A Segment of One: The new reality

Consumers now have access to all the information they need to define, compare and select the financial products and services that best serve their individual needs.

As a result, financial institutions (FIs) who continue to offer cookie-cutter products will struggle to retain existing and attract new customers.

Gone are the days of a single product fitting the needs of all. Financial institutions need to focus on satisfying the individualised needs of the new consumer.

In conversation with Finextra, CEO of i2c Inc. Amir Wain highlights that while it is easy to get excited about innovation and its role in delivering personalised products, an FI must not forget their primary responsibilities to protect consumer data and ensure service reliability.

An apparently super cool product will not resonate with the consumer if it does not work all the time or increases the chance of personal data turning up on the dark web.

Wain goes on to discuss how the financial services industry should not chase shiny new objects; instead, their focus should be on meaningful innovation that delivers tangible value to the consumer and/or makes the process more efficient.

Maintaining an orientation focused on the consumer and value creation will help financial institutions grow and differentiate their business. Wain says that the traditional strengths of large FIs around brand, distribution, financial strength and geographic reach have become less relevant in ensuring success.

The new consumer who is empowered by Google search and social media, and who is spoiled by the on-demand content delivery of Netflix and Hulu will expect the same of their financial services provider. Once this realisation becomes a daily business orientation, banks will win and retain more consumers and greater profits will become the natural outcome.

Taking credit card rewards as an example, Wain explains that individualised experience is key. When consumers are provided with rewards and offers that are relevant and personalised to their specific situation and need, and when those offers are delivered in the right format over the right channel at just the right time, consumers respond well and are more loyal.

Wain warns that increasingly it will take more than duelling points, miles and cashback offers to attract and retain the new consumer. FIs should look beyond the current “red ocean” effect of competing loyalty programs and look to provide new, “blue ocean” types of rewards for the savvy consumer-- perhaps providing them with the account control to tweak their own programs with the unique benefits they want for themselves.

Financial institutions versus fintechs

Wain notes that large financial institutions and fintechs are coming from different vantage points and have different strengths and weaknesses when it comes to servicing the consumer.

“Incumbent banks do not have the burden of acquisition costs so they can focus on innovating the consumer experience for retention, which is a much easier problem to solve. Banks have the added advantage of expertise in regulation and compliance when compared to fintech disruptors, which can help consumers feel safe and protected.

“Bankers do not come into the office thinking about how they will disrupt, instead they are concerned about protection and safeguarding. Their weakness is that they don’t think about disruption because they don’t have the necessary organisational competence for technology-driven innovation.

“They should be focusing on finding the right partners with the innovative technology to help them build a sustainable, ongoing and competitive position in the market.”

“For financial institutions, innovation should not be viewed as a project. You cannot invest $50 million and say you’re done with innovation. It’s a competence that you need to build throughout your organisation and the fastest way to make that happen is by working with an innovation partner who has the infrastructure and ‘building block’ capabilities to help design, build, test and iterate products they can bring to market quickly that ‘resonate with consumers.’”

Wain explains: “If FIs break down consumers into addressable markets of two, three or even four segments, the resulting product still does not meet all the needs of the individual.” This is where AI comes in to ensure that all points of interaction between consumers and financial service providers are individualised down to A Segment of One.

Though decades old, now is the time when AI is ready to be commercialised at scale and AI tools will become stronger in detecting and responding with emotional intelligence (EQ), to raise the level of interactions with humans. Wain also believes that AI with “unsupervised learning” provides insights and picks up trends that we as humans cannot otherwise detect.

AI will also positively impact the 1-1 consumer experience. Says Wain, “today’s chatbot represents the kindergarten level of AI’s evolution, so there is a tremendous amount of growth to expect from this technology.” Wain predicts other types of AI-augmented interactions will connect with consumers at the human level like never before.