By Christian Klacko, Cofounder and COO, Micronotes

May 17, 2019

I’m always interested in articles that discuss how businesses—particularly financial institutions—can use technology to deliver a more personalized experience to their customers.

Recently, I read an article from The Financial Brand titled “Personalization in Banking Can’t be Disguised as Cross-Selling.” Written by Executive Editor Steve Cocheo, the piece featured excellent insights on the subject from Alyson Clarke, principal analyst at Forrester Research, where she covers banking.

The banks and credit unions we do business with know a lot about us, at least when it comes to our finances. And, when you think about it, that gives them a great deal of knowledge about our lives. This knowledge provides financial institutions with a tremendous opportunity to deliver personalized service and build deeper relationships with their customers and members. But are bankers taking advantage of that information to build strong customer relationships? And isn’t that especially critical when it comes to digital banking users, people who rarely if ever visit a branch?

Clarke told a story about receiving a “Happy Birthday” email from her bank. A nice gesture, but that’s all it was—a gesture. There was nothing really personal about it, and nothing that provided her with any tangible benefit. Contrast that to the actions of a retailer Clarke patronizes. They sent her birthday greetings, too, but they included a discount on a product she had purchased previously and was likely to buy again. The article accurately states: “her bank knows much more about her than the [retailer] does, but the birthday message from the store meant much more than the bank’s.”

The article also cites a Harvard Business Review report on the value of personalization: “When executed effectively, strategic personalization initiatives, can drive significant revenue impact… fostering greater customer loyalty and retention.” That’s a message that any business serving consumers should take to heart, especially financial institutions.

But, that’s not happening—at least not to the extent it should be. “While most banks and credit unions recognize the value of personalization, however, they lag in building the capability,” The Financial Brand wrote. “Less than 10 percent of the industry has actually deployed advanced personalization technology, according to the Digital Banking Report. The truth is that simply stamping a consumer’s name at the top of a message means very little, no more than would sewing one’s name in an off-the-rack garment make it ‘tailored.’

As Clarke defines it, ‘Personalization is an experience that uses customer data and understanding to frame, guide, extend, and enhance interactions based on that person’s history, preferences, context, and intent.’” As she put it: “personalization means adding value. If you’re not doing that, you aren’t really personalizing.”

And that’s a lesson all banks and credit unions must remember and act on. They have the information required to deliver highly personalized service to digital banking users. They just need to use it effectively and, well, personally. The upside of doing this is huge. The downside is a huge problem.

[On Tuesday, May 7, Devon Kinkead spoke at the annual Fiserv Forum client conference in Las Vegas. His presentation, “Empowering the Digital Marketer,” was part of the Forum’s session on artificial intelligence and analytics. Following is a transcript of his talk.]

By Devon Kinkead, Founder and CEO, Micronotes

While attending the MIT Sloan School of Management, I got interested in big data and analytics. And I realized there was an opportunity to transform digital businesses that had two things: a lot of customer data, and high number of website visits, which is exactly what financial institutions have.

That led to the creation of Micronotes.

Let’s talk about the marketing function in financial institutions. Bank and credit union marketers have a tough job. They have to figure out what people want—without ever seeing them, in many cases—as customers seldom come into branches anymore. It’s a challenging problem.

Marketers have three main tools to work with today: email marketing, direct mail marketing, and advertising. As you probably know from your own behavior, you don’t interact with these items very much. You probably ignore spam, don’t click on advertising, and throw away most of the stuff that arrives in your mailbox. That’s why the efficacy of these tools is pretty low.

However, when you add artificial intelligence (AI) to the marketer’s toolkit, you supercharge the marketing function. That’s because, suddenly, a whole lot of data comes to bear on the problem. You can get the experience right on the customer side, and you can get a lot of user interaction, which is important.

Using AI, you can get customers to tell you explicitly if they’re in the market for a product or service. And that leads to the ability to make offers to truly in-market consumers and not aggravate those who are not in the market. And you can also let the consumers actually train the data model, which is where the machine learning element of AI comes into play on the Micronotes platform.

Let’s unpack a few of these things. First is this notion of data-driven dialogue. Micronotes takes in about six months of customer data from our bank and credit union clients. We create a time-search data set, and we turn classifiers loose on that data set, to classify everybody into essentially a probability matrix that tells us whether or not we should talk to a particular customer about a particular product.

The next thing that happens is Micronotes launches a 10-second interview (which looks a little bit like a survey) during customers’ mobile and online banking sessions. We ask questions such as “Are you interested in an auto loan?” or “Are you thinking about home repair?” and so on.

