Banking professionals wonder whether generative artificial intelligence (gen AI) is a poor substitute for the human touch, experience, and nuance that customers appreciate in an industry built on trust and reliability.
Considering the risks and doing the due diligence is a must before AI adoption, including for marketing teams. But what if gen AI can deliver the more complete, personalized picture of the customer, engaging them better at the outset and setting up more meaningful subsequent human interactions?
Among banking departments already or close to tapping AI and other predictive analysis tools, marketing teams are especially energized to call on AI for reinforcement, proponents suggest. Banks want to reach busy customers where and when they’re ready to transact. Already customers seek omnichannel banking across mobile, branches, and video tellers via ITMs. Needs span white glove service to 24/7 do-it-yourself ease. Being everything to everybody can be challenging; marketers are stretching budgets to meet these increasingly high demands.
It’s also challenging to cut through online noise and competitor promotions to reach customers with relevant products and services. With traditional banks, neobanks, fintechs, and others all competing for wallet share, presenting the right combination of offerings at a perfectly timed cadence is essential. Messaging must resonate as well; research shows consumers favor an institution that is transparent about rates and fees and can guide them to financial milestones.
McKinsey data shows that 71% of consumers universally expect product and service personalization in marketing, and 76% get frustrated when they don’t see it. Similarly, 76% of consumers are more likely to consider purchasing from brands that personalize a campaign feature or offer.
Just what does “personalization” mean to consumers? Generally, it refers to delivering relevant product and service recommendations, using factors such as age or income, and aligning with other interests. Over two-thirds of consumers expect recommendations today to hit the mark.
To drill down on what gen AI looks like in practice in banking marketing, ProSight talked to Kristopher Lazzaretti, president of data solutions at Deluxe, a provider of marketing support and solutions to banks and credit unions.
Lazzaretti stressed that understanding AI’s attributes for determining customer profiles and keeping up with the competition attracts the marketing department to the table, but AI can help shape a wider strategy across banking departments. For instance, AI-generated data can continue to track features throughout the life of an account long after the first promotional campaigns. Data might determine account quality or the likelihood for deposit retention. And deposit growth, after all, remains a key priority for banks, results of the annual ProSight Banking Outlook research show.
Some answers have been edited for length and clarity.
Gen AI and predictive analysis underpin our discussion, but let’s set the scene. Banks see challenges and opportunities with omnichannel marketing demands. What trends are we seeing in the field?
Existing banking customers are engaging across a variety of channels, and those channels are increasingly digital. For prospective customers, the buying journey is not linear, and it often includes touchpoints across digital and offline channels. Maybe somewhat ironically, in this digital landscape the branch remains of critical importance. Some large money centers and regional banks even recently committed to building hundreds of new branches, collectively.
For many banks, most new deposit accounts are opened in branches. In fact, branch-originated accounts are consistently larger and retained at a much higher rate. We also see the importance of the branch in our marketing work. For consumer checking acquisition, some of the most predictive drivers of conversion are the distance to the nearest client branch, density of the client’s network around the prospect, and market share capture of the client. To that end, the omnichannel nature of the buying journey is undeniable.
Banks remain margin-sensitive for retail accounts. While the chase for “hot money” may have cooled, interest rates are not coming down as fast as once expected. That means retail banks are still deposit focused. They may want to hear about gen AI and data-informed approaches to marketing, but they may be reticent about upfront costs. How do you make the case?
Our experience is that the most effective deposit marketing strategies today are anchored in the precise identification of a target audience. Following this stage, the activation of that audience is on a one-on-one basis across channels, e.g., direct mail, email, programmatic display, paid social, etc.
Based on the campaigns we execute, we know that multichannel activation improves conversion by 50%-70% or more versus single-channel activation. This lift in conversion more than offsets the higher cost of media across multiple channels. It’s important to note, omnichannel activation is only effective if you’ve identified the appropriate audience.
For many banks today, I’d agree with your research findings that deposit gathering remains the highest priority for their retail franchises. However, account and balance mix is more important now than it has been over the last few years. Non-interest-bearing deposits, primarily checking accounts, are the objective. In our experience, building effective audiences for checking marketing involves understanding three critical factors:
1) Financial capacity and allocation. What is the size of the liquid deposit “wallet” for the household? How does the household hold those balances across products? This information helps align prospective customers with the most appropriate product, such as basic or premium checking.
