What Is Personal Banking?
Wouldn’t we love the idea of having a bank that operates like a convenience store? A one-stop bank that could cater to all our individual banking needs with less hassles and stress? This is what personal banking revolves around. Personal banking, also referred as consumer banking or retail banking, is banking that provides financial services to consumers as individuals not businesses. This is markedly different from investment or corporate banking which caters to investors and corporations respectively.
Personal banking deals with the products and services that banks offer to individuals to meet their most fundamental financial needs. Such products and services may include opening of savings accounts, facilitating mortgages, disbursing personal loans, issuing credit cards, retirement planning, insurance, or individual brokerage services.
Personal banking could be described as the “one-customer banking”, the type of banking that is personalized to suit the individual and unique needs of each customer. By looking at each customer as its sole customer, the bank is able to tailor services that would suit the needs of the customer. But how true is this?
Everything You Need To Know About Personal Banking
Choose A Bank That Meets Your Personal Needs
When we shop for banks, we tend to consider what benefits their products or services could have for us. Are their interest rates on auto loans? Do they provide overdraft lines of credit? How do they handle mortgage payments? It may be that we want to open an account to save for your kid’s tuition, or just because the bank branch is around the corner. The fact remains that we are more inclined to open an account with a bank which offers us a certain measure of convenience that is not available in other banks. As such, we tend to incentivize and personalize our banking needs. Rather than focus on the array of services available in a bank, we tend to ask ourselves what benefits such products have for us.
Fintechs: The Glowing Face Of Personal Banking
Personal banking is undergoing radical changes, no thanks to technology. Customers today expect more from their banks these present times. The ‘in branch’ experience is been eroded for online banking platform and/or mobile app. While traditional banks have been slow in adapting technologies to suit the change consumer tastes, FinTechs have stepped up to fill this vacuum. The emergence of FinTechs have led to the expansion of personal banking, making baking products and services more personalized. New entrants are now offering targeted solutions with better servicing to retail consumers offering services available via non-traditional channels such as social media. This of course, has served as a wake-up call for traditional banks which are now allowing more room for technology to be adapted to their core services.
How Banks Can Be More Personal?
So how can banks be more personal and responsive to the needs of individual customers? According to a report published by PWC, banks can be more responsive by building customer-centric business models. Rather than investing huge resources on advertising, banks should focus on “contact optimization.” By staying in touch with customers, even those who have stopped using their products and services, banks can develop a deeper understanding of customer needs, and build relationships at a lesser price that leaves much room for profit.
Banks should also improve on their services, especially in this age of social media which has increased word-of-mouth exponentially. Customers can use social media platforms to amplify about their customer-service experiences in real time. As such, banks have to cognise the power of social media in building or tarnishing reputations, and focus on delivering the quality of service they would love to read about online.
AI And The Future Of Personal Banking
One factor which has opened up the boundaries for the personal banking, and altered the traditional mode of offering such service is Artificial Intelligence. AI has made it possible for banks and FinTechs to aggregate data on consumers behaviour and provide services that would cater to their specific needs. For example, your bank would be able to inform you if you are late on payment of utilities or suggest a cheaper alternative if you are paying too much for a particular service
This is much more effective and precise than the scatter-gun approach of traditional banks which is exemplified lack of the sophistication and personalization. The ability to process big data through predictive analytics, and generate insights into consumers that can be used by artificial intelligence to create and propose customized offers and promotions to customers. If banks can achieve this, they can take their personal banking experience to the next level.
Personal Or Lumped Banking?
Many financial services companies aim to be the one-stop-shop retail banking destination to their individual consumers and advertise themselves as such. Banks would like to have us believe that they cater to our individual needs. However, if we dared to look closely, we would find out that they lump our needs into different categories and create products and services based on these categorizations.
For example, a bank may have noticed a need among pensioners, and decide to open an investment account for pensioners. A bank may decide to start up a ‘back-to-schoo’l loan scheme for parents who have their salary accounts with them. While such service may offer some form of respite to parents who can’t meet up with tuition payments, to the bank, they are catering to the need of a group rather than an individual customer. Your individual needs are only satisfied if they fall under an appropriate group under the bank’s categorization.
Traditional categorizations have led to what has been described as organization silos, a term which refers to products and services which focus on optimizing efficiencies, but are misaligned from the current needs of the digital customer. This tends to slow down the ability of the bank to adapt to market changes.