And the customer responds—with quite a bit of honesty—”Yes,” “No,” or “Maybe.” Then, if they are in the market for the product or service being offered, we create a lead that goes to the bank’s front lines. Or we handle it directly by sending the customer to the loan page or the CD page, or whatever page matches what they’ve told us interests them.

Even if the customer says “No,” it’s okay because that response becomes a piece of training data for the classifiers. That’s how machine learning works. Any response, positive or negative, is fed back into the system, training it to be even more accurate with each subsequent customer conversation.

If you’ve ever given a thumbs-up or thumbs-down to a recommendation from Netflix, you are training the Netflix machine by providing data for algorithms running in the background. You’re helping them figure out what programs to recommend the next time you log into Netflix.

The great news is when customers actually have the power to say explicitly whether they’re in-market for a particular product or service, that means all the marketing you do from that moment forward is focused on a legitimate need, which is a really powerful idea. And it’s something the world desperately needs.

And this notion of letting customers train the data set and personalize their own experience is another extremely powerful idea. At the end of the day, it means the financial institution is quickly learning from its customers, and marketing only to people who are explicitly in-market.

The results are pretty amazing. Most of our customers engage up to 20 percent of their entire digital population in any given month. If you do the math, that’s a learning curve about 20 times faster than what you can achieve with targeted advertising. And that’s huge because, as we know, fast learners get to the finish line first. And fast-learning financial institutions are more competitive than slow-learning ones.

With Micronotes’ AI-driven marketing automation platform, 100 percent of the marketing that takes place is focused on validated needs. If you pick up the phone and call a customer, it’s because you have validated that they are not only a high-propensity target, but they are actively in-market for what you’re offering.

Because we consume our banking clients’ data every day and measure how many sales they make, we know financial institutions can achieve 10 cross-sales per thousand active digital users, per year. That’s important because Micronotes measures our success on how many customer needs we meet during any particular timeframe. And our measure of how to meet customer needs is “Did we get the sale?” because we view each sale as a successful engagement that met the customer’s requirement.

By Kevin Flanagan, Marketing Director, Micronotes

Ron Shevlin, one of the most interesting analysts following the financial industry, is managing director of Fintech Research at Cornerstone Advisors. But he also writes a regular column for Forbes titled “Observations from the Fintech Snark Tank.“ How can you not read something with that title?

Shevlin captured my eye with the title of his column this week—”Why People Don’t Switch Banks Anymore.” From the Micronotes perspective, our business is to help our banking clients retain their customers by helping them deepen relationships with the digital users they rarely see. So, if people aren’t switching banks anymore, then bankers must have figured out how to engage with their digital users and perhaps they don’t need the industry’s only artificially intelligent marketing automation platform that enables them to make the right offer to the right customer.

I needn’t have worried.

According to Shevlin, bank switching is on the decline not because institutions have made banking convenient, but because “money movement is so convenient.” That’s a bold statement, and it contradicts the findings of JD Power’s 2019 U.S. Retail Banking Satisfaction Study, which said that just 4 percent of consumers switched primary banks in 2018, which would make it the lowest level of switching ever recorded by Power, and a 50 percent reduction from 2016’s record 8 percent.

For the sake of argument (and because he’s one of the sharpest observers of the banking and fintech industries), let’s assume that Shevlin is correct. He backs up his claim with this thesis: “Checking accounts have become ‘paycheck motels’—temporary places for people’s money to stay before it moves on to bigger and better places. The cause of this is deposit displacement: the displacement, or diversion, of funds from traditional accounts (i.e., checking) to alternative accounts.”

Those alternative accounts are now home to billions of dollars that formerly would have resided in checking accounts at traditional banks. They range from health spending accounts (home to $44 billion) and person-to-person payment accounts (Cornerstone estimates that Venmo and Square Cash alone are holding more than $90 billion) to merchant apps like Starbucks cards (which possess an estimated $2 billion) and digital-only banks such as Ally and Marcus, which have an estimated $125 billion in their coffers).

So, if you’re a traditional bank or credit union—big, small or somewhere in between—how much of those billions of dollars would you have held among your assets just a few years ago. A pretty good chunk of it, it’s safe to say.

All of which brings us back to the Micronotes value proposition. If consumers have more places to put their money than ever, and if traditional checking accounts are just a couch on which friends crash for a few days and not a permanent residence, isn’t it more important than ever to figure out a fast and effective way to engage with your digital users before they become someone else’s source of revenue?

