‘The dirty little secret is that most of these companies’ customers are not active users’: Ahon Sarkar, GM of Helix by Q2, on personalization

Personalization has become a catchphrase in banking, but few banking products actually make good on this promise. Ahon Sarkar, General Manager of Helix by Q2, is adamant that the core of a truly personalized product is rooted in human-centric design.

“For some reason, we have convinced ourselves that personalization through human centered design is a nice app,” said Sarkar at Tearsheet’s The Big Bank Theory Conference. A slick user experience can only go so far, according to Sarkar. A truly personalized experience relies heavily on the products and services a customer is offered, not just the aesthetics of the channel.

To start off, FIs can approach personalization by asking three main questions: 

1. Do we want to drive up engagement?
2. Do we have to bring down the costs?
3. Do we want to retain customers?

Driving engagement

“When you interact with rewards, would you rather see 10,000 rewards that you can access? Or would you rather have the three that you actually care about?” asked Sarkar. In this case, FIs are better off cutting through the noise and only presenting the rewards that will really appeal to their customers. For example, Square's business customers can offer three types of rewards: “per visit”, “per amount spent” and “per item or category”.

Having too many options can overwhelm customers by triggering “choice overload” which impedes the decision-making process. To deliver the right kind of rewards to each customer, FIs would have to pay close attention to how and where their customers are spending money, and reward the interactions that are driving use.

Bringing down costs

Not all users are created equal, though. “The dirty little secret is that most of the customers that these companies collect are not active users. They are users that they brought on that are ultimately just a source of cost,” he said. Users that are not active drive-up costs because the FIs still have to pay for storing their data and monitoring their accounts, without any real return on investment.

Another added cost is fraud. According to Sarkar, this issue, along with the struggle with inactive users, can be countered by segmenting users into three broad categories: super users, occasional users, and everybody else.

Super users drive most of an FIs revenue, while most of the fraudulent transactions emerge from “the everybody else” category. The conundrum is how to reduce fraud without hurting the super users.
Although fraud management seems unrelated to personalization, Sarkar asserts that it is not. Rather than having a blanket strategy that lowers limits for all users or one that keeps limits high but increases losses in instances of fraud, Sarkar recommends segmenting the consumers.

Through this segmentation, super users can continue to enjoy higher limits on ACH but everyone else continues to operate under lower ceilings. Helix by Q2 offers its customers such as Credit Karma and Betterment the ability to segment consumers through its partnership with Visa.

Retaining customers

If a customer leaves a bank and returns six months later and is offered the same account with the same terms, they have less incentive to stay loyal to the brand. “Every time an FI is like yeah, you didn't tell me you were going to this country, but I know you opened your app in that country. So, I'm going to allow transactions there, it builds a little bit of trust,” said Sarkar.

Trust not only encourages future use, but also keeps customers loyal to the brand. Contextual understanding of a consumer allows FIs to tailor their services to a particular consumer, but also adds friction in the decision to sever the relationship. This is the same model that community banks have been following for a while. When a new product with better terms is offered to the customer, they may elect to stick with the brand because the trust component will be missing, and the time spent building that trust would go wasted.

The sunk cost fallacy refers to the tendency to continue with processes that people have already spent a lot of time and resources on. FIs can find profits in this way of reasoning if they make good on the time invested in their services. If consumers feel that each transaction they make adds to the relationship they have with a financial institution, the readiness to break away dissipates.

Tearsheet take

Naturally a human-centric approach to designing products relies heavily on data. Unfortunately, using data effectively is a problem FIs are still working on. One issue that can significantly break down the process of building personalized products is information silos.

“If you look at yourself as a typical customer of a bank, you probably have different services that you consume from the bank. You will actually see that you get different experiences,” said Bentzi Aziz, who heads the Financial Services Unit at Amdocs, on the Tearsheet podcast. Hence if FIs want to offer personalization in their products not only do they have to identify where they are going to focus first but also break down the silos they have within different products.

One way to counteract fragmentation is to move data away from the siloed layer to an enterprise solution that has centralized information, according to Aziz. Doing so allows FIs to establish a single layer of truth which aids in customer segmentation as well as designing what a human centric approach to personalization will look like.