In today’s fiercely competitive market, U.S. banks face a pivotal moment to rethink how they serve customers. Traditionally, many banks have operated within a product-led model, focusing on pushing specific financial products rather than designing experiences around what customers truly need. But with open banking regulations reshaping financial services and digital-first players offering highly personalized solutions, the stakes are higher than ever. Banks that fail to embrace a more customer-centric approach risk losing both relevance and market share.
Our research — in partnership with our in-house digital agency, Hi Mum! Said Dad — found that 71% of U.S. customers agree that digital experiences are better when personalized, while 52% would switch to a service that delivers more tailored experiences (see Figure 1). This signals a powerful opportunity for U.S. banks to take advantage of the clear customer preference for personalization — an opportunity that not only meets customer expectations but could also drive meaningful growth.
This necessary shift toward personalization isn’t just a tweak to customer service operations; it requires a deeper mindset change. Banks must pivot from a traditionally product-focused approach to a model that prioritizes customer needs at every step.
“Nearly every bank today would cite securing lower-cost deposits as a strategic priority. However, the challenge they face is that deposits are increasingly flowing elsewhere.”
— Aaron Byrne, L.E.K. Consulting Partner
As digital-first players like Chime and Revolut set new customer expectations with seamless, personalized experiences, U.S. banks are taking steps toward personalization to retain customer loyalty and secure deposits.
What is personalization?
At its core, personalization in banking involves using data to create experiences that feel relevant and tailored. Banks can take two approaches: personalization and hyper-personalization.
Personalization is often the first step, using historical customer data to segment users by demographics or behavior. For example, recommending a new credit card based on past spending patterns reflects a basic form of personalization.
Hyper-personalization goes beyond this, using real-time data and machine learning to adjust to customers’ current behavior and context. Rather than just responding to historical actions, hyper-personalized banking solutions are proactive, helping customers make more informed financial decisions on the fly. One example is Snoop, a personal finance app built by Hi Mum! Said Dad that uses open banking data and artificial intelligence (AI) to deliver real-time insights and advice to users, helping them better manage their finances day to day.
It’s worth viewing hyper-personalization as the ultimate goal due to its ability to deepen customer relationships and strengthen loyalty, imperatives in an increasingly competitive market.
Taking the first steps
Embarking on a journey toward personalization doesn’t mean tackling hyper-personalization right away. Instead, banks can start with practical steps using data they already own, such as transaction histories and account behaviors, to create segmented experiences that reflect different customer preferences and needs.
The recent Hi Mum! Said Dad “Personalization Playbook” underscores that personalization doesn’t always need to be high tech to be effective.
“Personalization is a feeling we create for customers. Feeling and function are quite different things.”
— Chris Wilkinson, Head of Digital Channels, NatWest
Banks can evoke a sense of personalization through thoughtfully designed interactions within the customer journey — without sophisticated AI. For example, by designing “delightful moments” when transferring money to friends and family or allowing customizable interfaces, banks can elicit the same feeling of personalization without the need for a complex AI model.
Digital-first challengers can also provide critical lessons on customer-centric strategies. Chime’s payback advance feature directly addresses a common pain point around cash flow, demonstrating how banks can offer targeted products that meet specific customer needs at the right time. Observing these models can help traditional banks identify opportunities to adapt their own offerings, addressing customer needs with focused solutions.
Navigating structural challenges
Shifting toward customer-centricity isn’t always straightforward. Many banks grapple with legacy technology systems and operational structures that can impede progress. However, with open banking regulation reshaping the landscape, there’s an imperative to act. The risk of inaction is clear: As consumers gain access to a broader array of personalized services, traditional banks that don’t adapt may find themselves losing deposits and loyal customers to competitors.
“Rather than overhauling the entire bank, focusing on transforming the customer interaction model allows for dynamic engagement and tailored product offerings.”
— Aaron Byrne
To overcome this, start simple. Begin by mapping out key customer segments and understanding their unique needs across each stage of their life cycle. Then focus on delivering personalized, convenient solutions that meet these needs where the customers are. While legacy structures can make this shift challenging, the rise of open banking provides a unique opportunity to innovate.
The path forward
While hyper-personalization may be the ultimate goal, banks can lay the foundation with customer-first strategies today. By leveraging existing data, adopting best practices from digital-first competitors and mapping out the financial needs and pain points of different consumer groups, banks can design targeted solutions that truly meet those needs. This customer-centric approach will help drive lasting engagement.
The path to personalization will require thoughtful planning and a shift in mindset, but for banks ready to meet customers where they are, it holds the potential to unlock long-term value.
For more information or to find out how we can help, please contact us.
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