The ability to conduct brief conversations with digital banking users where you can offer a homeowner a HELOC or someone without a car loan at your institution an attractive rate for a new car loan or a better deal to refinance their loan at another institution or any number of other attractive offers is a proven method of retaining customers and driving revenue growth.

If you don’t figure out how to keep your customers and members from spreading their money around to more places, then you’ll only be able to visit it when you’re in line for a latte and the woman in front of you pays with her app at the First National Bank of Starbucks.

By Kevin Flanagan, Marketing Director, Micronotes

Whenever new technologies disrupt a market, there’s a period of “figuring things out” for both the technology providers and their clients.

The artificial intelligence (AI) software market for financial institutions is no exception.

Last month, I blogged about the trend of conversational banking. That’s a term that wasn’t commonly used just a short time ago. But it’s beginning to gain traction. And that’s a good thing, because when I think about the capabilities Micronotes provides to our banking clients, conversational marketing is a superb way to describe what we do, with all of the positive connotations of how people use conversations.

As the term conversational banking becomes more common, it’s beginning to appear in more media coverage.

This week, I watched a video interview on the Finextra websitewith Dharmesh Mistry, chief digital officer of Temenos, a European software company.

The title, “The Benefits of Conversational Banking,” caught my eye. The interviewer began by asking Mistry if conversational banking was “just chatbots?” I was waiting to see what he had to say, assuming he would talk capabilities far beyond chatbots. I was underwhelmed.

Mistry said “most people will experience conversational banking through chatbots initially.” He added that Capital One is “experimenting with things like Siri.” And I was still waiting for something a little more, shall we say, cutting edge. He went on to include text, voice, and even sign language in the litany of conversational banking capabilities.

What he never mentioned was a truly innovative method of engaging with the banking customers who rarely set foot in a branch, and who want to bank using mobile devices web browsers. Using those technologies to talk or sign with bankers doesn’t seem very practical. What bank has sufficient staff to handle incoming calls from phones and the internet?

I did like the way Mistry described conversational banking is a “two-way thing.” Micronotes’ clients and their digital banking customers can confirm that. And he made the point that conversational banking is not always about selling. Selling is, obviously, important to every business, but as Mistry added, it’s also about “retaining the customer, driving loyalty and creating advocacy.” All good points.

What was missing was the way conversational banking that’s built on AI machine learning can use a bank’s data to engage with digital users in many ways. Making the right offer to the right customer at the right time is just one example. It also means creating propensity scores from bank data to identify customers at risk of attrition or delinquency, so bankers can reach out to them before problems arise. And it means providing useful and even fun information about wealth management, cybersecurity or holiday trivia to engage with digital users.

That’s what Micronotes means by conversational banking.

By Kevin Flanagan, Marketing Director, Micronotes

When is the last time you logged on to online or mobile banking? If the answer is more than a few days ago, then you’re not in on the trend.

Our partner Fiserv recently surveyed digital banking users in the UK (from both banks and “building societies,” or what we Yanks call credit unions) to measure their feelings about the convenience and ease-of-use of digital banking experiences. The gist of the findings is financial institutions that fail to deliver a user-friendly digital banking experience are at risk of losing customers.

If you work in banking and this comes as a surprise to you, you have my deepest sympathy. Thinking about the recent—and rapid—analog-to-digital transformations taking place all around us, whenever a digital alternative appears, it almost always proves incredibly popular. Imagine if email suddenly vanished and we had to resort to mailing letters to communicate. Then think how many fewer emails you’ve sent since the advent of texting.

The survey results are published in the research report Rising to Meet Customer Expectations.

As a company that provides a patented solution that enables bankers to engage with their digital banking users, Micronotes know how much consumers prefer digital banking to branch visits. Various studies show that the average person makes about three visits to a branch each year, vs. more than 170 digital banking logins. That’s what we marketers call a trend.

But not every banking institution is doing enough when it comes to offering digital banking services. And that’s not good for their long-term viability.

Here are a few of the key takeaways from the report about best practices institutions can employ to attract and—most importantly—retain customers/members:

• Offer flexibility and control over where and when customers can access their accounts.
• Provide a consistent experience across every channel.
• Support customers to organize their financial goals and establish saving habits.
• Leverage digital channels to cross-sell or upsell financial products and services.

That last bullet is no surprise to us here at Micronotes. Our clients are achieving tremendous results engaging with customers they rarely see.

If your institution isn’t successfully engaging with—and selling to—digital users, time may be running short to catch up with this fast-moving trend.