What’s Consumer Behavior Got to Do with Digital Banking?

Financial institutions and their customers have always been partners in each other’s progress. But customer experience is a crucial factor in the success of their business. A study revealed that 50% of customers are willing to remain loyal to their bank, albeit the choices many. This loyalty is dependent on banker’s ability to analyze and address the varying needs of customers. 

Changing Human Behavior – A Barrier in the Banking Landscape

Studies show that humans are not always rational in their decisions. Over a period, they have also started counting on shortcuts to resolve problems. This approach, also called heuristics, often results in various forms of biases that lead to judgment errors. This situation poses a challenge for banks whose primary focus has been on changing consumer behavior pertaining to investment discipline, insurance coverage, savings, and credit discipline. The needs and consumption patterns of today’s customers are unpredictable, thanks to the plenitude of choices they have. 

Less wonder that a study revealed that the average rate of application abandonment across a bank’s retail offerings is approximately 40–50%. Also, the non-performing loans have added to the bankers’ woes. 

Behavioral Science – Perfecting the Art of Knowing Customers

Behavioral science is that elusive answer to multiple questions bankers are asking. It is a field of study that deals with human behavior and decision-making. Experts in behavioral science apply the principles of psychology, sociology, economics, and neuroscience to analyze human relationships. 

Traditionally, banks have been leveraging the concept of behavioral sciences in the areas of strategy, product design, and marketing. Nowadays, they face the challenge of mitigating the new issues related to acquiring and assisting customers. Many banks and solution providers have realized that the application of behavioral science to banking technology has now become the need of the hour.

Infusing Empathy into Technology

Financial institutions have been investing heavily in digital technology. All these investments will pay off only if they help decision-makers recognize and analyze their customers’ behavior across channels and touchpoints. 

Today’s progressive banks are on a journey to deploy the next-generation behavioral banking technology; one that would cater to the financial and psychological needs of users. Bankers have to gain a deeper and comprehensive understanding of their customers and their behavior at every stage of engagement. This demand has resulted in the development of newer solutions with triggers to enhance the consumer’s decision-making ability. 

Bankers can apply the principles of behavioral science across the technology themes of business model change, digital simplification, risk management, customer value management, and customer acquisition. Online/mobile banking, architecture & integration service, AI capabilities, personalization & marketing, process re-imagination, and big data analytics are some of the most common technology services supported by this fast-emerging trend in the banking space. Powered by comprehensive Master Data Management (MDM) technologies and integration of several backend applications, behavioral banking technologies create a single view of the customer, while making the business more transparent, more nimble, and more effective in the marketplace.