Digital Marketing

HOW DATA, AI AND MACHINE LEARNING POWER PERSONALIZATION FOR BANKS

The problem with banks’ use of AI technology isn’t always a digital banking inability or unwillingness to invest in it. In fact, more financial institutions are spending on artificial intelligence and related technologies as banking leaders strive to develop customer personas.

Instead, the problem may stem from the financial institution’s failure to align technology with the bank’s strategy. As a result, a bank or credit union may buy (or build) the technology, but then abandon it or default on it soon after, says a McKinsey report.

The report uses as an example a large, unnamed retail bank, which has budgeted resources for machine learning (ML) technology, a subset of AI, to personalize customer and Marketing campaigns can be automated. Sounds great, but two years later, that expense still wasn’t worth it.

“The bank was still managing its personalization program as it always had: manually and in silos,” the report said. “Although it had acquired a sophisticated analytics engine, the digital banking had overlooked the elements necessary to turn that engine into a smooth-running ‘brain.'” The result was a perpetual cycle of sub-scale efforts. was

The consultant says that this instance is not an anomaly. In fact, the report says it’s common in banking. However, at a time when investment in AI is increasing and becoming more critical to meeting customer expectations, not taking AI or ML software seriously will affect the growth and relevance of a bank or credit union. can do. A report by Research and Markets found that AI was worth about $4 billion in global banking market volume in 2020 and is predicted to reach at least $60 billion by 2030.

 

Growing Trend:

AI is becoming a dominant technology in digital banking. It is predicted to grow 15-fold between 2020 and 2030.

An American Banker survey found that just over half (51%) of all financial institutions report that they are “actively engaging with AI and ML in pilots, limited use, or significant use cases; Most of which are still under development.” Early stages. ”

But even if a bank or credit union is investing heavily in machine learning or AI solutions and data analytics, that doesn’t mean they’re getting it right.

 

Mistakes Banks Make With Ai Investments

There’s no limit to the variety of AI technology that banks or credit unions can invest in, whether it’s automating paperwork and back-end processes, reducing fraud, or improving their customers’ lives online. Make it easy.

McKinsey insists that machine learning technologies are the way forward for traditional banking players. The growing presence of ML indicates that it is an important integration for financial institutions. Machine learning software is generally considered a subset of artificial intelligence technology that enables computers to predict future trends and solve problems based on past data.

But, even for digital banking that have begun to invest in machine learning, there are hurdles they continue to face. The top five issues highlighted by McKinsey are:

Sporadic and disparate customer data: Only 28% can rapidly integrate internally structured customer data for use in AI or ML initiatives.

Limited scope of machine learning models: Only 9% have a complete set of machine learning models to drive personalized interactions at each customer touchpoint.

Sub-scale analytics development: Only 16% of marketing teams follow a standard approach to building and delivering AI tools, such as analytics, at scale.

Poor integration and campaign tracking: Only 8% of companies use model insights in campaign execution and decision-making.

Inadequate AI risk management: Only 14% have an AI governance framework that manages AI-related risks without compromising speed and flexibility.

Collecting digital data alone has been a chronic pain for banks and credit unions for years. But, as McKinsey points out, collecting data the wrong way or getting it from the wrong source, storing it in multiple digital and physical locations, and even over-indexing third-party data. This would render any AI technology useless.

Other problems arise in the integration of AI software. For example, many financial institutions fail to follow the correct steps when installing technology (which can lead to delays or inefficient results) or fail to integrate learning with technology in a feedback loop. live

 

Advances In A Comprehensive Deployment Of Ai Martech

Banks and credit unions cannot afford to lose the personal nature of the banking experience. In the era of personalized customer experience, personalization is critical for any financial institution, especially if they target millennials and Gen. Want to retain population Z as customers.

“A zama Back then, hyper-personalization was considered good. For Millennials and Next-Gen Zers, slow adoption in this area could spell long-term disaster,” Cohen says in an article in the Global digital banking and Finance Review.

Fraud protections are needed in the customer experience in addition to fast, efficient and sophisticated mobile apps, he says, but it all starts with strong AI technologies.

 

Five Steps to Machine Learning and AI Success

McKinsey recommends a five-tiered approach to establishing and deploying AI software, which it says improves financial institutions’ relationships with customers.

  • Identify high value opportunities.
  • Rapid activation and optimization at scale.
  • Invest in the right martech capability for your purpose.
  • Commit to creating a truly agile operating model.
  • Invest in talent and skills development.

Regarding the first step, the report states that a bank or credit union does not implement AI personalization integration across the board with all customers. Instead, McKinsey recommends starting with a handful of “high-impact travel use cases” in a process called “opportunity identification.”

Using another unnamed retail bank as an example, the report says the bank successfully implemented AI software as its marketing teams focused on the “deposit curve journey” among its affluent customers. , then proceeded to “Deposit Kiran Travel”. same class. . Only when he solved the data aggregation and customer profiles of these segments did he move on to other customer segments.

“Once they were further up the maturity curve, the bank challenged its personalization teams to identify mass segment customers who may have low short-term value but whose lifetime The potential value was double or triple the average, making them good candidates for upgrading to the affluent segment,” the report reads.

The second step referenced above deals with how a bank should implement machine learning software across the enterprise. “In addition to advanced machine learning ‘brains’, rich customer data sets. And marketing automation tools, organizations need a robust set of performance metrics,” the report reads.

 

Building A Well-Oiled AI Machine:

Integrating technology without a purpose never works. Applying metrics and data analytics is critical for marketers when adding AI to the martech mix.

It will take time for a financial marketer to develop these metrics. But the company recommends developing a playbook of best practices, which can reduce the learning curve.

The third step involves taking the marketing metrics developed in the second step and running them through machine learning technology. This will generate campaign inputs, which can be compared to what. The campaign produces until a reliable customer marketing strategy is in place.

“Many companies fall into the trap of ‘throwing technology at the problem. ‘But instead of an integrated technology stack, they end up with a bloated company that increases cost and complexity. ” Says McKinsey. ,” says McKinsey. “Best-in-class organizations align martech resources around their highest-priority use cases. And separate the data, design, decision-making, delivery. And measurement dimensions that align them with their customer goals. will be required to fulfill the

The fourth and fifth steps are related to team development. The marketing team cannot be the hand that suffers from the integration of AI and machine learning software.

 

“In the digital banking case, the marketing team was in charge of managing the program. But marketers had only sporadic access to analytics resources. Forcing them to fall back on basic heuristics that were easy to manage but customized. Was less effective,” says McKinsey”. As a result, the organization struggled to meet its retention and satisfaction goals for key segments.”

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