financial institutions build stronger digital relationships. At the same time, banks must be mindful of customer concerns about privacy and security. Consumers who feel their spending is being monitored too closely may view personalization as intrusive rather than helpful.
Ultimately, the effectiveness of personalized banking offers will depend on whether financial institutions can use their unique insight into customer spending to provide genuine value without overwhelming customers. Finding that balance could turn transaction data into an important tool for improving mobile engagement and customer loyalty.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
Read the full story here