2) Psychographic drivers related to checking. How secure does a consumer feel in their financial situation? Are they seeking advice? How do they prefer to engage their financial institution? Knowing this helps the bank personalize the message.
3) Provider selection preferences. Determining if the prospective customer would ever choose your bank. Are they only going to bank with national money centers, community banks, credit unions, or a fintech?
Now walk us through how gen AI drives marketing personalization, please.
Gen AI-powered technology has unlocked for bank marketing teams a set of tools for data aggregation and predictive analytics that had not been readily available in the past. This technology has really met the moment, as consumer expectations for personalization increase.
Financial service providers are sitting on or will tap a vendor or use a combination to super aggregate data across suppliers. The speed comes in with large-language model AI that reconciles over a trillion data points across hundreds of millions of consumers.
Depending on a marketing team’s needs, a third-party vendor partner might take that data and apply further analytics to, for instance, develop audiences in real time and incorporate always-on streaming data into marketing decision-making. Then, for instance, a targeted social media message could be dispatched within minutes of an initial data signal, replete with personalized advice, guidance, product experiences, and offers, delivered when a consumer’s need is greatest.
Super-aggregation of data, real-time data streaming, and hyper-personalization at scale were just not tools that were available, and synced for this use, until recently.
Our industry often talks about AI’s use for efficiency. In marketing, that could mean handing over routine tasks to AI so people can focus more on strategic responsibilities. But you see AI and data in a strategic marketing role, too?
Consumer expectations have increased dramatically over the last five years, as it relates to banking experiences, such as seamless digital experiences, easy access to balances, and streamlined transfers. These features are table stakes today. Expected, in other words. The next frontier of delivering exceptional customer experiences is unlocked by personalization.
While the execution can be complex, the ask is simple: Consumers want you to know who they are. What does this look like in banking, and specifically deposit banking? Here again we come back to the three factors we spoke about earlier: understanding my financial capacity; recognizing my needs, attitudes, and behaviors (psychographics); and knowing my brand preferences. Delivering these experiences does not just potentially yield better customer satisfaction, it drives better marketing results and market share capture.
Here’s an example: Checking account marketing almost always involves cash incentives for responders. Many banks have multiple offers in the market, with increasing payouts for opening more premium products or depositing more into the account. The common default is to heavily promote the highest offer available, and “backstop” with lower offers deeper into the marketing.
For a top-10 bank client, we recently tested leading the marketing with a lower offer amount that was most appropriate and achievable for the prospective customer audience based on their financial situation. This lower offer was the marketing “hero,” with higher offers placed later in the marketing experience. In a head-to-head test, we found that leading with the lower offer versus the highest available in the market generated 40% higher checking conversion and yielded a 30% lower cost to acquire. This test analytically demonstrates that “ticking off” the customer is real when you promote a product or offer that isn’t appropriate, even if it has better “curb appeal.” Customers expect you to know them and build experiences for them that are personal and appropriate.
At the intersection of personalization and AI there is an opportunity to reinforce the trust and sense of community customers value. How might older customers, or anyone who is skeptical of AI, respond? Is there risk these approaches come across as invasive rather than progressive?
In our experience, expectations for personalization really don’t differ dramatically by age group or demographic. Technology has spoiled us all. My retired mother watches TikTok and expects personalized experiences on par with that in her shopping, watching, and banking engagements. Going back to the McKinsey study, over half of consumers expect brands to deliver trigger marketing and personalize it based on their behaviors. Milestone consumer life events are some of the most powerful triggers and they happen across demographics: new movers, new homeowners, newly married, new and expectant parents, change in household composition, and newly retired.
Across our client base of regional and super regional banks, we’ve found life event trigger-based marketing programs activated in real time yield 100%-plus lift in checking conversion rates versus campaigns not informed by life-event triggers. Business milestone events can be just as powerful. Business marketing campaigns triggered by business milestones yield checking conversion rates two to three times higher than campaigns not informed by those milestones.
Heightened expectations for personalization have really eroded some of the natural alignment of demographic preferences for banking products and experiences that may have been more prevalent in the past. As such, marketers should expect more of themselves when delivering experiences to existing and prospective customers, given the data and technology available to them.
A version of this Q&A originally ran in the November Executive Report. Explore the full issue, AI in action: Practical applications and approaches for banks, to read how financial institutions use the technology across call centers to fraud detection and more, while keeping close tabs on how accurately, consistently, and effectively AI is performing.
Rachel Koning Beals is Senior Editor at ProSight.
